• United States
Charlotte Trueman
Senior Writer

UK competition agency provisionally OKs Broadcom’s $61B VMware acquisition

Jul 19, 20233 mins
Mergers and AcquisitionsRegulationTechnology Industry

Eight months after launching an investigation into whether the deal would reduce competition in the UK, the CMA has provisionally cleared the acquisition.

Jigsaw puzzle pieces coming together, merger, M&A, mergers and acquisitions

The UK’s Competition Market Authority (CMA) has provisionally cleared Broadcom’s proposed acquisition of VMWare, paving the way for the $61 billion deal to go ahead.

In November 2022, the CMA announced it was launching an in-depth investigation into the proposed deal, looking into whether the proposed merger “may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”

In particular, the CMA was concerned that the deal could harm the ability of Broadcom’s rivals to compete with VMware’s server virtualisation software, and if there would be a potential financial benefit to Broadcom and VMware if they were to make rival products work less well with VMware’s software

However, having completed its investigation, an independent CMA panel has provisionally found that these concerns were unfounded and the deal would not substantially reduce competition in the supply of server hardware components in the UK.

“We welcome the Competition and Market Authority’s provisional decision to clear unconditionally our proposed acquisition of VMware,” a spokesperson from Broadcom said, adding that the company has always believed its proposed acquisition will enable enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in the multicloud era.

Noting that the deal has also received clearance in the EU in addition to other global jurisdictions, Broadcom said it expects the transaction will close in the company’s fiscal year 2023. The US Federal Trade Commission, however, is also investigating the proposed merger but has yet to publish the outcome of its review.

The CMA is under scrutiny

In recent months, the CMA has made rulings on a number of antitrust cases, most notably Microsoft’s proposed acquisition of Activision Blizzard. In that instance, the CMA ruled against the proposed deal, which has led to its ruling being challenged by the two companies at a tribunal.

As a result of that case, merger decisions coming out of the CMA in the immediate aftermath of those events are likely to come under closer scrutiny, said Alex Haffner, competition partner at UK law firm Fladgate, adding that interested parties might be looking for signs that the chastening experience might inform the way it approaches ongoing cases.

However, while  the CMA will undoubtedly be wary of how its decision making is viewed from a public relations perspective, it will remain determined to stick to its guns and determine each case on the basis of the facts before it, Haffner said.

“Here, it seems that, having had more of an opportunity to look at the evidence in some detail, the facts as presented suggest to the CMA that any competition concerns are less pronounced and so the merger should provisionally be allowed to proceed,” he said.