The UK’s competition regulator has expressed concerns over Broadcom’s $61bn takeover of VMware.
The deal could stop Broadcom from providing VMware-compatible hardware components to its rivals, the Competition and Markets Authority (CMA) said after concluding its phase one investigation.
US-headquartered Broadcom produces semiconductors and infrastructure software, while VMware, also US-headquartered, provides virtualisation and cloud technology.
David Stewart, executive director of the CMA, said: “We are concerned this deal could allow Broadcom to cut out competitors from the supply of hardware components to the server market and lead to less innovation at a time when most firms want fast, responsive, and affordable IT systems.”
Broadcom now has five working days to suggest legally permanent suggestions that ease competition concerns.
The CMA will then scrutinise the changes and, if needed, continue to a phase two investigation.
Stewart added: “It’s now up to Broadcom to respond to our concerns or face a more in-depth investigation.”
In a statement VMware said
“Broadcom’s acquisition of VMware continues to move forward as expected, including with respect to the regulatory review process taking place in the UK and those across multiple other jurisdictions.
“VMware will continue to respond to all regulatory inquiries, as appropriate, and we continue to expect the deal to close in Broadcom’s fiscal year 2023.”
Despite both companies involved being US-based, they are still subject to the CMA if they are deemed to have an effect on British competition markets.
Previously, the CMA prevented the $315m acquisition of the video database Giphy by Meta, citing concerns it would “significantly reduce competition in markets”.