Adobe and Figma Terminate $20 Billion Deal After Regulator Clash

Adobe Inc. walked away from its $20 billion acquisition of startup Figma Inc. after clashing with regulators in Europe and the UK.

Adobe will pay Figma a $1 billion termination fee, the companies said in a statement Monday. They saw “no clear path” to getting regulatory approvals from the European Commission and the UK’s Competition and Markets Authority.

Adobe, the dominant force for years in such creative software as Photoshop and Illustrator, announced the purchase of Figma in September 2022.

The acquisition, which would have been one of the largest takeovers ever of a private software maker, was a massive bet that more creative work will be done on the web, a market that Figma has rapidly seized. While Adobe has introduced less expensive, streamlined products for that audience, most of its offerings are still desktop programs aimed at specialists.

But regulators in multiple jurisdictions had said the deal was another example of a tech incumbent snuffing out a nascent competitor. UK regulators suggested drastic remedies to clear the deal, which Adobe rejected. US regulators, meanwhile, were preparing a lawsuit to block the acquisition earlier this year.

Both companies “strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” Adobe Chief Executive Officer Shantanu Narayensaid in the statement.

Adobe shares gained 2.2% in New York on Monday morning.

“No Figma, No Problem,” was the title of a note by Evercore ISI analyst Kirk Materne. Adobe is in a much stronger position now than when the deal was announced due to its investments in generative artificial intelligence, Materne said, and walking away from the deal frees up cash for share buybacks.

Anurag Rana, an analyst at Bloomberg Intelligence, said the termination “doesn’t change Adobe’s dominant position in the creative software market.” Due to Adobe’s recent stock gains, the deal’s total cost would have been closer to $26.5 billion, noted Wells Fargo analyst Michael Turrin.

For more: Adobe Is Focused on AI Rather Than Figma With Acquisition in Limbo

Wall Street had largely been lukewarm on the deal due to its high price tag. While Figma would have helped Adobe reach new customers, some saw the valuation as revealing severe competitive pressures. The creative software giant previously tried to buy Figma in 2020 and 2021 as the startup rapidly gained steam, according to a filing with details on how the merger came together. Eventually, Figma accepted an offer double its valuation at a time when many peers were seeing decreases.

Figma is mainly used for designing app or website interfaces. It trounced Adobe’s competing XD product in recent years, which is now being phased outby the company. Adobe has argued the deal isn’t anticompetitive because Figma doesn’t make tools that compete with its important products like Photoshop, which is used for photo editing, or Premiere, which is used for cutting video.

For more on why the deal made sense for Adobe.

Still, the plan drew comparisons to Meta Platforms Inc.’s 2012 acquisition of Instagram, another takeover of a small but rising competitor. The UK’s CMA argued that if Figma were to stay independent, it would likely grow to compete more directly with Adobe.

Combining the two clear market leaders for app design and editing of other media, like photos and logos, “would have terminated all current and prevented all future competition between them,” Margrethe Vestager, the EU’s competition chief, said in a statement. “Our in-depth investigation showed that this would lead to higher prices, reduced quality or less choice for customers.” The CMA said in a statement that the deal could have reduced choice, innovation and the development of new products.

Adobe and Figma met with senior Justice Department officials last week to discuss the US’s concerns about the deal. The Justice Department didn’t have an immediate comment.

“It’s not the outcome we had hoped for,” wrote Figma CEO Dylan Field in a blog post. “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.”

(Updates with comments starting in the ninth paragraph.)

To contact the reporters on this story:
Brody Ford in New York at bford61@bloomberg.net;
Leah Nylen in Washington at lnylen2@bloomberg.net;
Samuel Stolton in Brussels at sstolton@bloomberg.net

To contact the editors responsible for this story:
Sarah Frier at sfrier1@bloomberg.net

Molly Schuetz, Robin Ajello

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