Broadcom has moved a step closer to finalizing its $61 billion acquisition of VMware, with the approval of the European Commission. However, this approval comes with certain requirements that must be met. The European Commission conducted an extensive investigation into the potential competitive harm of the merger and concluded that Broadcom’s power was limited and that certain remedies could ensure healthy competition going forward.
The Commission found that Broadcom did not have a dominant position that could harm competition in network and storage adapters. Additionally, it determined that Broadcom would not have an incentive to limit its networking partnership with AMD and NVIDIA. However, the company would have a motivation to limit the compatibility of Marvell’s Fiber Channel adapters with VMware, in order to squeeze its long-time rival.
To address this concern, the EU regulator is requiring Broadcom to offer third parties the tools necessary to make compatible Fiber Channel adapters. The company will also have to provide the source code for the drivers that run those adapters. This is intended to ensure that companies can be confident that their equipment will work properly with VMware’s server virtualization technology.
Broadcom has stated that it continues to make progress in obtaining approvals for the merger. The company points to similar arrangements in other countries, including Australia, Canada, and South Africa. However, it still faces reviews from the US Federal Trade Commission and the UK’s Competition and Markets Authority.
If the deal goes through, it will be one of the largest tech acquisitions to date. Only Dell’s purchase of EMC ($67 billion) and Microsoft’s tentative buyout of Activision Blizzard ($68.7 billion) were larger. For Broadcom, this acquisition would represent a significant expansion into enterprise software, allowing the company to have a greater presence in the business world. It would also serve as a way for Broadcom to make up for its failed takeover attempt of Qualcomm in 2018.
Broadcom’s acquisition of VMware has been closely watched due to the potential impact it could have on the semiconductor industry. VMware, a leading provider of cloud infrastructure and virtualization software, has a strong market presence and is considered a critical partner for many technology companies. The merger with Broadcom would create a powerful player in the enterprise software market, with the potential to influence industry dynamics and competition.
The regulatory approvals required for such a large acquisition highlight the increasing scrutiny of antitrust authorities on big tech deals. Companies are facing more stringent assessments of potential anti-competitive effects, as regulators aim to protect market competition and prevent the concentration of power in the hands of a few dominant players.
Despite the regulatory hurdles, Broadcom remains optimistic about the completion of the merger. The company sees this acquisition as a strategic opportunity to expand its business and capitalize on the growing demand for enterprise software solutions. If successful, it could significantly reshape the technology landscape and position Broadcom as a major player in the software industry.
