Adobe General Counsel Explains how its $20 Billion Figma Deal Fell Through

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Adobe and Figma started the week by halting their $20 billion merger. Adobe had to pay Figma $1 billion for the acquisition termination.

Over at The Verge, its editor-in-chief Nilay Patel chatted with Adobe general counsel Dana Rao for an upcoming episode of the website’s Decoder podcast, sharing additional details on what went wrong with Adobe’s massive Figma purchase.

As expected, ongoing and persistent regulatory issues significantly contributed to the breakup. The European Commission (EC) claimed that the acquisition could reduce competition. At the same time, the United Kingdom’s Competition and Markets Authority (CMA) had halted the acquisition pending appeals, which were slated to be heard this week. Not to be left out, the antitrust regulators in the United States were also poking around the deal.

It is common for significant mergers to attract the attention of regulators. Microsoft’s recent controversial purchase of Activision Blizzard for nearly $70 billion took almost two years of regulatory battles to complete. As for why Adobe did not follow Microsoft’s lead and fight for its Figma acquisition, Rao tells The Verge that Adobe and Figma did not see a path forward, given how their arguments had been received thus far.

Among the major roadblocks for regulators is that Adobe XD, which has been an abject failure for Adobe, offered tools and features similar to Figma’s platform.

“We tried and failed with our tool,” Rao tells Patel. Contrary to what regulators think, Adobe believes there is no overlap between Adobe’s offerings and Figma.

Another issue is that current antitrust regulation has an increased focus on preserving future competition rather than focusing only on the contemporary market situation. Adobe and Figma saw no way to convince regulators that the deal would not harm the future competitive landscape.

“The only way to solve a future competition issue, that someone might do something, is to not do the deal,” Rao explains. “That’s essentially what they were telling us.” Given how conversations had gone and the pessimism about reaching a suitable resolution and completing the acquisition, Adobe and Figma determined the time was right to throw in the towel.

Rao’s new comments echo Adobe’s statement earlier this week. “Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” Adobe chair and CEO Shantanu Narayen said earlier this week.

The Decoder podcast episode featuring Dana Rao will be released next month and will surely be a treasure trove for anyone interested in the tech industry.

Image credits: Header photo licensed via Depositphotos.