In a serious blow to Nvidia the deal, which has faced growing criticism, was questioned by Britain's competition regulator suggesting that the merged entity could reduce competition in markets around the world and in key sectors such as data centres, the internet-of-things, automotives and gaming.
Usually, in order to pass which raises these competition implications, the regulator would normally require a disposal of the part of the merged business that has the power to harm rivals. However, in the case of this deal those threats actually span the whole business.
"We're concerned that Nvidia controlling ARM could create real problems for Nvidia's rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets," said Andrea Coscelli, head of Competition and Markets Authority.
One of the main concerns about the deal focuses on the fact that Arm has long been a neutral player licensing key IP to customers who are otherwise rivals, including the likes of Qualcomm and Apple and there are fears that should Nvidia acquire the company then it will be able to give itself an unfair advantage gaining early access to Arm's innovations rather than distributing them to the entire industry.
According to Reuters a growing number of analysts have said they believe the takeover will be blocked.
Followng the competition authoritiy's announcement, the UK government will now consider the findings and give a fuller response at a later date, which will also include its thinking on any impact on national security.
A full in-depth inquiry takes around six months.
Britain's government could then block the takeover, approve it or allow it to pass with certain undertakings.