Adobe and Figma abandon proposed $20bn merger

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Adobe has abandoned its proposed $20bn acquisition of product design software company Figma, saying there was “no clear path to receive necessary regulatory approvals” from UK and EU watchdogs.

The deal had faced probes from both the UK and EU competition regulators over fears it would stifle competition and innovation in the product design, image editing and illustration markets.

According to a document published by the UK’s Competition and Markets Authority on Monday, Adobe refused to offer remedies to satisfy the regulator’s concerns last week, arguing a divestment would be “wholly disproportionate”.

Hours later, the two companies issued a mutual statement terminating the deal, citing the regulatory challenges. Adobe will pay Figma $1bn in a termination fee under the terms of the merger agreement. Shares in Adobe were up 3 per cent on Monday.

“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” said Shantanu Narayen, Adobe’s chair and chief executive. 

Competition regulators around the world have recently sent mixed signals over Big Tech groups hoping to acquire promising start-ups and potential rivals at a time when public markets have been largely closed to new listings.

The EU’s antitrust watchdog has made a formal objection to Amazon’s $1.7bn proposed purchase of Roomba-maker iRobot. However, Microsoft was able to complete its $75bn takeover of games maker Activision in October after it made revisions to the deal to appease UK regulators.

The proposed merger of Adobe, which makes a broad range of digital marketing and creative tools including Photoshop and InDesign, and Figma, which specialises in online software for designing apps and websites, had been battling multiple regulatory challenges.

The European Commission published a statement of objections to the deal last month, arguing the takeover could “significantly reduce competition in the global markets”.

The huge price that Adobe was willing to pay for San Francisco-based Figma had been seen by critics of the deal as an effort to quash the software giant’s most promising new rival in decades.

The merger, which was first negotiated during the Covid-19 pandemic’s boom in tech investment, would have valued Figma at roughly 50 times its annual recurring revenue, and double its last private funding round in 2021.

A CMA spokesperson said: “During a detailed Phase 2 investigation, the CMA provisionally found that the deal between Adobe and Figma had the potential to impact the UK’s digital design industry by reducing choice, innovation, and the development of new competitive products.”

Margrethe Vestager, the EU’s competition commissioner, added: “By combining these two companies, the proposed acquisition would have terminated all current and prevented all future competition between them.”

The companies were expected to appear in front of the CMA to contest the regulator’s provisional findings on Thursday this week.

Under its proposed remedies in November, the CMA said it was considering either prohibiting the deal or demanding the divestiture of overlapping operations, such as Adobe’s Illustrator or Photoshop, or Figma’s core product Figma Design.

Speaking with the Financial Times last week, Figma chief executive Dylan Field said the latter suggestion left him amazed at “the idea of buying a company so you can divest [it]”.

In a statement following Monday’s announcement, Field said he was “disappointed in the outcome”.

Earlier on Monday, the CMA had published the companies’ responses to its provisional findings, which Adobe and Figma said contained “serious errors of law and fact” and took “an irrational approach to the gathering and appraisal of evidence”.

“Requiring a multibillion-dollar global divestment of Photoshop or Illustrator in order to address an uncertain and speculative theory of harm is wholly disproportionate,” they wrote.

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