Broadcom–CA Technologies acquisition

Broadcom–CA Technologies acquisition
Name	Broadcom–CA Technologies acquisition
Date	2018–2019
Location	United States
Acquirer	Broadcom Inc.
Target	CA Technologies
Value	US$18.9 billion
Industry	Software industry

Broadcom–CA Technologies acquisition was the 2018–2019 takeover of CA Technologies by Broadcom Inc. that combined a semiconductor and infrastructure-software buyer with an enterprise-software vendor. The transaction was announced amid consolidation trends involving firms such as Microsoft, IBM, Oracle Corporation, VMware, and Cisco Systems. Observers compared the deal to earlier large technology acquisitions like Dell Technologies' acquisition of EMC Corporation, Hewlett-Packard's purchase of Compaq, and Intel Corporation's acquisitions in the data-center space.

Background

The background to the acquisition involved corporate histories of Broadcom Inc.—founded through the merger of Avago Technologies and legacy Broadcom Corporation—and CA Technologies, formerly Computer Associates International, Inc., a long-established mainframe and enterprise-software vendor. Broadcom's board, led by executives with ties to Symantec Corporation discussions and serial dealmakers familiar with transactions involving Blackstone Group, Silver Lake Partners, and KKR, pursued software assets amid shifts driven by players such as Amazon Web Services, Google (company), Facebook, and Alibaba Group. CA's portfolio included products used by customers like Bank of America, Wells Fargo, JPMorgan Chase, and governments including the United States Department of Defense and agencies influenced by policies similar to those considered by Federal Communications Commission regulators.

Acquisition announcement

On July 11, 2018, Broadcom announced an agreement to acquire CA for approximately US$18.9 billion in cash, joining a sequence of technology transactions alongside deals involving Qualcomm, NVIDIA Corporation, and Broadcom Limited's earlier strategic moves. The announcement followed public commentary from executives such as Broadcom's CEO and CA's board members, and evoked comparisons to major mergers like Cisco Systems' purchase of AppDynamics and IBM's acquisitions of Red Hat. Media coverage included outlets that frequently report on mergers and acquisitions like The Wall Street Journal, The New York Times, Bloomberg L.P., and Reuters.

Deal terms and regulatory review

The transaction terms provided for a cash purchase financed through Broadcom's cash reserves and debt arrangements with lenders including major banks similar to those used in other deals involving Goldman Sachs, Morgan Stanley, and JPMorgan Chase & Co.. The acquisition required approval from CA shareholders and antitrust and security reviews by authorities such as the Committee on Foreign Investment in the United States, and oversight comparable to regulatory scrutiny seen in mergers involving Intel Corporation and Broadcom Limited. Concerns were raised by U.S. lawmakers and officials about national-security implications, echoing scrutiny in transactions including NXP Semiconductors' sale discussions and foreign-investment reviews concerning companies like Huawei Technologies and ZTE Corporation.

Strategic rationale and market impact

Broadcom framed the deal as a move to diversify revenue from semiconductor markets into higher-margin enterprise-software, similar in strategic intent to diversification efforts by Oracle Corporation and IBM. Analysts compared the rationale to previous platform acquisitions by Microsoft and SAP SE and to shifts among infrastructure vendors including VMware, Inc. and Hewlett Packard Enterprise. The market impact included reassessments of valuation models for legacy software vendors and effects on customers such as AT&T, Verizon Communications, and large financial institutions. Industry groups and competitors like ServiceNow and Splunk monitored potential changes in product roadmaps and licensing, analogous to concerns that followed Symantec's restructuring and divestitures by EMC Corporation.

Reactions and controversies

The acquisition provoked reactions from CA employees, customers, investors, and lawmakers. Employee and union-like advocacy echoed debates seen during mergers at Intel and Qualcomm. Some CA customers and industry commentators feared product de-emphasis similar to past controversies around HP Inc.'s portfolio shifts. U.S. senators and representatives, informed by national-security discussions involving Department of Defense (United States), expressed concern about outsourcing critical software assets. Shareholder activists and investment firms compared the deal's governance aspects to proxy fights and board decisions in cases like Activision Blizzard's negotiations and other high-profile takeover defenses.

Integration and post-acquisition developments

After the acquisition closed in late 2018 and through 2019, Broadcom initiated integration actions affecting CA's workforce, product lines, and support contracts, reminiscent of post-merger integrations at Autonomy Corporation and Time Warner acquisitions. The combined entity's moves influenced licensing models, maintenance agreements, and product roadmaps, impacting customers including major banks and government agencies. Subsequent industry consolidation and divestiture discussions involved stakeholders such as private-equity firms like Permira and TPG Capital, and drew attention from global markets in regions including Europe and Asia. The acquisition remains a reference point in analyses of strategic diversification by semiconductor firms into enterprise-software portfolios, alongside comparable industry shifts involving NVIDIA Corporation's software investments and Intel's acquisitions.

Category:Broadcom acquisitions Category:2018 mergers and acquisitions