Synopsys' (SNPS) proposed acquisition of Ansys (ANSS) could reduce competition in the semiconductor chip design and light simulation software sector in the UK, Britain's Competition and Markets Authority said in a Friday statement.

In January, Synopsys agreed to acquire Ansys in a cash-and-stock deal valued at about $35 billion. The companies at the time said the deal was expected to close in the first half of 2025. In August, the regulator invited parties to comment on the impact of the transaction on competition in the UK. It launched an inquiry into the deal in October.

The proposed deal could decrease competition in the supply of three software products where Synopsys and Ansys enjoy strong market positions and compete closely with each other, the regulator's phase 1 investigation found, as announced on Friday. The deal may decrease choice for customers, according to the statement.

The CMA's concerns are related to a power consumption analysis tool, and global optics and photonics software.

"Synopsys and Ansys are important suppliers of semiconductor chip design and light simulation software, and we're concerned that this deal could reduce innovation and lead to higher prices for these products in the UK," Naomi Burgoyne, the CMA's senior director of mergers, said in the statement.

Synopsys and Ansys can submit proposals to address the CMA's concerns. The regulator would start an in-depth phase 2 investigation should the parties fail to submit suitable action points. The deal could be approved if the CMA's concerns are resolved, the statement said.

"The CMA's phase 1 announcement is an expected step in the UK regulatory review process. We have already taken steps to address all concerns raised by the CMA after their phase 1 investigation," Synopsys said in a separate statement. "We remain confident in a positive resolution of the ongoing regulatory review process, and we continue to expect the transaction to close in the first half of 2025."

In September, the company agreed to sell its optical solutions business to Keysight Technologies (KEYS), subject to regulatory approvals and the closing of its proposed Ansys deal.

Ansys didn't respond to MT Newswires' emailed request for comment.