The UK’s Competition and Markets Authority (CMA) has started a more in-depth ‘phase two’ probe into Broadcom’s planned $61bn acquisition of VMware. This decision follows a first stage investigation back in January, which was due to worries that Broadcom could restrict competition in the hardware components market that work with VMware’s software. The CMA asked Broadcom on the 22nd of March to provide undertakings on the matter, and warned a phase two would begin if the undertakings weren’t submitted or accepted.
Today (29th March), the CMA revealed it was informed by Broadcom that the company wouldn’t be submitting any undertakings on the merger. This news meant the CMA had to start a more thorough investigation and appoint an inquiry group to investigate the bid.
The $61bn deal was one of the most significant tech sector announcements of 2020. If the merger is approved, Broadcom Software Group would get the VMware name, and incorporate Broadcom’s infrastructure and security software into an extended VMware portfolio.
However, worries have been raised about the possible restriction of competition due to the two companies’ power. This led to the European Commission launching an in-depth investigation into the merger bid late last year, citing the same worries that the deal could let Broadcom restrict competition in the hardware components market that operate with VMware’s software.
Broadcom has said the deal follows their strategy to expand their software business and will lead to new growth opportunities. In 2018, the semiconductor giant purchased enterprise software vendor CA Technologies for almost $19bn, showing their intent to get into the software sector. Previously, the company made a $103bn offer for Qualcomm, but this was blocked in 2018 by Donald Trump due to national security issues.
