KKR Pays $4Bn for VMWare Unit
This became a part of Broadcom’s end-user computing business when they acquired VMware
Private equity players have been on the lookout for multi-billion dollar deals in recent times. Having witnessed a slowdown in 2023, some really big deals are now being spoken off and KKR added to the flurry of activity by announcing its acquisition of Broadcom’s end-user computing business. It paid $4 billion for VMware Workspace One and VMware Horizon.
The end-user computing (EUC) unit will become a standalone company and will continue to be run by its existing management team led by Shankar Iyer, KKR said in a statement. The above-mentioned two remote desktop applications had been part of the VMware family for which Broadcom had spent $61 billion to acquire last year.
What’s Broadcom trying to do here?
Ever since Broadcom has been looking to recoup some of the high price tag from the deal that was announced in May 2022 but took until November 2023 to clear all regulatory hurdles. And almost on the dot, the company began slashing costs, starting with a massive layoff of over 2,000 VMware employees.
Thereafter, Broadcom also axed as many as 56 products within a month and continued to seek options to recover some of its high acquisition costs. Thus, it appears to be the logical next step for the company to hive off the end-user computing pieces, given that Broadcom’s stated focus was on the core capabilities.
Readers would recall that when the pandemic struck and offices were forced to shut down, employees were required to work remotely. This is where desktop tools such as Workspace One and Horizon provide the IT teams better control. Given that this reason does not stand to test now, we wonder what’s the idea behind KKR’s huge punt.
What does KKR see that others do not?
According to KKR managing director Bradley Brown, there is still room for a lot of growth in the area of end-user computing and to turn it into a stand-alone vibrant business. “We see great potential to grow the EUC Division by empowering this talented team and investing in product innovation, delivering excellence for customers and building strategic partnerships,” he says.
As a standalone company, the EUC Division will continue to be run by its existing management team led by Shankar Iyer. In addition to expanding R&D and pursuing new strategic partnerships, KKR plans to support the EUC Division’s focus on customer relationships through significant investments across go-to-market functions. The standalone business will be positioned to make long-term investments in resourcing for customer success, partner support and an expanded, dedicated sales team.
“We are confident that this pending transaction marks an exciting next chapter for the EUC Division and one that will create enormous opportunities and benefits for our customers, partners and employees,” said Shankar Iyer, Senior Vice President and General Manager, End-User Computing Division, Broadcom. “The KKR team knows our industry well and is the ideal strategic partner to help us become a standalone company with an exclusive focus on delivering powerful tools for the digital workspace.”
After becoming a standalone company, the EUC Division will implement KKR’s broad-based employee ownership program, which makes all employees owners in their respective businesses alongside KKR. This strategy is based on the belief that employee engagement and a strong ownership culture are key drivers in building stronger companies. Since 2011, KKR portfolio companies have awarded billions of dollars of total equity value to over 60,000 non-senior management employees across more than 40 portfolio companies.
As we said at the start, PE deals are warming up and today’s marks the fifth multi-billion dollar deal of the year. Others include HPE buying Juniper Networks for $14 billion and Synopsys acquiring Ansys for $35 billion – both of which took effect in January.
