EU Antitrust Salvo May Sink US Mega-Merger

The second largest deal of 2022 is under attack from European Union regulators. The EU antitrust watchdog announced this week that it will investigate Broadcom’s proposed $61 billion acquisition of VMware, Inc.

In May, the tech giant announced its intentions to acquire cloud computing and virtualization technology company VMware for a mixture of cash and equity. The merger agreement included a go shop provision permitting VMware to see other suitors for 41 days. Go shop provisions are historically rare, appearing in just 7.5% of deals according to Matterhorn’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of each transaction.

Source: Matterhorn Transactions

Further, the period of 41 days is a relatively generous one because the median duration for go shops over the past 12 months is 36 days.

In their joint press release, the companies touted the deal’s merits, stating, “The combined solutions will enable customers, including leaders in all industry verticals, greater choice and flexibility to build, run, manage, connect and protect applications at scale across diversified, distributed environments, regardless of where they run: from the data center, to any cloud and to edge-computing.”

EU regulators have their doubts, however. Although both Broadcom and VMware are US-based companies, the global reach of US technology companies makes regulators take notice. As the following chart depicts, U.S.-based companies dominate the list of global tech giants and Broadcom already reigned as the 11th largest as of the end of 2021.


Margrethe Vestager, Executive Vice-President in charge of competition policy of the European Commission stated, “We are concerned that after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualisation software. This would lead to higher prices, lower quality and less innovation for customers and consumers.” While U.S. antitrust regulators historically focus on how businesses’ dominance affect consumers, EU regulators broaden that focus to how it affects rival businesses.

The deal’s agreement includes standard language obligating the companies to press on: “Parent and the Company agrees to (and shall cause its respective Subsidiaries to) use its reasonable best efforts, and agrees to take (and shall cause its respective Subsidiaries to take), any and all actions to avoid and, if necessary, eliminate, each and every impediment under any Antitrust Law that may be asserted by any Governmental Entity, so as to enable the Closing to occur no later than the Outside Date.” Broadcom has stated that it expects the deal to close in its fiscal year 2023, nonetheless.

Broadcom is advised by law firms Wachtell, Lipton, Rosen & Katz and O’Melveny & Myers LLP. VMware is advised by Gibson, Dunn & Crutcher LLP.