Synopsys + Ansys stalls in UK and South Korea

Yes, there's lots of earnings news to cover, but this just came across the inbox: the UK's Competition and Markets Authority (CMA) will be investigating Synopsys' proposed acquisition of Ansys because "the Transaction meets the requirements of section 96(2) of the Enterprise Act 2002". I don't know what that means either, but the thing to note is that the CMA will start its investigation on Monday, 28 October, and announce a decision on whether the deal can go ahead or if it requires further investigation by 20 December 2024. So it's on hold for now, at least.

The Enterprise Act of 2002 has a lot going on; I think the relevant thing for us is the fact that the companies had to notify the CMA of the deal, and the CMA then opened up a channel by which competitors and customers could argue that the deal was anti-competitive. Section 96(2) just says that

(2) Any such?notice?(in this?Part?a "merger notice") -

(a) shall be in the prescribed form;

(aa) shall contain the prescribed information; and

(b) shall state that the existence of the proposal has been made public.

(2A) Where?the CMA?is satisfied that a merger notice meets the requirements of subsection (2), it shall give notice to that effect to the person who gave the merger notice.

-- so we're really none the wiser about a specific complaint or concern regarding the deal. But there must have been something, or the CMA could just have let the notification period expire without comment.

The CMA isn't the only regulator interested in this potential merger. China's State Administration for Market Regulation said in March that Synopsys would have to seek its approval of the deal, even though the transaction is smaller than China's revenue-based merger notification threshold. In April, Synopsys said that the US Federal Trade Commission is reviewing the deal and that it also filed with Austria, Belgium, Canada, France, Germany, Ireland, Israel, Italy, Japan, South Korea, Spain, Sweden, Taiwan, Turkey as of and the European Union. And just last week came the news that South Korea has paused its review of the deal while it waits for more information from Synopsys. This is far from over.

Why do regulators care? Because this combination has national security implications (anything involving chip design does, and not just for the US) and also because customer fear that a combo Ansys+Synopsys could bundle offerings and increase prices, which would in turn affect their ability to compete.

As of 10 am ET on Friday, 25 October, neither Ansys nor Synopsys has issued a press release about this -- but all they can really do is wait it out. If they did comment, it would be something like, "We have every confidence the deal will go ahead and believe it's the right thing for us, our employees, our shareholders, our customers, and all concerned." Ansys will announce Q3 results on 6 November, and Synopsys will likely announce its Q4 results at the very end of November and might or might not comment then. I'll update you if something changes.