Adobe Pays $1 Billion to Terminate $20 Billion Figma Acquisition

Adobe and Figma

Adobe has abandoned its $20 billion takeover bid for design platform Figma. The prolonged acquisition attempt has been wrought with regulatory opposition in the United States, European Union, and United Kingdom.

When Adobe announced its acquisition of Figma in September 2022, the company said that the purchase would “usher in a new era of collaborative creativity.” However, the purchase did not go over well with Adobe stockholders, leading to a 17% dip in share value, Adobe’s largest stock price drop since 2010.

Beyond the initial damage to stock value, the massive acquisition ran into a significant roadblock last month when the Competition and Markets Authority (CMA), a competition watchdog in the United Kingdom, moved to halt Adobe’s purchase of Figma.

The CMA argued that Adobe’s purchase of Figma would eliminate existing competition between the most prominent players in the design software space, Adobe and Figma, reducing innovation in the market and essentially removing Adobe’s biggest competitor from the market. The companies had until tomorrow, December 19, to make their case to the CMA.

In a blog post, Figma’s co-founder and CEO, Dylan Field, explains that after 15 months of regulatory reviews, “Figma and Adobe no longer see a path toward regulatory approval of our proposed acquisition.”

“Figma and Adobe have reached a joint decision to end our pending acquisition. It’s not the outcome we had hoped for, but despite thousands of hours spent with regulators around the world detailing differences between our businesses, our products, and the markets we serve, we no longer see a path toward regulatory approval of the deal,” writes Field.

Figma’s CEO adds that he is “proud” of how the Figma team continued its work over the past 15 months, including shipping new products and making updates to its platform. Field explains that Figma’s focus for 2024 will be to continue to develop products that make it easier for “anyone to design and build digital products on a single multiplayer canvas — from start to finish, idea to production.”

As for Adobe, it explains, “Today, Adobe (Nasdaq:ADBE) and Figma announced that they have entered into a mutual agreement to terminate their previously announced merger agreement, originally announced on September 15, 2022, under which Adobe would have acquired Figma for a mix of cash and stock consideration.”

“Although both companies continue to believe in the merits and procompetitive benefits of the combination, Adobe and Figma mutually agreed to terminate the transaction based on a joint assessment that there is no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority.”

Adobe’s chair and CEO, Shantanu Narayen, adds, “Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently. While Adobe and Figma shared a vision to jointly redefine the future of creativity and productivity, we continue to be well positioned to capitalize on our massive market opportunity and mission to change the world through personalized digital experiences.”

“Figma has built an incredible product design platform, and I am confident in their continued innovation and growth after spending more than a year with their team and community,” says David Wadhwani, president, Digital Media Business, Adobe. “I have been impressed with Dylan and his incredible team at Figma and will look for ways to partner to delight joint customers in the future.”

Adobe’s purchase of Figma was designed to provide the software giant vast control over a rapidly growing competitor in a shared space. Now that regulators have squashed these plans, it remains to be seen how Adobe will handle the Figma-sized elephant in the room. Throughout the regulatory review process, Adobe and Figma have argued that they do not compete with each other, although obviously, competition watchdogs have disagreed.

Adobe must pay Figma a $1 billion penalty as part of the purchase termination. So far, the breakup has been met with a slightly positive response from shareholders, as Adobe’s stock is up slightly today.