Broadcom acquiring VMware for $61 bln but the UK is closely watching the deal

The Competition and Markets Authority (CMA) of the United Kingdom said on Monday that it has launched a preliminary investigation into Broadcom’s proposed acquisition of VMware. The agency is now collecting feedback from interested parties by December 6th to help them decide whether to officially begin a detailed phase 1 investigation into the transaction.

The CMA said it was considering whether this transaction constitutes a ‘relevant merger situation as defined by the Enterprise Act of 2002, and if it does, ‘whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.’

Following the preliminary assessment, the CMA may launch a full ‘phase 1’ investigation if it believes the acquisition will result in a significant decline in competition in any UK markets.

 The $61 billion Broadcom-VMware deal, announced in May, is the second largest in 2022, after Microsoft’s $69 billion acquisition of Activision, and shows Broadcom’s ambition to push into enterprise software.

Broadcom’s most well-known business is its chip division, which designs and manufactures semiconductors for modems, Wi-Fi, and Bluetooth chips used in some products. On the other hand, VMware has long been regarded as one of the key participants in the cloud computing industry. Large corporations utilize their services to manage data centers, private and public cloud networks, and other infrastructure.

Broadcom might diversify away from its primary business of developing and selling chips and into corporate software, which has the potential for better profits, by purchasing VMware.

To accelerate innovation and meet the most demanding IT infrastructure requirements, Broadcom claims that the new company would provide corporate customers with a greater selection of significant infrastructure solutions.

The proposed merger between Broadcom and VMware is also being investigated by the European Commission, which plans to announce its preliminary findings on December 20. The US Federal Trade Commission’s (FTC) probe into the deal has evolved to a more in-depth stage.

Due to worries about the concentration of too much market power in too few hands and the potential for larger firms to purchase start-ups solely to shut them down, regulators from all over the world have been closely scrutinizing tech mergers.

A few years back, Broadcom made a $117 billion acquisition bid for Qualcomm. But previous President Donald Trump vetoed the agreement, claiming national security issues. Nevertheless, Broadcom continued to look for new M&A deals. In 2018, it invested almost $18 billion to buy business software provider CA Technologies. The enterprise security division of Symantec was acquired the following year for around $11 billion.

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