Nvidia has officially announced that its desire to acquire Arm will no longer be continued due to significant regulatory challenges.
According to Cnet, announcing the termination of their agreement to sell Arm to Nvidia, SoftBank and Nvidia cited "regulatory challenges" as a contributing factor in their decision to terminate the original plan to acquire Arm.
The work of Arm as a chipmaker company is seen evident behind the processors found in many of the world's mobile phones due to the licenses it grants to companies like Samsung, Apple, and Qualcomm for chip designs and related technology.
Regulatory Challenges Hindered Acquisition
SoftBank, a Japanese technology giant, agreed to sell Arm to Nvidia in September 2020. Unfortunately, after acquiring Arm, both companies have struggled to obtain regulatory approval.
Nvidia received a legal complaint from the U.S. Federal Trade Commission. The Trade Commission claims that the acquisition would harm competition in the market.
On top of that, the United Kingdom government launched an investigation into the transaction.
As a result, it became the subject of international regulatory scrutiny, which included inquiries from China and the United Kingdom.
The largest transaction in the semiconductor industry history would have been witnessed had the $40 billion worth acquisition been pushed through.
According to CNN, the Federal Trade Commission filed a lawsuit against the acquisition in December, claiming that it would stifle competition and give the combined company an excessive amount of control over chip technology and designs.
Also, in late 2021, the European Commission announced that it would be looking into the transaction.
China, the E.U., and the U.S. would have been some of the countries in which a plethora of regulatory approvals would have been required in order to acquire Arm legally.
Nvidia's Acquisition of Arm
As a matter of fact, the largest foreign takeover by a Japanese firm was when SoftBank bought ARM for $32 billion.
Four years after that, SoftBank, a Japanese technology giant, agreed to sell Arm to Nvidia in September 2020
In addition to being one of the largest deals ever completed in this industry, the transaction would have given GPU manufacturer Nvidia control of the company whose architecture and intellectual property is used in virtually every smartphone and tablet chip ever produced and a growing range of servers.
If the acquisition of Arm is completed, Nvidia is expected to pay $40 billion to complete the company's acquisition.
However, Nvidia will be required to pay SoftBank $1.25 billion as compensation for failing to complete the transaction due to significant regulatory challenges.
In addition, The Verge reported that Arm CEO Simon Segars is stepping down and will be replaced by Rene Haas, the company's head of intellectual property, who, coincidentally, previously served as the CEO of Nvidia's own Arm business many years ago.
Arm Preparing For IPO
Since the decision to discontinue the ownership of Arm, SoftBank now focuses on preparing Arm for an initial public offering (IPO) during the fiscal year that ends March 2023.
It is expected that during the initial public offering (IPO), it is estimated to be valued at $80 billion.
