Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC orders software tool manufacturers to divest assets to move forward with $35 billion merger, (May 29, 2025)

By Jody Coultas, J.D.

The FTC found that the merger of Synopsys, Inc. and Ansys, Inc. raised several antitrust concerns that would be resolved by the divestures.

Software developers Synopsys, Inc. and Ansys, Inc. have agreed to divest certain assets to resolve antitrust concerns surrounding their $35 billion merger, according to the FTC. The FTC’s proposed divestiture order requires several divestures in order to preserve competition across several software tool markets and help protect consumers from higher input prices for cars, smartphones, cameras, televisions, and other critical products, the agency said (In the Matter of Synopsys, Inc., FTC File No. 241-0059, May 28, 2025).

Synopsys is a leading developer and supplier of Electronic Design Automation (EDA) software principally used to design semiconductors, including integrated circuits and systems-on-chips. Ansys is a leading provider of Simulation & Analysis (S&A) software tools, which model physical effects for an array of products, including semiconductors. Software products used for EDA and S&A in the design of devices and integrated circuits, or chips, include optical software tools, photonic software tools for designing and simulating photonic devices, and Register Transfer Level (RTL) power consumption analysis tools. The global market for optical software tools is a duopoly shared by Synopsys and Ansys. The global markets for photonic software tools and RTL power consumption analysis tools are highly concentrated.

The FTC was concerned that the acquisition, if consummated, would substantially lessen competition or to tend to create a monopoly by eliminating actual, direct, and substantial competition in the relevant markets. Also, the transaction would lead to higher prices as well as accept reduced service and innovation. Specifically, Synopsys would be able to determine input prices for producers of screens, lenses, and mirrors, including automotive, smartphone, camera, and television manufacturers. In the photonic software tools market, Synopsys and Ansys closely monitor one another, solicit feedback from customers regarding how their tools compares to the other’s tools, and innovate in response to the other to retain and gain customers. Also, customers with a history of using either Synopsys’ or Ansys optical software tools cannot easily or quickly switch to an alternative. Further, the FTC noted that head-to-head competition in the RTL power consumption analysis tools market benefits customers and would be lost if the acquisition is consummated.

The FTC noted that barriers to entry in optical software tools and photonic software tools for designing and simulating photonic devices are high. Development of EDA software tools, including RTL power consumption analysis tools, is capital-intensive, requiring significant time, technical expertise, and investment in research and development. In all three relevant markets, customers face high switching costs and tend to keep the same tools in their design flows for long periods.

Under a proposed consent order, Synopsys will divest its optical software tools and photonic software tools. In addition, Ansys will divest a power consumption analysis tool, called PowerArtist, which is used to measure and optimize the power consumption of digital chips at an early stage of the design stage, known as Register Transfer Level (RTL) design. Both Synopsys and Ansys will divest their assets to Keysight Technologies, Inc.

The proposed consent order, among other terms, requires that:

• Synopsys and Ansys complete the divestitures no later than 10 days after Synopsys closes its acquisition of Ansys.

• Synopsys and Ansys provide a limited amount of transition services and technological support so that Keysight can compete immediately with the merged company.

• The Commission appoint a monitor to oversee the implementation of the requirements of the consent order and a divestiture trustee in the event Synopsys and Ansys fail to complete the divestitures as required.

• FTC staff cooperated closely with staff of the competition agencies in the European Union, United Kingdom, Japan, and South Korea to analyze the proposed acquisition and potential remedies.

Statement on remedies. Chair Andrew Ferguson, along with the two remaining commissioners, issued a joint statement in support of the decision and outlining their understanding of the role of remedies in FTC enforcement. The statement unsurprisingly took shots at the Biden Administration’s approach to merger enforcement, specifically blocking mergers rather than negotiating settlements and allowing mergers to proceed with divestures. “If the Commission simply disregards proposed settlements that would have addressed a merger’s competition problems, nothing stops the parties from presenting that settlement as a remedy to the court during litigation,” and litigating the fix does not end in the agency’s favor.

Ferguson stated that the FTC should accept settlements in merger cases only when it is confident that the settlement will protect competition in the relevant market to the same extent that successful litigation would. “[B]ehavioral remedies should be treated with substantial caution. They are often difficult or impossible for the Commission to enforce effectively and can lock the Commission into the status of a monitor for individual firms rather than a guardian of competition across the entire economy.” Also, the Commission should only accept a structural remedy unless it involves the sale of a standalone or discrete business, or something very close to it, along with all tangible and intangible assets necessary (1) to make that line of business viable, (2) to give the divestiture buyer the incentive and ability to compete vigorously against the merged firm, and (3) to eliminate to the to the extent possible any ongoing entanglements between the divested business and the merged firm. “When confronted with an anticompetitive merger, I will favor litigation to guarantee that competition will be protected rather than accepting an uncertain settlement,” said Ferguson.

Companies: Synopsys, Inc.; Ansys, Inc.

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