Clearance Delay Causes Cancellation of $20 Billion Adobe and Figma Deal
(Reuters) – Adobe on Monday scrapped its $20 billion deal for cloud-based design platform Figma, indicating there is “no clear path” to antitrust approval in Europe and Britain, which would have been one of the software startup’s biggest acquisitions.
The cash-and-stock deal, announced in September last year, was the latest to come under intense scrutiny from regulators worried about Big Tech buyouts that increase the market power of dominant companies or involve startups seen as emerging rivals.
Adobe is paying a $1 billion severance fee to San Francisco-based Figma, whose web-based design and brainstorming platform is used by Uber, Coinbase, Zoom Video Communications and many other companies.
Last month, the UK’s Competition and Markets Authority (CMA) said the deal would harm software innovation used by the majority of UK digital designers, echoing similar EU concerns about potentially reducing competition.
Adobe, whose shares rose about 1 percent, had refused to offer remedies to the deal to the CMA on the grounds that any Remedy preserving the benefits of the deal would not be sufficient to alleviate its concerns.
The maker of Photoshop had claimed that it does not compete with Figma in any meaningful way. It said in November that its only product related to the antitrust issue was the Adobe XD design tool, which lost $25 million as a standalone app over the past three years.
Adobe CEO Shantanu Narayen said Monday that the companies “strongly disagree with the recent regulatory findings, but we believe it is in our best interests to proceed independently.”
The European Commission did not immediately respond to a request for comment, but the CMA said it was withdrawing the investigation.
The CMA has been in the spotlight in recent months for opposing high-profile deals, including Microsoft’s $69 billion purchase of Activision-Blizzard.
Several analysts said the layoff underscores how tighter controls on corporate acquisitions can also hurt startups.
“The effects are not only seen among large tech companies, but also among smaller tech companies that may not be able to command the same favorable exit fees,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
“In Figma’s case, it had accepted Adobe’s offer at double the value.”
The Figma deal was seen as a bet on the “future of work,” but investor concerns over the hefty price tag and potential margin erosion had wiped more than $30 billion off Adobe’s market value when it was announced.
It was also a big win for Figma’s venture capitalists, including Index Ventures, Greylock Partners and Kleiner Perkins.
Figma “thrives as an independent company with an incredible team, a clear mission and focus,” Index Ventures partner Danny Rimer said in an email.
