Introduction:
The UK’s competition regulatory body, the Competition and Markets Authority (CMA), has granted its approval for the proposed acquisition of VMware by US chipmaker Broadcom. The regulator’s extensive investigation has determined that the £54 billion deal will not lead to a substantial reduction in competition within the UK’s server hardware components supply sector.
CMA’s Ruling on the Deal:
The CMA, in what marks its largest-ever investigated deal, has declared that the merger of Broadcom and VMware, valued at $69 billion (£54 billion), does not raise any significant competition concerns in the UK market. This landmark decision underscores the authority’s commitment to scrutinizing mergers comprehensively and ensuring that they do not negatively impact competition.
Assessment and Findings:
During the in-depth investigation, the CMA delved into various aspects of the proposed acquisition that had prompted initial concerns. Broadcom specializes in computer chip manufacturing, while VMware focuses on cloud technology services. A key aspect of the investigation revolved around the possibility of Broadcom gaining a competitive advantage by monitoring competitors utilizing VMware services.
The CMA also assessed whether the merged entities might compel rival chipmakers to share sensitive business information with VMware to ensure compatibility with its software. However, the regulatory body concluded that this scenario was unlikely to transpire, given that sharing such information at a point when it is not commercially advantageous to Broadcom reduces any potential risk.
Moreover, the CMA evaluated the possibility of the merged companies intentionally diminishing the performance of VMware’s software with products from Broadcom’s rivals. The authority determined that the financial costs of such a move would outweigh any potential benefits, making such an action illogical for the companies involved.
Chair’s Statement:
Richard Feasey, the chair of the independent panel responsible for investigating the deal, emphasized the importance of assessing mergers thoroughly to prevent any harm to competition within the UK market. He highlighted that even though the UK market’s share of total sales might be relatively small in a merger of this scale, the CMA’s obligation remains to ensure that competition remains unhampered.
Feasey stated, “In this case, having carefully considered the evidence and found no competition concerns, we have concluded the deal can go ahead.”
CMA’s Previous Decision and Conclusion:
It’s noteworthy that the CMA had provisionally cleared the Broadcom-VMware deal in July. This final decision reaffirms the authority’s belief that the merger is not expected to adversely affect competition dynamics in the UK.
