Adobe has abandoned its $20 billion Figma takeover due to opposition from antitrust regulators, particularly those in the U.K. and EU. Figma CEO Dylan Field says he’s “disappointed” and both companies say they disagree with the watchdogs’ reasons for opposing the deal. As my colleague Jessica Mathews writes in today’s Term Sheet newsletter, the episode is bad news for private market investors, as the deal was supposed to prove that good exits were still possible.
However, ‘tis the season to be jolly—and for the main players in this scenario, the outcome is in many ways a positive one.
For Figma, the deal’s collapse comes with a $1 billion termination fee. That’s nothing to be sneezed at, even if the UX design tool company is already doing very nicely indeed. According to The Information, annual recurring revenue is up 40% year on year, likely surpassing $600 million this year, and now an IPO may beckon in 2025 or later.
Adobe’s share price rose 3% on the news, so its investors clearly see this as a win—don’t forget that the announcement of the acquisition in September 2022, at a valuation many thought was outlandish, knocked 20% off Adobe’s share price.
Even fans of the deal see considerable upside for Adobe in its failure. Constellation Research’s Liz Miller reckons the regulators blew it by hearing the word “design” and conjuring up conflicts that don’t exist—Adobe’s inferior and largely abandoned competitor to Figma, XD, was never a major part of its portfolio anyway. However, Miller wrote today, “The regulators may have done Adobe a solid by dragging their heels and bungling these inquiries”:
“Let’s, for argument’s sake, imagine a world in which the deal swam forward smoothly and realized a close date of mid-2023. This would have been in the THICK of the earth-shaking shift to generative AI. Would the world be a bit different if Adobe had been pushed into deciding between the investment into Figma and the investment into bringing the Firefly portfolio of AI models to market?…While regulators were lamenting that Adobe would use their posture in the marketplace to miss out on improvements and innovations, tools like Generative Fill and Firefly Image models have radically changed the work of creation in ways we couldn’t have truly envisioned when the headlines first broke about Adobe and Figma. The time free from the chaos of acquisition allowed Adobe’s roadmap into an AI-enriched creative future to unfold.”
And finally, let’s spare a thought for the regulators, who get to hold aloft the scalp of what they—rightly or wrongly—saw as a significant killer acquisition. They’ve blown it in the past by applying insufficient skepticism to acquisitions that turned out to have removed big potential competitors from the scene, notably Facebook’s purchases of Instagram and WhatsApp. (In the latter case, Facebook told the European Commission at the time of the 2014 takeover that it couldn’t automatically match user data from both services; it then went on to do just that, earning a $122 million fine for providing misleading information.) Killing Adobe-Figma overcomes some of that lingering embarrassment, and maybe a strong and independent Figma really will end up generating the anti-Adobe competition that the regulators feared would have been lost.
Always look on the bright side and all that. More news below.
David Meyer
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