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Nvidia-ARM Deall off Citing Regulatory Challenges

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In September 2020 Nvidia announced that it was in talks to acquire ARM Holdings from SoftBank Group Corp. The deal was not surprising, but it did send waves through the industry. The concerns around this deal were and are the same as the ones currently surrounding the Microsoft-Activision deal. Given the level of competition in the industry, would Nvidia use its new purchase to create roadblocks for their competition? Nvidia has always maintained that they would never do anything like this, but their assurances were never enough to get past regulators.

Both Nvidia and ARM will not be seriously impacted by the deal falling through. ARM will move froward with their plans for Initial Public Offering (IPO) which, if done right, will raise a significant amount of money. It might not be the full $40 million that Nvidia was going to pay out, but it will still be a good influx of capital. The IPO is expected to kick off sometime in early 2023. In some cases, organizations look to get purchased just before their IPO so they can avoid it. Just before an IPO is also a good time to look to pick up a company. It gives both parties the chance to gain without the uncertainties of going through the IPO process.

For Nvidia they do lose around $1.25 Billion that was put up at the start of the acquisition. While SoftBank gets to report this as profit. However, not all things are bad for Nvidia as they get some stocks that were involved in the deal at an increased value. They also get to retain their 20-year ARM license.
Nvidia is expected to report record earnings this quarter and will pass Meta for the 7th Largest US company.

the death of the ARM deal was also not surprising as many felt it was going to fail from the beginning because it would have consolidated too much in Nvidia’s hands. This could have led to serious anti-competition concerns (as we mentioned before). Apparently, this was the biggest issue for regulators as they continued to resist allowing the deal to go through.
It is possible that another company will try to acquire ARM before their early 2023 IPO, but it is not likely. Instead, we would expect to see SoftBank along with other investors push some additional funds AMR’s way to get them set for the next year. We may also see some innovations released from them that will generate additional interest from investors.

ARM is not likely to have any problems raising and making money regardless of the state of this deal. Their core technologies are vital to many business sectors and not just mobile. They will flourish over the next few years even if they remain an independent entity.

Sean Kalinich

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