UK’s competition watchdog provisionally clears £53bn computer tech tie-up
19 July 2023, 13:54
The Competition and Markets Authority is investigating US computer chipmaker Broadcom’s proposed buyout of cloud technology firm VMware.
The UK’s competition watchdog has provisionally given the green light to the 69 billion US dollar (£53 billion) merger of Broadcom and VMware, the joint-biggest takeover it has ever investigated.
US computer chipmaker Broadcom proposed buying cloud technology firm VMware in May last year.
The mega deal consists of a 61 billion US dollars (£47 billion) purchase and the assumption of 8 billion US dollars (£6 billion) of debt, making it the same value as the proposed blockbuster tie-up of Microsoft and video game maker Activision Blizzard.
The UK’s Competition and Markets Authority (CMA) raised concerns that the move could drive up the cost of computer servers used by the UK Government, banks and telecoms firms.
It is because Broadcom makes hardware and VMware produces software products which thousands of businesses and public bodies in the UK rely upon, the CMA said.
Merging the two technology giants could therefore limit the supply of important computer parts and put rival companies at a disadvantage, resulting in less choice and higher prices for customers.
But the CMA said it had provisionally found the deal would not substantially reduce competition in the supply of computer server hardware parts in the UK.
It is despite worries that the merged company could make their products work less well, or not at all, with VMware’s software, which is used by rival companies.
But the CMA suggested that the financial benefits of the merger could outweigh the possible costs of business being lost as a result.
It also said the deal would be “unlikely” to harm innovation, having considered concerns that Broadcom would have access to commercially sensitive information shared by rivals with VMware.
Richard Feasey, chair of the independent inquiry panel carrying out the investigation, said: “Computer servers – often using the products of Broadcom and VMware – play a critical role in enabling us to work in the office or at home or to access TV shows or use banking services.
“That’s why it’s important we investigate this deal to ensure that UK businesses continue to benefit from competition and innovation in the supply of server components.
“After carefully considering a broad range of evidence, we have provisionally found that this deal would not harm competition.”
The European Union’s executive commission approved the deal last week, after carrying out its own in-depth investigation.
The provisional decision comes after the CMA moved to block Microsoft’s takeover of Call of Duty maker Activision earlier this year, over concerns it would stifle competition in the small but fast-growing cloud gaming market.
It was met with stiff resistance from the two tech firms who argued the deal is good for both competition and for gamers.
But the regulator said last week it was considering Microsoft’s argument that new developments mean its industry-leading acquisition should go ahead.
