Adobe Scraps: In a surprising turn of events, Adobe announced the abandonment of its ambitious $20 billion deal to acquire the cloud-based designer platform, Figma. The deal, initially revealed in September last year, faced insurmountable obstacles in securing antitrust approvals in Europe and the UK, dealing a significant blow to what could have been one of the largest acquisitions in the software startup landscape.
Citing a “no clear path” for regulatory green lights, Adobe’s decision comes as regulators intensify scrutiny over high-profile acquisitions by Big Tech, particularly those that could potentially consolidate market power or stifle competition with emerging startups. The termination of the deal incurs a substantial termination fee of $1 billion, which Adobe will pay to Figma, the San Francisco-based design collaboration platform known for its web-based tools utilized by major firms, including Uber, Coinbase, and Zoom Video Communications.
Figma, whose platform has gained widespread adoption, recently expanded its team and is poised to achieve a remarkable annual recurring revenue growth of over $600 million this year. The company’s positive cash flow and strategic moves into software development have positioned it as a formidable player in the industry. Both Figma and Adobe have capitalized on the surge in generative AI trends, enhancing their offerings to cater to evolving market demands.
However, the UK’s Competition and Markets Authority (CMA) raised concerns about the potential adverse effects of the deal on innovation within software used by a majority of UK digital designers. The European Union also echoed similar apprehensions about a reduction in competition. Despite ongoing discussions with antitrust agencies in the UK, EU, and the United States, recent indications from UK regulators suggested a requirement for Adobe to divest Figma’s core assets.
Also Read: Adobe 20B Dollar Figma Acquisition Faces EU Scrutiny
Adobe’s refusal to offer remedies deemed sufficient by the CMA, coupled with the company’s assertion that it does not compete meaningfully with Figma, led to an impasse. Adobe’s shares saw a modest 1% rise following the announcement.
Adobe CEO Shantanu Narayen expressed disagreement with recent regulatory findings but emphasized the decision to move forward independently in the respective best interests of both companies. The termination of the deal reflects the broader trend of heightened scrutiny over mergers and acquisitions, potentially impacting not only major tech players but also startup opportunities.
Analysts highlighted the implications for smaller technology companies, suggesting that increased regulatory scrutiny could hinder their ability to secure favorable exit premiums. Figma, having accepted Adobe’s offer at twice its valuation, now faces the prospect of thriving as an independent entity with unwavering focus and a clear mission. This turn of events marks a significant development in the landscape of tech acquisitions, underlining the challenges and uncertainties faced by companies navigating the complex regulatory environment.