Trade War Raises Alarm for Ansys-Synopsys Deal Needing China Nod

The escalating tariff fight between the US and China is casting a shadow over one of the world’s biggest pending deals, and traders are growing fearful that the takeover will get bogged down by Beijing’s antitrust regulators.

Ansys Inc., which agreed to be bought by chip-designer Synopsys Inc. for about $34 billion back in January 2024, ranks as the world’s sixth-biggest acquisition of the past two years, according to data compiled by Bloomberg. But in less than two weeks the deal spread — the difference the value of the cash-and-stock offer and current trading price of the target company — has widened from roughly $25 per share to more than $40.

That swelling gap reflects growing uncertainty that the deal will be able to clear its last major hurdle — approval from China, which the companies are hoping to get in the first half of this year. 

“China does not tend to block transactions outright, but they could kick the can down the road over and over again until the companies eventually give up,” said Matthew Osowiecki, a merger arbitrage-focused portfolio manager at Water Island Capital. “If they are looking for a way to get back at the US by either prolonging the process or extracting additional remedies, that leads to delays.” 

Although both companies are based in the US, their businesses are global and in critical sectors to China. Synopsys is one of the few major companies in the world that makes software used to design semiconductors, 16% of its 2024 revenues came from China, data compiled by Bloomberg show. Ansys makes simulation software used by engineers to predict how products will work in the real world. 

The purchase has received regulatory approval in the US, UK, Europe, and several other smaller jurisdictions. China is the last significant holdout. 

The deal warrants scrutiny from Chinese regulators because the companies are in “strategic sectors,” said Oppenheimer analyst Ken Wong. But rising political tensions between Beijing and the Trump administration pose a greater risk to the deal’s closing, he said.

Synopsys continues to expect the transaction to close in the first half and is “making strong progress toward gaining regulatory approval,” a company spokesperson said. An Ansys representative declined to comment.

It isn’t unusual for China’s reviews of takeovers by foreign companies to drag on. In 2018, US-based Qualcomm Inc. scrapped a $44 billion bid for Dutch chipmaker NXP Semiconductors NV after failing to secure a nod in time, and in 2023 Intel Corp. abandoned its proposed $5.4 billion acquisition of Tower Semiconductor Ltd. for the same reason.

Broadcom Inc.’s $61 billion merger with software maker VMware Inc. eventually went through, although investors were on edge throughout the process due to speculation that China was holding up the deal. 

The uncertainties are affecting smaller deals, too. For example, the spread in the proposed combination of UK telecom network testing company Spirent Communications Plc and US buyer KeySight Technologies Inc. has spiked to its highest level since November. China’s Huawei Technologies Co. is Spirent’s second-largest customer, according to data compiled by Bloomberg. 

The takeover by KeySight was approved by the UK competition regulator last month. However, the company has since delayed the completion date — previously at the end of April — until the end of July, while it seeks approval in the US as well as in China. KeySight declined to comment.

“China may wind down the clock on US deals which need approval as a covert retaliation tactic against the US,” said Emmanuel Valavanis, senior vice president of equity sales at Forte Securities. “Tariffs are front and center of investor minds right now, but don’t forget we’ve also had IP Wars between China and the US for a number of years, together with aggressive rivalry on tech and US blacklisting Chinese companies.”

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