Broadcom’s
takeover of
VMware,
worth around $80 billion, has been cleared by historically tough-on-tech European regulators in the latest sign that technology dealmaking slowed by competition concerns could get rolling once again.
The European Commission on Wednesday said that it had approved the chip maker’s acquisition of cloud computing group
VMware
(ticker: VMW), conditional upon compliance with commitments offered by
Broadcom
(AVGO).
A victory for Broadcom in Europe is a good sign for the whole technology sector.
The industry has seen dealmaking slow, and it’s not only because of an environment of higher interest rates. There has been a perception that regulators are unwilling to wave through tech mega-mergers and acquisitions, perhaps no more so than in Europe, which is home to some of the toughest competition watchdogs in the tech industry.
Nvidia’s
(NVDA) bid to buy chip designer Arm from SoftBank (SFTBY) was quashed by regulators last year, and Broadcom’s cash-and-stock deal to buy VMware—worth around $77 billion to $81 billion at current prices—could have suffered the same fate. With the deal having received clearance in Europe, attention now turns to the U.S., where the Federal Trade Commission helmed by Lina Khan is also scrutinizing the deal.
However, the FTC on Tuesday suffered a crushing blow to its campaign against corporate mergers, with a federal judge ruling against the agency’s halt on the $75 billion acquisition of
Activision
(ATVI) by
Microsoft
(MSFT).
The high-profile defeat could make the regulator less likely to pursue anything but a slam dunk, and Europe’s green light for Broadcom suggests the deal may not fit in that category. Tech dealmakers waiting on the sidelines—corporate transactions have plunged this year—may now be preparing for a comeback.
“This was a black eye for Khan and the FTC and we expect the floodgates now to open up on tech M&A,” said Dan Ives, an analyst at broker Wedbush. “Broadcom and
Activision
are music to the ears of the tech world.”
Shares in VMware surged 5.2% on Tuesday on the back of the Activision news, and were advancing a further 1.6% in premarket trading Wednesday after the approval from Brussels. Broadcom stock was 0.4% higher, building on a 0.5% gain on Tuesday.
It may be only the start of a wave of stock market moves driven by deal activity in tech—finally.
Write to Jack Denton at [email protected]
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