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November 21, 2022

UK competition regulator opens investigation into $61bn Broadcom-VMware deal

The Competition and Markets Authority will look at whether the blockbuster deal would raise problems of competitiveness.

By Matthew Gooding

Broadcom’s proposed $61bn takeover of VMware will be subject to an investigation by the UK Competition and Market Authority (CMA) the regulator revealed today. It is the latest investigation to be launched into the deal, which was announced earlier this year.

Broadcom faces regulatory action in the UK over its acquisition of VMware (Photo by T. Schneider/Shutterstock)

The CMA is inviting interested parties to comment on the deal over the next two weeks as part of a ‘Phase One’ investigation under the 2002 Enterprise Act, which closes on December 6. Once this is complete, the competition watchdog will assess whether to progress to a fuller ‘Phase Two’ investigation. It is here that the CMA could decide to take action if the deal is found to be anti-competitive, including blocking it altogether.

Why Broadcom’s VMware takeover plan is being scrutinised

Chipmaker Broadcom’s plan to buy VMware, which specialises in virtualisation software, was first revealed in May. The companies are not a natural fit, and analysts told Tech Monitor at the time that the move by Broadcom was a bid to diversify its portfolio.

VMware has been operating as an independent company since it split from Dell last year, and an alliance with Broadcom, which has successfully undertaken large acquisitions in the past, could give it more financial power. It is also aiming to accelerate its transition away from providing on-premise solutions to offering software-as-a-service solutions to clients.

However, the size of the deal means regulators are queueing up to investigate its impact on the market, particularly as VMware clients are said to have voiced concern that they may be forced to buy Broadcom products after the takeover.

Will regulators block the VMware takeover?

Last week it was announced Broadcom is working with the European Union to gain approval for the take-over and avoid a formal investigation. Reports had said the EU was planning to intervene and that a probe could delay the deal by up to a year.

As well as the UK CMA, the US Federal Trade Commission is looking at the acquisition, and has progressed its own investigation to stage two, meaning it has found sufficient evidence to warrant a closer look.

Broadcom may be getting flashbacks to a previous unsuccessful takeover, when it tried to buy another chipmaker, Qualcomm, but saw its efforts blocked by then-US president Donald Trump in 2018.

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A Broadcom spokesperson said: “We look forward to working with the Competition and Markets Authority throughout its process. We are confident that this deal does not present any competition issues. We are making progress with our various regulatory filings around the world and expect the transaction to be completed in Broadcom’s fiscal year 2023.

“The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era.”

Read more: AMD EPYC server chip could spell trouble for Intel

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