European Union Approves Broadcom’s Acquisition of VMware for $61 Billion
Broadcom has made significant progress in securing its $61 billion acquisition of VMware, although certain conditions must be met. The European Commission of the EU has granted approval for the merger after conducting an extensive investigation into potential negative effects on competition. Authorities concluded that Broadcom’s ability to misuse its dominance was limited, and implementing certain measures would guarantee fair competition in the future.
The commission ruled that Broadcom does not have a “strong position” that could impede competition in network and storage adapters, and that it would have no incentive to limit networking partnerships with AMD and NVIDIA. It also couldn’t integrate VMware with its own software. However, Broadcom would have an incentive to squeeze long-time rival Marvell by limiting the compatibility of that company’s Fiber Channel adapters with VMware.
To address this, the EU regulator requires Broadcom to provide third parties with the tools to manufacture compatible fiber channel adapters. The company must also provide the source code for the drivers that use these adapters. Ideally, companies know that their equipment will work properly with VMware’s server virtualization technology.
In a statement, Broadcom said it was “continuing to move forward” with merger approval and pointed to similar arrangements in countries such as Australia, Canada and South Africa. It is still under review by the US Federal Trade Commission and the UK Competition and Markets Authority.
If the deal goes through, it will be one of the largest technology acquisitions to date. Only Dell’s purchase of EMC ($67 billion) and Microsoft’s initial purchase of Activision Blizzard ($68.7 billion) are larger. For Broadcom, this would also be a key expansion — making a deep dive into software that could help it dominate more of the business world. To some extent, it would also help Broadcom make up for the failed Qualcomm takeover in 2018.
