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© evertiq Business | November 23, 2015

EU commission clears Avago's acquisition of Broadcom

The European Commission has approved under the acquisition of Broadcom by Avago Technologies Limited. The Commission concluded that the merged entity would continue to face effective competition in Europe
Commissioner Margrethe Vestager, in charge of competition policy, said: “Thanks to very good cooperation with the companies the Commission has been able to approve this multi-billion dollar takeover within a very short space of time while preserving effective competition in this crucial high-technology sector. "

The Commission's investigation showed that the portfolios of the companies are mainly complementary since Broadcom makes "off-the-shelf" chips for the broadband and connectivity market segments, while Avago makes custom-built chips for special applications in the analog wireless integrated circuits, enterprise, storage and industrial segments.

Nevertheless, the Commission had some concerns about the vertical relationship created by the transaction, since Avago supplies certain intellectual property (technology for allowing fast data transmission between chips) to some of Broadcom's competitors. The Commission's concern was that after the takeover Avago could have had an incentive to withhold this intellectual property in order to extend the merged entity's dominance in the so-called "switch chips" market.

However, during the Commission's assessment of the case, Avago addressed these concerns by entering into commercial agreements with other "switch chip" manufacturers. These agreements will ensure that other "switch chip" manufacturers will continue to have access to the necessary intellectual property on reasonable terms.
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