What Trump's Broadcom/Qualcomm block means for post-Brexit Britain

Increasing protectionism is likely to hinder UK tech deals, say experts

One of the ways that large and well-established companies enter new markets and acquire whole new areas of operation is to buy other large and well-established companies. This is pretty much normal practice, including in the tech sector.

Here are a couple of examples from last year. Hewlett Packard Enterprise bought Nimble Storage, a company specialising in 'hybrid' storage using flash and hard disks for $1.1bn. Cisco Systems bought Broadsoft a developer of cloud-based telecoms software for $1.9bn. And Verizon bought Yahoo, gaining a consumer-focused web business for close to $4.5bn.

Another big US deal announced last year was Broadcom's $117bn bid for Qualcomm. But that one was blocked by US president Donald Trump because, in the words of the Presidential Order, "there is credible evidence that leads me to believe that Broadcom Limited... through exercising control of Qualcomm Incorporated... might take action that threatens to impair the national security of the United States".

Does this matter to the UK?

So, what does that mean for UK tech businesses looking at merger or acquisition as a legitimate route to growth? Do they need to be wary of potential blocks to their own purchase of, or acquisition by other companies?

Carlos Keener, founding partner at BTD Consulting, which specialises in helping businesses get more from their deals, believes that the Broadcom/Qualcomm block is "yet another example of growing economic nationalism", particularly when it comes to fears around a growing Chinese market.

Advertisement - Article continues below
Advertisement - Article continues below

"While some issues may arise related to acquisitions, the primary concern here is for UK businesses looking to merge or sell to an overseas organisation," says Keener. "Given China's continuing interest in acquiring European firms in high-tech (including those in the UK), larger tech firms looking to sell in the coming few years will need to make sure to formally consider - and prepare for - potential governmental resistance to their proposed 'dream deal', be it a sale or even a partnership or joint venture."

What about Brexit?

It seems almost churlish to talk about this topic without paying some attention to Brexit, with the UK's formal leave date now less than a year away.

Daniel Domberger, partner at Livingstone, a mid-market M&A and debt advisory firm, argues that, in the context of Brexit, "we can expect the British Government to become more prickly about its global independence and may become potentially more protectionist.

"This might come in administrative as well as political forms such as a more aggressive review by the CMA (Competition and Markets Authority) rather than just ad hoc Government fiat."

However, he also envisions a rocky road ahead when it comes to dealing with a demonstrably protectionist US, adding that "the UK may find they face greater scrutiny, especially if the deals are particularly large, strategic, or have national security implications."

Advertisement - Article continues below

Theresa May is also likely to find herself in an "awkward position" if a British acquisition into the US were to be blocked on the same grounds as the Broadcom/Qualcomm deal.

"The Special Relationship is ever more important in the context of Brexit, and the UK will find itself caught between the political need to protest and perhaps retaliate, after debacles like Kraft/Cadbury and the diplomatic need to maintain relationships," says Domberger. "It's an old problem but Brexit makes it more acute."

More financial than military

While the premise that blocking one deal on national security grounds might have wider ramifications for the UK is a sound one and worthy of discussion, it isn't a simple matter to unpick. In the global economy there are many regional interests, trade blocks and agreements.

Perhaps, then, it's worth focusing not on the Trump block, but instead on the UK's situation. The issue for the UK, if there is one, might turn out to be much more about economics than about national security.

As BTD's Carlos Keener explains, "a 'hard' Brexit may lead to similar issues between the UK and EU countries, for example, if France continues to work hard to woo financial services firms and money across the Channel."

Advertisement - Article continues below

If all this shows us anything, it's that those tech firms mulling the idea of growth through mergers or acquisitions will need to keep a weather eye on global as well as local politics in the years to come.

Advertisement - Article continues below

Image: Shutterstock

Featured Resources

How inkjet can transform your business

Get more out of your business by investing in the right printing technology

Download now

Journey to a modern workplace with Office 365: which tools and when?

A guide to how Office 365 builds a modern workplace

Download now

Modernise and transform your sales organisation

Learn how a modernised sales process can drive your business

Download now

Your guide to managing cloud transformation risk

Realise the benefits. Mitigate the risks

Download now


Business strategy

The IT Pro Podcast: Beyond Brexit

7 Feb 2020

UK tech investment jumps 44%, despite Brexit uncertainty

15 Jan 2020
cyber security

The EU calls for cyber security pact with post-Brexit UK

6 Nov 2019
Business strategy

Can the UK tech sector still attract investment post-Brexit?

19 Sep 2019

Most Popular

cloud computing

Google Cloud snaps up multi-cloud analytics platform for $2.6bn

13 Feb 2020

How to use Chromecast without Wi-Fi

5 Feb 2020
operating systems

How to fix a stuck Windows 10 update

12 Feb 2020
cyber attacks

Apple Mac malware detections overtake Windows for the first time

11 Feb 2020