UK Competition and Markets Authority (CMA) initiated the so-called “Phase 1” investigation proposed by Broadcom $61 billion deal to buy virtualization software giant VMware.
The news comes soon after there is news that the European Commission (EC) is also investigating what will be one of the biggest technology acquisitions of all time. Meanwhile, in the domestic market of US companies, the Federal Trade Commission (FTC) last month moved its investigation into a deeper second phase of review, meaning the FTC saw enough during its initial review to justify a closer look.
The essence of the transaction is that the chip giant Broadcom seeks to diversify its activities through deeper penetration into the field of enterprise infrastructure software. While VMware shareholders green light an offer made a couple of weeks ago, a deal of this size was always going to get the attention of regulators, so it’s not surprising that we see several authorities scrutinizing the deal. Broadcom had previously said it hoped to close the deal by October 2023, so it knew it would be a long way to go.
Broadcom’s previous mega deal was derailed back in 2018 when it was planning acquire competitor Qualcomm for $130 billion was eventually abandoned after the intervention of President Trump citing national security concerns. Both the political and competitive optics are different this time around, so it’s hard to predict how this will all play out, but the UK CMA has now opened a two-week consultation period, to which it invites comments from “stakeholders”.
The implications of this will determine what happens next, and if the CMA determines that this acquisition “would result in a significant reduction in competition” in any UK market, it could take further action.