Adobe Abandons $20 Billion Figma Acquisition

Adobe’s ambitious pursuit of a $20 billion acquisition of Figma, a rising star in web-based interface design, has come to an abrupt halt due to regulatory challenges in the European Union. The antitrust scrutiny, driven by concerns over market competition, proved insurmountable, leading Adobe to abandon its efforts to absorb its innovative competitor.

Negotiations between Adobe and Figma unfolded during the peak of the COVID-19 pandemic, coinciding with a significant surge in global technology and software investments. The proposed acquisition, disclosed in September 2022, revealed Adobe’s willingness to shell out a substantial amount, equivalent to 50 times Figma’s annual recurring revenue and double its latest private funding round in 2021.

From the moment of announcement, both companies faced formidable opposition from antitrust authorities, particularly in the EU and the UK, determined to prevent the deal. The European Commission voiced concerns that the merger could substantially diminish competition on a global scale. Margrethe Vestager, the EU’s Competition Commissioner, asserted that the acquisition would eliminate all future competition between the two entities, resulting in limited choices, diminished quality, and increased costs for consumers.

Simultaneously, the UK Competition and Markets Authority (CMA) expressed apprehensions about Adobe’s proposal. In November, the CMA suggested alternative “remedies,” urging Adobe to either abandon the deal or divest overlapping business products like Illustrator or Photoshop. Another option included compelling Figma to sell off its core product, Figma Design.

Figma CEO Dylan Field found the CMA’s proposal amusing, characterizing it as an attempt to “buy a company so that you can divest the company.” Field expressed disappointment with the outcome, emphasizing that there was no clear path to satisfy the stringent conditions set by UK and EU regulators for approval.

In response, Adobe and Figma criticized the CMA’s provisional findings, citing “serious errors of law and fact” and accusing regulators of an “irrational approach” to evidence gathering. The requirement to divest a multibillion-dollar business, such as Photoshop or Illustrator, was deemed a disproportionate response to an “uncertain and speculative” theory of harm to competition, ultimately leading to the abandonment of the acquisition.