Broadcom just took a big step toward clinching its $61 billion purchase of VMware, albeit with some requirements attached. The EU's European Commission has approved the merger following a months-long investigation of the potential competitive harm. Officials found that Broadcom only had limited opportunities to abuse its power, and that some remedies could ensure healthy competition going forward.
The Commission determined that Broadcom doesn't have a "strong position" that could hurt competition in network and storage adapters, and that it wouldn't have an incentive to limit a networking partnership with AMD and NVIDIA. It also couldn't bundle VMware with its own software. Broadcom would, however have the motivation to squeeze its longtime rival Marvell by limiting the compatibility of that company's Fiber Channel adapters with VMware.
To address this, the EU regulator will require that Broadcom offer third parties the tools to make compatible Fiber Channel adapters. The firm will also have to provide source code for the drivers that run those adapters. Ideally, companies will know that their equipment works properly with VMware's server virtualization technology.
In a statement, Broadcom says that it "continue[s] to make progress" in getting approvals for the merger, and points to similar arrangements in countries like Australia, Canada and South Africa. It's still facing reviews from the US Federal Trade Commission and the UK's Competition and Markets Authority.
If the deal closes, it will represent one of the largest tech acquisitions yet. Only Dell's purchase of EMC ($67 billion) and Microsoft's tentative buyout of Activision Blizzard ($68.7 billion) are larger. For Broadcom, this would also be a pivotal expansion — it would make a deep dive into enterprise software that could help it control more of the business world. To some degree, it would also help Broadcom make up for its failed takeover of Qualcomm in 2018.