📋 Tender Overview
The European Commission has opened an in-depth investigation to assess under the EU Merger Regulation the proposed acquisition of VMware by Broadcom. The Commission is particularly concerned that the transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMwares software.Broadcom is a hardware company that offers among other products Network Interface Cards NICs Fibre Channel Host-Bus Adapters FC HBAs and storage adapters. Broadcom recently started expanding into software markets. VMware is a software provider offering mainly virtualisation software which interoperates with a wide range of hardware including NICs FC HBAs and storage adapters. The companies portfolios are largely complementary.The Commissions preliminary competition concernsThe Commissions preliminary investigation indicates that the transaction may allow Broadcom to restrict competition in the market for the supply of NICs FC HBAs and storage adapters bydegrading interoperability between VMwares server virtualisation software and competitors hardware to the benefit of its own hardware andorforeclosing competitors hardware by preventing them from using VMwares server virtualisation software or degrading their access to it.This in turn could lead to higher prices lower quality and less innovation for business customers and ultimately consumers.In addition the Commission will also examine whetherBroadcom may hinder the development of SmartNICs by other providers. In 2020 VMware launched Project Monterey with three SmartNICs sellers NVIDIA Intel and AMD Pensando. Broadcom may decrease VMwares involvement in Project Monterey to protect its own NICs revenues. This could hamper innovation to the detriment of customers.Broadcom may start bundling VMwares virtualisation software with its own software namely mainframe and security software and no longer offer VMwares virtualisation software as a stand-alone product reducing choice and potentially foreclosing rival software providers.The proposed transaction was notified to the Commission on 15 November 2022. The Commission now has 90 working days until 11 May 2023 to take a decision. The opening of an in-depth inquiry does not prejudge the final result of the investigation.Companies and productsBroadcom is a US based hardware company active in the production of NICs FC HBAs and storage adapters amongst other products. NICs are server components that provide an interface between the server and other computers and equipment on a network. FC HBAs are storage adapters that connect servers to storage located outside the server on a storage-area network using the fiber channel protocol typically through a switch. Storage adapters connect servers central processing units to storage directly. Broadcom recently started expanding into software markets notably through the acquisition of CA Technology and Symantec.VMware is a US based software company that mainly offers virtualization software whichenables IT operators to create virtual versions of computer resources e.g. hardware operating systems OS storage devices or network resources known as virtual machines. This enables IT organizations to run more than one virtual system and multiple OS and applications on a single server at the same time. Merger control and procedureThe Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds see Article 1 of the Merger Regulation and to prevent concentrations that would significantly impede effective competition in the European Economic Area or any substantial part of it.The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified the Commission generally has 25 working days to decide whether to grant approval Phase I or to start an in-depth investigation Phase II.In addition to the current transaction there are currently six on-going Phase II merger investigations i the proposed acquisition of OMV Slovenija by MOL ii the proposed acquisition of VOO and Brutl by Orange iii the proposed acquisition of Alumetal by Hydro iv the proposed acquisition of Activision Blizzard by Microsoft v the proposed acquisition of eTraveli by Booking and vi the proposed acquisition of Lagardre by Vivendi.
