Broadcom successfully closes $69 Billion acquisition of VMware amid global regulatory hurdles

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In a landmark move, Broadcom has officially concluded its $69 billion acquisition of cloud-computing giant VMware after overcoming regulatory obstacles, with China’s approval marking the final major market hurdle. The deal, initially announced in May 2022, stands as one of the largest global acquisitions and underscores CEO Hock Tan’s strategic push to bolster the chipmaker’s presence in the software business.

The acquisition process was marred by extensive regulatory scrutiny worldwide, leading to three prior delays in the closing date. The Chinese regulatory approval, secured on Tuesday, was particularly crucial given the escalating tensions between the United States and China over stricter chip export controls. Fears among investors regarding the deal’s fate before the looming Nov. 26 deadline were assuaged following the positive outcome.

Danni Hewson, Head of Financial Analysis at AJ Bell, attributed the improved sentiment to the recent meeting between China’s President Xi Jinping and U.S. President Joe Biden earlier in the month. This diplomatic exchange seemed to have played a pivotal role in easing concerns, providing a conducive environment for the deal’s successful closure.

The European Commission had already given its approval after Broadcom committed to remedies to address concerns related to competition, particularly with rival Marvell Technology (MRVL.O). Additionally, the UK’s Competition and Markets Authority (CMA) granted its blessing following a comprehensive investigation.

Market strategists and analysts, mindful of the regulatory challenges faced by other major tech mergers, expressed cautious optimism. Cabot Henderson, a market strategist at JonesTrading, highlighted that while the blessings received by Broadcom for the VMware acquisition and Microsoft’s closure of the $69 billion purchase of Activision Blizzard may pave the way for other deals, it would be premature to assume a blanket approval trend.

The tech industry has witnessed intensified regulatory scrutiny, with big-ticket mergers like Microsoft’s acquisition of Activision Blizzard facing heightened oversight from the U.S. Federal Trade Commission under the leadership of Chair Lina Khan. The successful closure of the Broadcom-VMware deal, despite the hurdles, may set a precedent for other companies navigating similar regulatory landscapes.

As Broadcom solidifies its position in the cloud-computing space through the VMware acquisition, the industry will be keenly watching for potential ripple effects on future M&A activities, particularly in the context of evolving global regulatory dynamics in the technology sector.

(Source: Reuters | Bloomberg | CRN)

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