The in-depth phase 2 probe will be launched by the British competition watchdog as Broadcom informed it of not offering any undertakings that could address its concerns such as the deal could make computer servers costlier for UK businesses


CMA to undertake a phase 2 investigation into Broadcom’s acquisition of VMware. (Credit: Cmglee/Wikimedia Commons)

The UK Competition and Markets Authority (CMA) has referred Broadcom’s previously announced $61bn acquisition of VMware for an in-depth phase 2 investigation after the phase 1 probe showed that the deal could stifle competition in the UK.

In its phase 1 investigation, the CMA concluded that the deal would result in the increased price of computer parts used by the government, banks, and telecoms apart from reducing innovation.

The British competition watchdog also noted that the merger would enable Broadcom to prevent other suppliers from being able to deliver VMware-compatible hardware including network interface cards (NICs) and storage adapters.

Besides, the CMA stated that the proposed merger would limit competition in the supply of fibre channel host-bus-adapters, storage adapters, and fibre channel switches.

The regulatory authority launched the phase 1 investigation into the deal in January 2023 and arrived at a conclusion last week.

Broadcom has informed the regulator of not offering any undertakings that could address the latter’s concerns.

UK CMA Markets and Mergers Executive Director David Stewart said: “On 22 March 2023, Broadcom informed the CMA that it would not offer such undertakings to the CMA.

“Therefore, pursuant to section 33(1) and in accordance with section 34ZA(2) of the Act, the CMA has decided to refer the Merger to its chair for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013 to conduct a phase 2 investigation.”

The inquiry group will have time till 12 September 2023 to investigate and report on the proposed deal.

Broadcom announced the cash-and-stock deal with the cloud computing and virtualisation technology company in May 2022.

As per the terms of the deal, shareholders of VMware will choose to receive $142.5 in cash or 0.252 shares of Broadcom shares for each VMware share.