Europe Gives Conditional Blessing To Broadcom’s $61bn VMware Deal

Broadcom has received some welcome news from European competition regulators, over its proposed $61 billion (£46.9bn) acquisition of virtualisation giant VMware.

The European Commission announced that it has “approved, under the EU Merger Regulation, the proposed acquisition of VMware by Broadcom. The approval is conditional upon full compliance with the commitments offered by Broadcom.”

Broadcom in May had offered European officials ‘interoperability remedies’ to rivals such as Marvell and others.

European concessions

This was an effort to address European Union antitrust concerns that Broadcom could restrict competition in some hardware components (such as Fibre Channel Host-Bus Adapters, storage adapters and Network Interface Cards) which interoperate with VMware’s virtualisation software.

In addition, Marvell and other rivals will also have guaranteed access to the source code for all of Broadcom’s current and future FC HBA drivers through an irrevocable open source license.

It comes Broadcom had first announced its proposed VMware acquisition back in May 2022.

That triggered multiple regulatory probes around the world, but now the European Commission has signaled it is happy for the deal to proceed.

It will be Broadcom’s largest ever purchase, and will expand the chipmakers move into enterprise software.

The Commission said that it had carefully investigated the effectiveness of the remedies, collecting views from Marvell as well as server manufacturers.

Conditional approval

The Commission said that in view of the positive feedback from market participants, it concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns and would maintain competition on the market for FC HBAs.

However the Commission said it’s decision is conditional upon full compliance with the commitments, which will be in place for ten years.

“Broadcom holds a very strong position in the market for the supply of certain hardware components,” said Margrethe Vestager, executive VP in charge of competition policy.

“VMware is a key server virtualisation software provider,” said Vestager. “By acquiring VMware, Broadcom could restrict or degrade interoperability between VMware’s leading server virtualisation software and some competing hardware components.”

“But the commitments offered by Broadcom will enable its only rival Marvell, to continue competing on equal footing and ensure a similar protection for any future entrants,” Vestager concluded.

Other probes

There are a number of other regulators also concerned at the deal.

In July 2022 for example the US Federal Trade Commission (FTC) said it would undertake a more in-depth “second look” investigation of the Broadcom-VMware deal, in line with a policy announced in September 2021.

But perhaps Broadcom’s most pressing challenge comes from the United Kingdom.

In November 2022 the UK regulator – the Competition and Markets Authority (CMA) – announced it was launching an initial review of the Broadcom deal to buy VMware, over concerns the deal could substantially hurt competition in the UK.

In January 2023 the CMA announced that it had begun a Phase 1 investigation of the deal.

Then in March 2023 the CMA concluded Broadcom’s deal to buy VMware could lead to less innovation and drive up the cost of computer parts used by the UK government, banks and telecoms.

The CMA found that VMware has a leading position in server virtualisation software and that compatibility with its software is critical for the server hardware components sold by Broadcom and its rivals.

The CMA said it was concerned that the deal could enable Broadcom to harm its rivals by preventing them from being able to supply VMware-compatible hardware components – such as NICs and storage adapters – reducing competition and ultimately choice for customers.

The CMA investigation also found that the merger may result in Broadcom obtaining commercially sensitive information (such as details of new planned products) that its hardware rivals currently supply to VMware.

The CMA was concerned that this could damage innovation and leave customers worse off, including fewer product updates or new features, and it has begun a Phase two investigation.

However it seems that both the US FTC and the UK’s CMA are now examining the European concessions.

“We continue to make progress with our various regulatory filings around the world, having received legal merger clearance in Australia, Brazil, Canada, the European Union, South Africa, and Taiwan, and foreign investment control clearance in all necessary jurisdictions,” Broadcom was quoted by Reuters as saying in a statement.