SoftBank's Sale of UK-Chip Company Arm Collapses Over Regulatory Concerns

By BK​

What do you need to know this week?

SoftBank’s proposed $66 billion sale of UK-based computer chip designer Arm to Nvidia has collapsed after US, UK and EU regulators raised regulatory concerns about its impact on competition within the global semiconductor industry. Arm licenses its technology to major tech companies such as Microsoft, Qualcomm and Samsung.

SoftBank suffered a 97% drop in quarterly profit as a result. In an effort to salvage the situation, SoftBank said it would instead seek an initial public offering of Arm by March 2023.

Why is this important for your interviews?

This purchase would have been the largest ever deal in the chip sector. The deal was meant to give Nvidia control of Arm, which owns patents vital to the mobile industry. Nvidia has also recently become the most valuable US chip company on the strength of its graphic processors, with its shares rising 82% within the last year. Graphic processors are not only crucial for video gaming - which itself is a highly promising industry as seen in Microsoft’s $68.7 billioncash purchase of Activision Blizzard - but it is also widely used in other areas of advanced computing such as AI applications.

This scrapped deal is a major setback for SoftBank’s plans to raise funds, adding to existing pressure caused by growing investor caution and China’s regulatory crackdown on tech firms. However, this is not the only issue which has plagued SoftBank in recent years. Some recent setbacks include the meltdown of WeWork and the resignation of Jack Ma, co-founder of the Alibaba Group, from SoftBank’s board which prompted the company to pause the issuance of dividends to retain capital in the business.

How is this topic relevant to law firms?

The Nvidia-Arm deal has garnered a great deal of regulatory attention since it was announced in September 2020. SoftBank’s failed acquisition of Arm demonstrates a worldwide tightening regulatory grip on not only BigTech companies, but also on industries that are vital for “national security” such as the semiconductor industry. For example, the Biden administration’s recent presidential executive order announced a policy of greater scrutiny of M&A activity and gave regulators a $500 million funding boost to departments working on antitrust enforcement. Therefore, law firms with specialist practitioners may stand to gain government contracts and panel positions that help screen and monitor M&A activity. In fact, “antitrust work - once a relatively sleepy area of the legal world - is now providing a windfall for big firms.”

On top of antitrust work, law firms could also see an increase in corporate and intellectual property work. Following greater regulatory scrutiny, some tech clients may seek to restructure their corporate holdings in order to divide up their intellectual property holdings into smaller “saleable chunks” which could pass regulators’ antitrust checks. In addition, law firms with strong litigation teams may be called to fend off any high profile antitrust lawsuits and investigations mounted by regulators.


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