The European Commission (EC) has granted formal approval to Broadcom’s $61 billion bid for virtualization software giant VMware.
However, the approval comes with certain conditions related to access and interoperability and after months of regulatory scrutiny since the deal was announced in May last year.
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In December, Europe announced plans for an extensive investigation due to competition concerns, and the UK initiated a similar probe in March.
The Federal Trade Commission (FTC) in the US is also currently examining the deal.
Broadcom’s interest in VMware stems from its strategic goal of diversifying beyond hardware and expanding further into enterprise infrastructure software.
VMware provides virtualization software that works with hardware like fibre channel host-bus adapters, storage adapters, and network interface cards (also provided by Broadcom).
The EC’s primary concern was that Broadcom’s acquisition of VMware could potentially limit competition in the hardware markets where Broadcom currently operates.
To address this concern, the EC has imposed specific conditions for approving the deal.
Broadcom must ensure guaranteed access and interoperability for rival hardware companies, such as Marvell, to leverage VMware’s virtualization software.
This includes providing access to APIs, materials, tools, and technical support on the same terms as Broadcom receives.
These commitments will be valid for the next ten years and will be supervised directly by the European Commission.
An independent trustee will be appointed to monitor the fulfillment of these commitments.
The approval of the deal by the European Commission could serve as an indication of what may happen in other jurisdictions, although outcomes in other regulatory probes have shown inconsistencies.
A notable example is Microsoft’s billion-dollar acquisition of Activision, which was blocked in the UK, approved in Europe, and recently received a favorable ruling in the US.
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This was after a judge determined that the FTC could not impede the deal.
While the Broadcom and VMware deal is not yet finalized, the EC’s approval marks a significant step forward.
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