E.U. Approves Synopsys and Ansys Merger
The European Commission on Jan. 10 conditionally approved the $35 billion acquisition of simulation software company Ansys by chip design software provider Synopsys. It represents the biggest tech deal since Broadcom acquired VMware for $69 billion in 2023.
The approval is subject to Synopsys divesting its optics and photonics software arm and Ansys selling its PowerArtist tool, which is used for analysing power consumption in digital chips. These divestitures will require separate E.U. approval before the merger can proceed.
“In a world where complex chips need increasing amounts of power, innovative software tools, like those offered by both Synopsys and Ansys, help chip designers build chips that consume less power to the benefit of customers and the environment,” Teresa Ribera, executive VP for Clean, Just and Competitive Transition, said in a statement. “We were concerned that this acquisition may have significantly harmed competition in certain global markets for design software for chips or other products.”
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Competition concerns addressed
Synopsys first announced the acquisition in January 2024, claiming it wanted to expand its reach across silicon-to-systems designs, combining its expertise in electronic design automation with Ansys’ in simulation. Ansys accepted the deal to accelerate its growth and offer more integrated solutions to its customers. The two had already been working together for several years up to this point.
Synopsys and Ansys compete in three key sectors, according to the EC and U.K. Competition and Markets Authority. The first is register transfer level power consumption analysis, which assesses a chip’s power demands and usage. The other two are optics and photonics software, both used to design and model light-related products like camera lenses, TV displays, car headlights, and lasers.
The EC was concerned that the merger would result in “high combined market shares” and “high concentration levels” in these areas, leading to fewer competitors and inflated customer prices.
To address this concern, the commission is demanding the sale of the Synopsys products CODE V, LightTools, LucidShape, RSoft, and ImSym, as well as Ansys’ PowerArtist. Synopsys has previously agreed to sell all these modelling solutions to another company once the Ansys acquisition has closed.
“The commitments fully address the competition concerns by ensuring that there will be sufficient competition and choice in the global markets for the supply of optics, photonics, and register-transfer-level power consumption analysis software,” the Commission stated in its press release.
Ansys confirmed it would divest its PowerArtist software on Jan. 6, stating it was “to obtain regulatory approval for Synopsys’ proposed acquisition.”
U.K. poised to approve the merger, but U.S. and China are still investigating
The CMA announced that it had completed a preliminary investigation into the Synopsys-Ansys merger on Dec. 20. It found that the merger has the potential to substantially lessen competition in the chip design and light simulation market but may still approve it if the two companies submit acceptable mitigations.
On top of reducing the choice of products in these areas, the CMA also suspected the deal would allow Synopsys and Ansys to limit their products’ interoperability to maintain dominance. However, the investigation found that this element is so important to their customers that they would switch providers if it was compromised, so they don’t have the incentive to do so.
On Jan. 8, the CMA announced it was considering accepting the undertakings offered by Synopsys and Ansys to address competition concerns that involve divesting certain businesses. It has until March 5 to finally decide, but they could extend the deadline to May 6. Synopsys said it had “already taken steps to address all concerns raised by the CMA” in a statement.
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Meanwhile, Synopsys is actively collaborating with the Federal Trade Commission to conclude its equivalent investigation and review of the proposed remedies, the company states. Synopsys also claims that China’s State Administration for Market Regulation is reviewing the merger filing, and it has been reported that the authority will request China-specific behavioral remedies.