Dr. John Yong Ren, founder and managing partner of T&D Associates, recently discussed the Broadcom/VMware deal in an interview with Dr. Sophie Yang, a Senior Vice President at Compass Lexecon as part of the CPI Talks video interview series. T&D acted as anti-trust counsel for Broadcom in China. Dr. Ren and his team have extensive experience in handling complex and challenging cases, having been involved in approximately 50% of the cases conditionally approved by SAMR to date. A global Compass Lexecon team comprised of personnel in the U.S., U.K., Europe, and China provided economic analysis and logistical support for the Broadcom/VMware transaction throughout the regulatory process. The deal, valued at USD$61 billion, was a semiconductor transaction that faced regulatory scrutiny in multiple jurisdictions.
The transaction, initiated in May of 2022, successfully cleared regulatory hurdles in the EU, the UK, the U.S., China, South Korea, etc., by November of 2023. This is considered one of the largest deals to date in the semiconductor industry.
During the discussion, John Ren highlighted the similarities and differences in the theories of harm identified by various antitrust agencies, particularly focusing on the SAMR’s perspective. He emphasized that the SAMR communicated and shared approaches with other jurisdictions but noted differences due to the unique characteristics of the Chinese market, including different competitors, customers, economic development stage, and business models.
Dr. Ren pointed out specific examples of these differences, such as the presence of local suppliers and competitors in the Chinese market that do not compete in other jurisdictions. Additionally, the SAMR did not focus on bundling Broadcom software with VMware software, unlike the EU.
Regarding remedies imposed by different jurisdictions, Dr. Ren explained that conditional approval was received in the EU, South Korea, and China. While there were similarities in concerns related to competition, the EU remedy covered one hardware (FC HBAs), while China’s remedy covered three hardware products (FC HBAs, storage adapters, and NICs), reflecting additional issues specific to the Chinese market.
Reflecting on the deal, John Ren recalled the most memorable moment was receiving final approval from the SAMR just one day before the deal deadline, highlighting the crucial nature of the approval for the success of the deal.
The discussion also delved into the challenges and attention surrounding high-tech industry mergers, emphasizing the need for a prudent review due to the sensitive nature and substantial financial involvement. Dr. Ren acknowledged the difficulty of the antitrust review process for such mergers, involving complicated products, competition concerns, and stakeholder input.
Addressing the touchy question of geopolitical factors influencing the review process, Dr. Ren stated that, while concerns may arise, most high-tech mergers can obtain clearance if handled properly. The SAMR follows a procedure based on competition concerns, and while geopolitical factors may impact the process, effective handling can still lead to timely approval.
In response to maximizing chances and obtaining good outcomes during the review process, Dr. Ren provided three takeaways.
- First, conduct a frank assessment of the transaction early on to identify potential concerns.
- Second, design a relevant strategy after identifying competition concerns, engaging with counsel, economists, and consulting firms.
- Lastly, actively engage with the SAMR and case stakeholders, addressing potential concerns in a timely manner.
Dr. Ren concluded by emphasizing the importance of creativity in handling each unique merger case, acknowledging the lack of a one-size-fits-all solution. The key is to proactively address potential concerns, conduct a high-quality filing, and engage with decision-makers and stakeholders throughout the review process.