UK competition agency launches inquiry into Broadcom’s $61B VMware buy

The UK’s Competition and Market’s Authority (CMA) has announced it is investigating Broadcom’s proposed acquisition of VMware to determine whether the deal would raise problems for competition.

Semiconductor manufacturer and infrastructure software giant Broadcom first announced its intention to acquire VMware in May, in a deal worth $61 billion in stock and cash. However, not everyone is happy with the proposed deal, with senior analyst for Forrester, Tracy Woo, noting back in September that Broadcom had a poor track record when it came to previous acquisitions.

“Following the purchases of CA and Symantec, Broadcom raised prices, decreased support, and stopped investing in innovation,” she said. “VMware customers would be wise to have an exit plan.”

In a statement on the CMA’s website, the regulator said it is opening up an investigation to look into whether proposed merger “may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”

This is not the first time Broadcom has had a potential acquisition scrutinized. In 2018, the company attempted to purchase fellow chipmaker Qualcomm for a $117 billion, but the deal was scuppered by the Trump administration over what it said were national security issues.

In order to carry out its Phase One investigation, the CMA is inviting interested parties to comment on the deal by December 6. Once this initial phase is complete, the regulator will assess whether to progress to a fuller Phase Two investigation, during which the CMA could decide to take action, including blocking the merger from taking place, if the deal is found to be anticompetitive.

The CMA announced its intention to investigate the acquisition shortly after the European Commission (EC) also said it would be proceeding with an investigation into the deal. Last month, the Federal Trade Commission (FTC) also advanced its investigation into a second review phase, having gathered enough evidence during its initial analysis to justify a more extensive look.

To allay customer fears that Broadcom would raise prices or cut R&D after the VMware acquistion closes, Broadcom CEO Hock Tan recently posted a blog. “The Broadcom business case for this transaction is premised on focusing on the business model, increasing R&D, and executing so that customers see the value of the full portfolio of innovative product offerings — not on increasing prices,” Tan wrote.

“For some time, Broadcom has recognized that the future of enterprise IT is multi-cloud—the ability to distribute applications and services across a combination of clouds. It’s one of the many reasons Broadcom solutions complement what VMware does in the multi-cloud space across private, public, edge and sovereign clouds today. It’s clear our customers have already adopted this mindset, too,” Tan said.

The Broadcom/VMware deal is not the only high value merger that is currently under investigation by the CMA. In July 2022, the CMA announced it was launching dual investigations into Microsoft’s proposed acquisition of videogame maker Activision Blizzard, and Amazon’s competitive practices related to its Marketplace platform.