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European Commission announces in-depth investigation into Broadcom's VMware deal.

Published: 2022-12-21

The EU has decided to launch a detailed investigation into Broadcom's proposed acquisition of cloud company VMware after European regulators warned that the acquisition could lead to "higher prices, lower quality and less innovation" for business customers.

According to European competition authority Margrethe Vestager, who spoke on Tuesday, a preliminary investigation revealed risks that, after the merger, Broadcom could limit compatibility with the server virtualization software offered by VMware today to competing hardware manufacturers. To complete the consideration of the deal, the EU has set a new deadline - May 11 next year. It is emphasized that the decision to start an investigation does not indicate that its outcome is predetermined. The possibility of an in-depth study of the transaction was previously reported.

Last month, Broadcom formally asked the EU for permission to merge after months of preliminary consultations with representatives of the European bureaucratic community. The $61 billion deal is expected to strengthen Broadcom's position in the software market with VMware resources. This is part of a long-term strategy for the buyer, who primarily dealt with hardware solutions. So, in 2018, the company acquired CA Technologies, and in 2019, the Symantec business related to corporate cybersecurity.

It is possible that the deal will also attract the attention of the British regulator, who wants to know if the purchase will harm competition in the British market. A detailed investigation by the EU was envisaged, given the record cost of the purchase and the fact that VMware is also a monopoly in its niche, which owned 79% of the market in 2021. The latter company is expected to provide guarantees to maintain an acceptable price level in order to dispel regulators' doubts. This is the second major deal being considered by EU regulators this year. As you know, Microsoft offered to acquire Activision Blizzard Inc. for $ 69 billion - an investigation is already underway and a final decision has not yet been made.

According to Broadcom, its deal has already been approved by regulators in Brazil, South Africa and Canada, and the company expects it to close in fiscal 2023. A series of acquisitions undertaken by Broadcom has already angered competitors concerned about the company's growing influence. This has led to intense lobbying efforts designed to frustrate the tech giant's business expansion.

The biggest blow came in 2018 when former US President Donald Trump issued an executive order barring Broadcom's $117 billion purchase of Qualcomm. is an attempt to acquire VMware.