KKR, a global investment firm, continues to contribute to the surge in multi billions dollar mergers and acquisitions (M&A) in 2024. The latest addition to this trend is KKR’s announcement of its $4 billion acquisition of Broadcom’s end user computing business, encompassing VMware Workspace One and VMware Horizon. This move comes in the wake of Broadcom’s $61 billion acquisition of VMware in the previous year, as the company seeks to recoup costs and streamline its focus.
Unpacking the Strategic Components of the Deal
The acquisition, originally disclosed in May 2022, faced regulatory hurdles, concluding with the deal’s closure in November 2023. Broadcom swiftly implemented cost cutting measures post acquisition, including significant layoffs of over 2,000 VMware employees and discontinuation of 56 products. Now, with the sale of end user computing pieces to KKR, Broadcom aims to narrow its focus to core capabilities and redefine its strategic trajectory.
VMware’s end user computing division, comprising Workspace One and Horizon, gained prominence during the early days of the pandemic when remote work became imperative. These applications provided IT professionals with tools for managing remote environments efficiently. Despite the initial boost during the pandemic, KKR sees substantial potential for growth in transforming the end user computing division into a robust standalone business.
KKR’s Vision for the End User Computing Division
Bradley Brown, KKR managing director, emphasizes the enduring relevance of remote work and the evolving nature of work models. The division’s focus on mobile devices, diverse software layers, dynamic office setups, and home work environments aligns with the changing landscape of modern work. Brown anticipates that managing complexity, particularly in terms of security and compliance, will be a pivotal aspect of the end user computing business.
Brown underscores the challenges posed by increasingly complex IT environments, stating that while historically workspace connectivity was about personal preferences, the present and future revolve around security and compliance. He highlights that IT environments are becoming exponentially more complex, yet corporate IT teams are not growing at the same rate. The tools acquired through this deal are expected to empower organizations to handle this complexity efficiently.
Employee Ownership Program and Corporate Culture
An intriguing aspect of the deal is KKR’s intention to implement an employee ownership program, providing employees with an opportunity to own equity in the new company alongside KKR. This move emphasizes a commitment to fostering a positive corporate culture and aligning the interests of employees with the success of the acquired business. The employee ownership program adds a unique dimension to the acquisition, reflecting KKR’s strategic approach to talent retention and motivation.
The KKR-Broadcom deal marks the fifth multibillion-dollar transaction of the year, joining other notable deals such as HPE’s acquisition of Juniper Networks for $14 billion and Synopsys’ purchase of Ansys for $35 billion. These transactions underscore the ongoing momentum in the M&A space, driven by companies seeking strategic advantages, market consolidation, and adaptation to evolving industry dynamics.
As KKR moves forward with the acquisition, the focus will be on seamlessly integrating VMware’s end user computing business into its portfolio. The deal’s closure, expected later this year pending standard regulatory approval, will determine the immediate impact on both KKR and the acquired business. Looking ahead, the industry will closely monitor how KKR leverages its investment and shapes the future of the end user computing division in alignment with broader technological and workplace trends.
In conclusion, KKR’s acquisition of VMware’s end user computing business from Broadcom signifies a strategic move in response to evolving work models, emphasizing the importance of security and compliance in modern IT environments. The employee ownership program introduces an innovative element, reflecting KKR’s commitment to both business success and a positive corporate culture in the dynamic landscape of 2024’s M&A activities.
