The $61 billion acquisition of cloud company VMWare (NYSE: VMW) by Broadcom (NASDAQ: AVGO) has provisionally passed two of its major hurdles, but must still get approval from the U.S. Federal Trade Commission (FTC).
The European Union approved the Broadcom buyout earlier this month, while the United Kingdom's relevant regulator sanctioned the acquisition on July 19, despite previous fears that the in-depth British Competition and Markets Authority (CMA) investigation would kill the merger.
The acquisition, however, still faces an examination by the FTC. Generally, acquirers face a lengthy review process and whopping legal costs under the FTC’s purview. Even with new stringent new antitrust guidelines from the FTC and Department of Justice (DoJ), however, regulators are unlikely to be able to block large deals.
New Street Research's Blair Levin told Silverlinings he's less an expert on tech mergers than he is on telco matters, but noted that generally speaking "the Europeans are tougher on antitrust than the American courts."
Thus, while it remains to be seen whether the FTC has bought Broadcom's arguments that the VMware deal will be good for cloud competition, Levin said. "I would think if the Europeans say its okay, that would have some influence on leadership of the FTC."
Broadcom has previously said that it expects to finalize the deal in fiscal year 2023, which closes at end of October.
Broadcom wants VMware to have access to its infrastructure software portfolio, according Broadcom CEO Hock Tan, who has said that this portfolio includes many multi-cloud and cloud-native elements. His logic is that a combined Broadcom and VMware would encourage customers to “modernize and architect their IT infrastructure” safe in the knowledge that they are backed by large-scale systems to do so.
While we collectively hold our breath waiting on the FTC, read up on our recent coverage of the deal: