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Broadcom and VMware received conditional approval for their merger from Chinese officials
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The deal is now set to close this week
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Analysts weighed in on what the transaction means for Broadcom
Talk about down to the wire. Broadcom and VMware are set to close their long-pending merger deal this week, after receiving regulatory approval from Chinese officials.
The nod from China was the final regulatory hurdle to the deal’s close. All told, the transaction has secured approvals from regulators in Australia, Brazil, Canada, China, the European Union, Israel, Japan, South Africa, South Korea, Taiwan and the U.K. With these in hand, the companies plan to close the transaction on Wednesday, November 22.
The close date is just four days before the deadline the pair had agreed upon to finish the deal before financial penalties would kick in.
In a note to investors, New Street Research analysts pointed out Broadcom did have to make some concessions to get the green light from China. Among other conditions, it had to agree not to bundle its hardware with VMware software and ensure VMware’s software remains interoperable with its competitor’s hardware.
While some analysts have raised concerns about what the deal means for VMware given Broadcom’s history of acquiring and gutting companies, New Street’s team noted that for Broadcom at least, the transaction is “transformational.”
“VMware propels the company into a selective league in terms of go-to-market for Enterprise IT software,” Pierre Ferragu and team wrote. “VMware’s salesforce and technological presence at the core of enterprise infrastructure covers 100% of Fortune 500 companies and >300k companies in total. This makes Broadcom a much stronger acquisition platform, expanding the number of targets the company can consider and increasing the amount of synergies acquisitions can yield.”
What now?
In terms of what comes next once the deal closes, CCS Insight's Chief of Research Bola Rotibi told Silverlinings she expects a lot of things to begin happening fast.
First on the list? Streamlining, aka job cuts. "We will know more on that front over the coming months," she noted.
Dell'Oro Group's Mauricio Sanchez agreed that integration plans, particularly around headcount reduction, will proceed quickly. "Remember that this deal was supposed to close a year ago (Oct-2022). The amount of employee FUD (fear, uncertainty, doubt) has grown rapidly over the past year. I think going slow with the integration plans will only prolong the significant hardship employees have already suffered and further erode low morale," he said.
Rotibi argued some things, though, won't change. For instance, she expects VMware's cloud foundation platform to continue to play an important role going forward, tipping it to underpin a "mix of technologies – virtualization, hybrid and multi-cloud support – that customers see as essential for consistent cross platform support."
She concluded: "Hock has been clear that the business units that he acquires run as independent units and VMware is set to retain its brand name and be the home of Broadcom software as Hock outlined at the start when the acquisition was announced. I suspect that much of the early months post-deal close will be exposing much of the integration work that has been going on for some time now. So, to ensure customers and partners are quickly reassured, I can imagine that VMware’s organizational structure will be quickly outlined along with the portfolio."
Catch up on our extensive coverage of this deal:
- Broadcom misses VMware deal deadline, waits for Chinese approval
- Broadcom's $61B VMware deal slowly makes progress
- Broadcom gets UK approval for $61B VMware acquisition
- Broadcom-VMware merger will hatch a new ‘supercloud’
- VMware customers should find 'exit ramps' ahead of Broadcom deal: Gartner
- $61B Broadcom-VMware merger is probably toast, says legal expert
- Broadcom’s $61B deal to acquire VMware raises questions for customers
Updated 11/21/2023 11:19 am ET to include comments from CCS Insight and Dell'Oro Group.