Every detail below comes from VMware, Inc.'s Form DEFM14A, filed with the SEC (CIK 0001124610). Full source on SEC EDGAR.
The short version
VMware stockholders could elect either $142.50 in cash or 0.2520 of a Broadcom share per VMware share, pro-rated to an overall 50/50 cash-stock split. Because half the consideration floats with Broadcom's own stock, both Goldman Sachs and J.P. Morgan had to build full standalone valuations of both companies, not just VMware, roughly doubling the modeling workload of an all-cash deal.
What happened
Early on the morning of May 26, 2022, VMware's board met with representatives of J.P. Morgan and Goldman Sachs, who each delivered oral fairness opinions, confirmed the same day in writing, on the terms of VMware's roughly $61 billion sale to Broadcom. The board had met the day before, May 25, to review a near-final version of the analysis before the deal was finalized and announced. The full record, including both banks' financial analyses, was filed as part of VMware's definitive merger proxy statement on SEC EDGAR.
What makes this deal instructive from a structuring standpoint is the consideration itself: VMware stockholders could elect either $142.50 in cash or 0.2520 of a Broadcom share for each VMware share, with the overall mix pro-rated so that exactly half of the total consideration paid out was cash and half was stock. That election-and-proration mechanic adds a layer of analysis on top of the standard fairness opinion toolkit that a pure cash deal (like Twitter/Musk) or pure stock deal doesn't require.
What the banks had to model beyond a single offer price
Because consideration wasn't a single fixed number, Goldman Sachs and J.P. Morgan each had to build valuation work that functioned across a range of possible outcomes. Standalone valuation of VMware on a comparable companies and precedent transactions basis, to establish a reference range independent of the deal structure. DCF analysis on VMware's projections, discounted at a company-specific rate, to sanity-check both the cash and implied stock components. Exchange ratio analysis, since half the consideration floats with Broadcom's own share price, this requires modeling Broadcom's standalone value too, not just VMware's, and assessing whether the fixed 0.2520 ratio was fair across a reasonable range of Broadcom trading scenarios. And pro forma and accretion/dilution considerations, relevant context for the board even though the fairness opinion itself focuses narrowly on consideration value to VMware holders.
Team structure on a dual-sided, mixed-consideration deal
The added complexity of modeling both sides of a cash-and-stock structure changes how work gets distributed across the deal team. Analysts build and maintain two full valuation stacks in parallel, one for VMware, one for Broadcom, since the exchange ratio analysis requires an independent view of the acquirer's value, not just the target's. This roughly doubles the modeling workload relative to an all-cash deal.
Associates are responsible for making sure the standalone Broadcom analysis and the standalone VMware analysis are built on consistent methodological assumptions (same treatment of synergies, same general discount rate framework), so the resulting exchange ratio fairness conclusion holds up to scrutiny, and for building the proration mechanics into the board materials clearly enough that directors unfamiliar with mixed-consideration deals can follow the tradeoffs.
Vice Presidents manage the negotiation dynamics around the exchange ratio itself, working with the client's management and legal team on how sensitive the fairness conclusion is to Broadcom's share price moving before closing, a live risk, since the deal was expected to take over a year to close pending regulatory review.
Managing Directors deliver the opinions to the board and take responsibility for the firm's institutional view that, notwithstanding market volatility in Broadcom shares between signing and closing, the overall structure was fair to VMware stockholders at signing. Both banks' engagement letters and fee arrangements, along with disclosure of prior relationships with VMware, Broadcom, and major VMware stockholder Silver Lake, are laid out in the proxy statement's conflicts disclosure.
Why the mixed-consideration structure matters pedagogically
Most fairness opinion case studies used in banking training default to all-cash transactions because the math is simpler. VMware/Broadcom is a clean, fully public example of the added modeling and negotiation work required when a board has to evaluate consideration that isn't a single fixed number, a structure common enough in real dealmaking that understanding it matters more than the simplified all-cash cases usually taught.
Every detail in this piece comes from VMware, Inc.'s Form DEFM14A (CIK 0001124610), publicly available on SEC EDGAR. This article is for informational purposes only and does not constitute investment, legal, or financial advice.
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