MOUNTAIN VIEW, Calif. Legal firms representing investors have voiced concerns that Synopsys Inc.'s bid to buy Avanti Corp. may raise antitrust issues with the Federal Trade Commission. While these sources don't expect the acquisition to be scuttled, they say the FTC will probably delay it by making a second request for information and requiring the divestiture of certain products.
"I think this deal is heading for some serious trouble," said one attorney, who declined to be identified. He said that competitors will almost certainly contest the deal before the FTC, primarily out of concern that a combined Synopsys-Avanti tool suite won't allow sufficient integration with third-party tools. He also said the FTC gets concerned when products from merged companies claim more than 35 percent market share in any one area.
"I'm not sure it will be enough to break the deal up, but there will at least be a second request for information that could drag it out for months and lead to some divestitures," the attorney said. The FTC may require merging companies to divest, or get rid of, products that the government believes will stifle competition.
Another legal representative said her firm believes there is a "60 percent chance" the FTC will issue a second request for information, potentially delaying the close of the deal by three to six months beyond the late-winter-to-late-spring time frame the companies had anticipated. While divestitures may be required, she said, the FTC probably won't nix the merger.
Steve Shevick, corporate counsel for Synopsys here, said the company isn't concerned. "We think the transaction is overwhelmingly pro-competitive," he said. "We'll make all the appropriate filings with the FTC, and if they have any concerns we'll work it out with them."
Asked whether a Synopsys-Avanti tool suite will be a closed system, Shevick responded, "Our track record on interoperability is unmatched in EDA electronic design automation. We'll do what's right for customers."
Companies seeking FTC approval for a merger must first file a document required by the Hart-Scott-Rodino act. The FTC routinely issues a first request for additional information. If customers or competitors complain, however, the FTC may issue a second request, and that can delay mergers for months.
A previous EDA merger that was delayed by FTC concerns was Cadence Design Systems Inc.'s purchase of Cooper & Chyan Technologies. Announced in November 1996, it didn't close until the following May due to FTC scrutiny. To close the deal, Cadence had to agree to widen its Connections program and to notify the commission of future acquisitions in the IC-routing area. Even then, the deal was approved on a split vote by FTC commissioners.