Adobe’s $20 billion bid to buy its competitor Figma has been officially terminated.
Last year, Adobe Inc (NASDAQ: ADBE) revealed its plans to pay $20 billion in cash and stock to acquire Figma, a popular cloud-based design platform. This would have not only increased Adobe’s market share but also its market power, which causes concerns among regulators. Now, Adobe and Figma have announced that they will be scrapping the deal due to the regulators’ concerns and demands.
Adobe Exiting the Deal with Figma
Adobe is already a global leader in the design space and when the acquisition was announced, there was concern that it would give the company too much influence. In response, the Competition and Markets Authority (CMA) blocked the deal and said that Adobe would have to satisfy its grievances.
One of the most prominent was the alleged divestment of several products like Figma Design and Adobe’s own XD app. The CMA essentially wanted Adobe to sell Figma Design before it could acquire it. In response, Adobe said that the request for divestment was unreasonable and that it would not be complying. Experts have pointed out that Figma Design is one of the biggest selling points of Fgma itself and getting rid of it would defeat the purpose of the acquisition. It has also been pointed out that the XD app had actually lost money for Adobe and thus, wasn’t a direct competitor for Figma Design.
In a statement, Adobe said that there was “no remedy package that preserves the benefits of the transaction will be sufficient to resolve the competition concerns.” Adobe management also said that both it and Figma disagreed with the opinions of the CMA and would be moving forward independently.
Even though there appears to be no bad blood between the two companies, this deal cancellation will still cost Adobe a lot of money. It will have to pay a termination fee of $1 billion to Figma, on top of not getting access to the company.
This incident has highlighted the regulatory issues within big tech and the ways that they affect companies. The CMA argues that this sort of acquisition would create an unfair market situation. It was also argued that bigger companies acquiring startups that might be competition gives an unfair advantage. This was also seemingly the reason for Adobe being told to sell Figma Design before proceeding with the acquisition.
On the other hand, some feel that these types of mergers do not hurt the market and feel that regulators are being unnecessarily hostile. Adobe’s share price saw a 1.75% rise on the pre-market today and it is left to be seen how the share price will continue to react to this news.
It is also left to be seen whether Adobe will try acquiring another company in the same vein as Figma and whether that bid will be successful.