UK market watchdog clears Broadcom's $61 billion deal to acquire VMware

The UK's Competition and Markets Authority (CMA) on Monday approved US-based hardware company Broadcom's $61 billion purchase of desktop virtualization software provider VMware following an in-depth investigation.

The CMA found that Broadcom's deal to buy VMWare “would not substantially reduce competition in the supply of server hardware components in the UK.” Image Source: Twitter/@ians_india

The UK's Competition and Markets Authority (CMA) on Monday approved US-based hardware company Broadcom's $61 billion purchase of desktop virtualization software provider VMware following an in-depth investigation.

The CMA found that Broadcom's deal to buy VMWare “would not substantially reduce competition in the supply of server hardware components in the UK.”

Following its initial Phase 1 investigation, the CMA identified competition concerns warranting in-depth review and referred the deal to a Phase 2 inquiry.

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In the 'Phase 2' probe, it has found that the potential financial benefit to Broadcom and VMware of making rival products work less well with VMware's software would not outweigh the potential financial cost in terms of lost business.

The panel also considered whether the deal could harm innovation. It found that this is unlikely to be a concern, in particular since information about new product adaptations only needs to be shared with VMware at a stage when it is too late to be of commercial benefit to Broadcom.

“Broadcom and VMware are US-based companies supplying hardware and software used by thousands of businesses and public bodies in the UK. Even if the UK market represents a small proportion of total sales in a merger, the CMA's job is to scrutinise deals like this thoroughly to ensure they don't harm competition in the UK,” said Richard Feasey, chair of the independent panel.

In this case, having carefully considered the evidence and found no competition concerns, “we have concluded the deal can go ahead,” Feasey added.

In July, the European Commission (EC) formally approved Broadcom's $61 billion acquisition of VMware, with certain conditions.

Broadcom holds a very strong position in the market for the supply of certain hardware components. VMware is a key server virtualisation software provider.

The Federal Trade Commission (FTC) in the US is currently investigating the deal.

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