The U.K.’s Competition and Markets Authority, or CMA, is looking into Synopsys Inc.’s proposed acquisition of Ansys Inc. for $35 billion.
The antitrust regulator announced its inquiry today. To determine whether Ansys’ sale may hurt market competition in the U.K., the CMA has asked interested parties to submit feedback about the deal. Such requests for information often precede a formal antitrust investigation.
Nasdaq-traded Synopsys is a major provider of EDA applications, the software tools that chipmakers use to design new processors. The company’s software enables engineers to create chip blueprints, test those blueprints for errors and automate repetitive parts of the development workflow. Synopsys’ tools also lend themselves to designing certain related products, notably photonic circuits such as those used to power fiber optic networks.
Another major source of revenue for the company is its chip design licensing business. Synopsys offers dozens of ready-to-use blueprints for artificial intelligence processors, memory circuits, networking modules and other semiconductor products. Those designs remove the need for the chip engineers to build all the components of a new processor from scratch, which speeds up development.
Ansys also sells software for engineers, but it has a considerably broader focus. The company’s high-tech revenue segment, which includes the chip industry, accounted for only 30% of its sales last quarter. The rest came from markets such as the auto and industrial equipment sectors.
Carmakers rely on Ansys’ software to develop motors, batteries and other core vehicle subsystems. Wind turbine manufacturers, in turn, can use the company’s software to simulate the aerodynamic properties of a new rotor design before starting mass production. Ansys also provides applications for dozens of other engineering use cases spanning fields such as sensor design and quantum computing.
Buying the company would give Synopsys a foothold in numerous segments where it currently doesn’t have a significant presence. When it announced the acquisition in January, the EDA provider estimated that the deal would expand its total addressable market by 50% to $28 billion.
Besides giving it a presence in new markets, the acquisition would also strengthen Synopsys’ flagship chip design software business. Ansys’ product portfolio includes, among others, several applications designed to ease the processor development workflow. Some of those applications already integrate with Synopsys’ software, which may make it easier for the EDA provider to integrate them into its product portfolio after the deal closes.
Depending on the findings of the inquiry announced today, the CMA may refer the deal to a so-called Phase 1 investigation. The primary purpose of such investigations is to determine whether a more in-depth, so-called Phase 2 probe is necessary. At the end of such a probe, the CMA can block the acquisition that it’s scrutinizing or order changes to the transaction terms.