UK Antitrust Regulator Sets Conditions for Synopsys-Ansys $35 Billion Acquisition Deal Approval

British competition regulator, the Competition and Markets Authority (CMA) has flagged the $35 billion Synopsys-Absys acquisition deal. According to Reuters, the competition watchdog says the acquisition could curtail innovation and result in higher prices.

Competition Watchdog Concerns

The CMA recognizes the critical role of semiconductor chips in advancing technologies that consumers and businesses in the UK need.

“Semiconductor chips are crucial components in technologies used every day by UK consumers and also in key sectors including artificial intelligence and cloud computing,” the CMA said.

However, the UK regulator says the Synopsys-Ansys deal raises a range of UK semiconductor competition concerns in the supply of light simulation and semiconductor chip design products in the UK market. According to the CMA, the acquisition could reduce customer choices and eliminate innovation.

These are mostly companies that use software in products like TV displays and camera lenses. Reduced innovation could lead to low quality software products and increase prices, which could overburden UK consumers and businesses. CMA says that the deal could also lessen competition in the supply of three software products where Ansys and Synopsys compete closely and have strong market positions.

The issues raised by the regulator relate to the analysis used to assess the amount of power a chip uses and needs to function as well as the software that is used to design and model light-related products.

Synopsys’ Response

The CMA said it could give the deal a nod if the two entities involved address these concerns. If the companies fail to submit proposals that sufficiently address the concerns, the CMA may proceed to mount an in depth probe into the merger. Synopsys says that CMA’s announcement was expected. The chip design software maker added that it was taking steps to address the concerns raised by the UK antitrust body.

“We will continue our constructive and collaborative engagement with the CMA in relation to our proposed remedies. We remain confident in a positive resolution of the ongoing regulatory review process, and we continue to expect the transaction to close in the first half of 2025,” Synopsys Spokesperson said.

Synopsys announced its Ansys acquisition deal in January this year. Ansys makes software that is used in the manufacturing of a wide range of products including airplanes and tennis rackets. Previously, Synopsys announced plans to sell off its optical solutions business to Keysight Technologies once the Ansys acquisition process is complete.

Regulator Scrutiny

Synopsys’ new investment in Ansys is among the tech transactions that the CMA has scrutinized closely in recent years. The antitrust regulator has been paying close attention to acquisitions that involve the cloud, AI, and semiconductor chips.

Next year, the regulator is expected to tighten its grip on tech transactions under the new digital markets law. Based in California, Synopsys is among the few firms that manufacture the software that’s used in the design of semiconductors. Anysys, on the other hand, manufactures simulation software that engineers use to predict how their products will work in the real world.

By acquiring Ansys, Synopsys is looking to expand its customer base and product range. Ansys shareholders are set to receive a $197 cash payout and 0.345 shares of Synopsys stock for every share held.