The European Commission (EC) has formally approved Broadcom’s $61 billion bid for virtualization software giant VMware, with the caveat that Broadcom fulfils certain ongoing commitments around access and interoperability.
The billion-dollar deal, among the biggest tech acquisitions of all time, was always likely to attract regulatory scrutiny when it was announced way back in May last year. Europe revealed plans for an in-depth probe late last year over competition concerns, followed by the U.K. in March. The Federal Trade Commission (FTC), meanwhile, is also currently investigating the deal.
That Europe has approved the deal could be a harbinger of what’s to come elsewhere, though that is far from certain as we’ve seen with other recent regulatory probes. Most notable, perhaps, is Microsoft’s billion-dollar Activision, which was blocked in the U.K., approved in Europe, and more or less given the go-ahead in the U.S. after a judge yesterday ruled that the FTC couldn’t block the deal.
Broadcom’s interest in VMware stems from a push to diversify beyond hardware through expanding deeper into enterprise infrastructure software fray. The EC’s core concern, it seems, was that through buying VMware, which provides virtualization software that works with hardware such as fibre channel host-bus adapters, storage adapters and network interface cards (which Broadcom provides), could restrict competition in the hardware markets it currently operates in.
Put simply, the EC’s concern was that Broadcom could restrict or “degrade” interoperability between VMware’s software and Broadcom’s hardware rivals, which includes Marvell which develops similar fibre channel host-bus adapters to Broadcom.
Thus, the EC has made this one of the conditions for approving the acquisition — Broadcom must provide guaranteed access and interoperability relating to the APIs, materials, tools, and technical support that allow rival hardware companies (i.e. Marvell) to leverage VMware’s virtualization software on the same terms as Broadcom does.
The commitment applies for the next ten years and exists under direct supervision of the European Commission, with an “independent trustee” appointed to monitor the commitment.