Adobe and Figma abandon $20bn acquisition plans citing regulatory pressure
Adobe loses chance to absorb key rival
Adobe and Figma have mutually agreed to terminate the planned $20 billion acquisition deal due to regulatory headwinds from both the European Commission and UK's Competition and Markets Authority (CMA), and the likelihood of similar action by the US Department of Justice (DOJ).
The deal had faced serious scrutiny from regulators since it was announced in September 2022, with concerns about its Adobe eliminating a major rival.
The CMA concluded after an investigation that the addition of Figma's interactive design tools would have given Adobe, creator of Photoshop and Illustrator, a significant hold over the digital design software space. To comply with competition rules, the UK regulator told Adobe that it should sell off Figma's core Design product, which it refused to do.
The EU announced a similar investigation in August, and there are reports that Adobe and Figma had been in discussions with the US Department of Justice (DOJ), which had also expressed concerns over the proposal, before announcing the termination of the deal.
Adobe CEO Shantanu Narayen said his company and Figma "strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently."
Figma CEO Dylan Field said in a blog post: "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."
As part of the failed merger, Adobe will pay Figma a $1 billion termination fee.
Adobe originally announced plans to purchase its competitor Figma for $20 billion, twice its market valuation, in September 2022. In June, it abandoned its own UI design platform, Adobe XD, which was a direct competitor to Figma.
The collapse of the deal was broadly welcomed by Figma users worried what increased dominance of the design by Adobe might mean, given the market leader's aggressive pricing strategies and what regulators identified as a threat to competition.
For Figma the future is unclear. It could attempt to go public with an IPO or look to be acquired by another large firm like Microsoft.
Commenting on the cancelled deal, Alex Haffner, competition partner at UK law firm Fladgate, said that while the UK CMA had led the moves against the acquisition, it shouldn't be seen as an "anti Big Tech" stance.
"Both the CMA and the European Commission were expecting significant concessions in the form of a structural divestment in order to clear the deal, and that was not a price Adobe could pay."
In contrast to Microsoft's acquisition of Activision, Figma appears willing to retain its independence, he noted.
"Certainly the regulatory landscape for Big Tech has become somewhat more complicated in recent times, but, on this occasion at least, the regulators appear to be talking with a unified voice in their opposition to the proposed deal."