Adobe, Figma abandon $20B acquisition deal over regulatory concerns

CALIFORNIA, UNITED STATES – Computer software company Adobe and design platform Figma have terminated their $20 billion merger due to regulatory roadblocks.
Since the announcement of the agreement in September 2022, industry regulators and tech startups have been keeping tabs on the massive merger.
Regulators were worried about Adobe’s monopolistic tendencies. Specifically, if the purchase of Figma pushes through, regulators believe that it would hinder Figma’s growth trajectory should it be allowed to operate and grow on its own.
As a remedy, the United Kingdom’s Competition and Markets Authority suggested that Adobe would have to divest assets, source code, and engineers – a proposal that Adobe rejected.
The Photoshop maker pointed out that the only product relevant to antitrust was the Adobe XD, a design platform similar to Figma. Adobe XD has lost $25 million over the last three years.
Meanwhile, startup investors noted that the botched deal will not bode well for small companies looking to snag massive merger or acquisition agreements with big tech companies.
“The effects will be felt not only amongst big tech, but also by smaller technology companies who may not be able to command as favorable exit premiums,” said Michael Ashley Schulman, Chief Investment Officer at Running Point Capital Advisors.
“In the case of Figma, it had accepted an offer from Adobe at twice its valuation,” he added.
Adobe will pay a $1 billion termination fee to Figma following this decision.
This year, Figma expanded its team from 800 to 1,300 people and is expected to grow its annual recurring revenue by 40% to over $600 million this year. The design platform is being used by tech firms Uber, Coinbase, and Zoom Video Communications, among others.