What just happened? Nvidia’s $40 billion acquisition of Arm has collapsed. The US tech giant announced that due to scrutiny by regulators, the deal was not completed. As previously anticipated, Arm will now begin preparations for an initial public offering (IPO).
Last month, there were reports that Nvidia was considering pulling out of the acquisition. The company now has confirmed that “the parties have agreed to terminate the Agreement” due to “significant regulatory issues” it faced.
“Arm has a great future and we will continue to support them as proud licensees for decades to come,” said Nvidia CEO Jensen Huang. “ARM is at the center of an important dynamic in computing. Although we will not be a single company, we will work closely with Arm. The significant investment made by Masa has allowed Arm to expand the capabilities of the Arm CPU beyond client computing. to supercomputing, cloud computing, artificial intelligence and robotics. I expect Arm to be the most important CPU architecture in the next decade.”
News that Nvidia had begun the first steps to acquire British company Arm from SoftBank came back in September 2020. The green team said it would take about 18 months to complete a deal of this size, but it has run into issues, mainly due to regulatory approvals from the UK, China, the European Union and the US being required.
In addition to the UK Competition and Markets Authority (CMA) investigation and government intervention, the FTC sued to block the acquisition over fear it would stifle innovation, there was an expanded EU antitrust investigation and China threatened to block the purchase even if others did not.
There has also been significant pushback from the tech industry. Qualcomm, Google and Microsoft expressed concern, even Arm co-founder Herman Hauser said the deal would be a disaster.
Arm will now begin preparations for an IPO during the fiscal year (ending March 31, 2023), which many believe will happen if the deal falls through. SoftBank will receive the $1.25 billion gap fee that Nvidia previously agreed to pay if the purchase is not completed.
That Financial Times writes that the failure of the deal will result in Arm’s chief executive Simon Segars being replaced by René Haas, head of the company’s intellectual property division. The publication also notes that the cash and stock acquisition would have been worth $66 billion as Nvidia’s share price has surged since the initial announcement.
The tech industry will no doubt breathe a sigh of relief once the deal is confirmed to close. Many Arm licensees feared the consequences of a competitor like Nvidia owning the company they rely on to develop their chips.