UK launches competition investigation into HPE/Juniper mega-deal

The Competition and Markets Authority opened its phase one probe on Wednesday, expressing concerns that the tie-up could impact on competition in the UK. Or, more specifically, it seeks to ascertain whether the deal could "result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services," which is its job in a nutshell.

This investigation is not unexpected and at this stage it's nothing to get too excited about. But the CMA has had a hand in overturning major tech deals before, so it is worth keeping an eye on.

HPE confirmed that it would spend US$14 billion to acquire HPE back in January. At the time it said it aimed to complete the transaction by the end of this calendar year or early in 2025, subject to regulatory approvals and so forth.

The CMA investigation may or may not derail this timetable. The watchdog has called for comment on the deal from interested parties, setting a fairly short deadline of 3 July. It then has until 14 August to decide whether to refer the case for a phase two investigation, which could, of course, take some time.

It's difficult to make a call on the outcome. There is overlap between HPE and Juniper's businesses and product lines, and, as Dell'Oro analysts noted earlier this year, the impact of the tie-up on enterprise market share in the short term will be minimal; the analyst firm puts the two companies' revenue overlap at a maximum of 24%, based on numbers for the first three quarters of 2023, incidentally.

But the deal will create a much bigger competitor in the networking space – all the talk has been about taking on Cisco – and it gives HPE some important future-proofing assets from a technology perspective; for the most part, the company has focused heavily on Juniper's AI assets in its rationale for the takeover.

"The acquisition is expected to double HPE’s networking business, creating a new networking leader with a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value," HPE said when it announced the deal. That's a very carefully-worded statement, in that it positions the merged company in a strong light in its own right, while at the same time implying that it will provide more choices for customers, a comment designed to get competition regulators onside.

"This transaction will strengthen HPE's position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders," said HPE chief executive Antonio Neri, who will retain his position as leader of the combined company should the deal come to fruition. His comments also tick a lot of boxes for the various different parties with eyes on this transaction.

Ultimately, creating something of a technology behemoth will always raise competition concerns. HPE and Juniper were already working hard to minimise those, and will doubtless continue to do so through the CMA probe, in the hope of avoiding a deeper investigation.