Planned Merger of ANSYS and Synopsys to Move Forward According to Current Reports
In a significant development, the merger between Synopsys and ANSYS, valued at $35 billion, has been officially approved by the US Federal Trade Commission and the European Union as of mid-2025 [2]. However, the deal is yet to receive final regulatory approval from China’s State Administration for Market Regulation (SAMR), with the decision postponed due to complexities related to the deal and recent US export controls restricting chip design software sales in China [1][2][3].
The US FTC approval came with conditions, requiring Synopsys and ANSYS to make certain divestitures to prevent monopolistic control in certain semiconductor software markets. Synopsys must divest its optical and photonic software tools, and ANSYS must divest its PowerArtist power consumption analysis tool. These assets are set to be sold to Keysight Technologies to maintain a competitive balance [4].
Despite the delay in Chinese approval, Synopsys and ANSYS continue to engage in "advanced stage" discussions with Chinese regulators, hoping for clearance to complete the merger soon [1][2][3]. The union of Synopsys’s electronic design automation (EDA) solutions with ANSYS’s simulation software technologies is expected to enhance capabilities in semiconductor design, analysis, and testing, including optical, photonic, and power consumption tools [2].
If the merger is completed, the combined entity is projected to become a dominant player in semiconductor software markets, but with divestitures, some competition will remain. The union is expected to strengthen innovation and product offerings across multiple industries such as semiconductors, transportation, and medical devices through integrated simulation and design tools, potentially increasing market reach and financial growth for both companies [2].
However, the delay in Chinese approval introduces uncertainty in the transaction timeline and may affect business operations in the important Chinese market due to ongoing geopolitical and trade tensions [1][2]. Furthermore, the merger is structured to result in a significant increase in the number of outstanding shares for both companies, potentially diluting shareholders. If successful, the combined company is expected to have more than 200 million outstanding shares in the near future.
The end of export restrictions to China could lead to a resumption of Synopsys's guidance in the next quarter, potentially resulting in higher sales and profits than expected for fiscal year 2025. The new, combined Synopsys/ANSYS company is also expected to play a crucial role in the future development of AI, with the merger resulting in an end-to-end EDA solution that focuses on Artificial Intelligence (AI).
Despite Synopsys's smaller guidance for fiscal year 2025 than expected, necessitating a valuation adjustment, the current trading of Synopsys at a lower multiple than Cadence presents a possibility of Synopsys/ANSYS reaching Cadence's valuation through a multiple expansion if the merger is carried out as planned. However, the planned synergies of the merger may be overestimated, as all forecasts for the future always carry the risk of misjudgment.
In summary, the merger is largely cleared and poised to create a powerful combined software company in semiconductor design and simulation, pending the critical final approval in China and fulfillment of divestiture conditions mandated by US regulators [1][2][4]. Both companies remain optimistic and committed to completing the merger while complying with regulatory requirements. The arbitrage opportunity associated with the merger is now small, as the likelihood of the deal going through is relatively high.
- The investment in the merger between Synopsys and ANSYS could potentially boost the environment for semiconductor design and analysis, as the combined entity may strengthen innovation and product offerings across several industries, which could lead to increased market reach and financial growth for both companies.
- If the merger is completed, the combined company may face significant competition in certain semiconductor software markets due to divestitures required by US regulators, as assets such as Synopsys's optical and photonic software tools and ANSYS's PowerArtist power consumption analysis tool will be sold to maintain a competitive balance.
