Adobe to Pay Figma $1 Billion After Acquisition Deal Falls Through

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Adobe and Figma have mutually agreed to terminate their proposed merger that would have seen Adobe Inc. acquire its key rival for $20 billion. The two companies say the growing pressure from EU and UK regulators majorly contributed to the decision.

“It’s not the outcome we had hoped for, 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,” Dylan Field, Co-Foundre and CEO, Figma, shares in the announcement.

Following the termination, Adobe will be required to pay $1 billion to Figma as a reverse termination fee in cash.

Figma has eaten into Adobe XD’s market with its offerings. This has seen its adoption by a majority of designers and notably, Microsoft employees who prefer it to Adobe products.

The acquisition announcement in November 2022 was met with mixed reactions with a majority of designers viewing this as a bad move. By acquiring its key competitor, most viewed this as a move by Adobe to monopolize the creative market. Figma’s CEO had however argued that the plan was to keep the product design platform operating autonomously.

Following today’s development, the news will be met with relief by a majority of designers.

Row with regulators

Regulators raised issues over the potential impact of the acquisition given Adobe’s dominance in the design software market. The proposed acquisition would see Adobe gain near-monopoly status in the market which potentially would hard innovation by limiting Figma’s ability to flourish. This is also a position that major designers hold.

However, Adobe has continuously refuted these claims since the merger announcement.

This proposed acquisition would prompt the European Commission to open an in-depth antitrust investigation and later issue its objections over the proposed acquisition. The Commission concluded that this merger would “significantly reduce competition in the market.”

To note, the EU Commission has since dropped its antitrust investigation following today’s development.

In November, the UK’s Competition and Markets Authority (CMA) effectively blocked the $20 billion deal due to what the watchdog viewed would harm the product design software market. In addition to its findings, the CMA further provided possible remedies leaving room to receive further suggestions from either party.

Earlier last week, Adobe rejected recommendations by the CMA that would otherwise smoothen the approval for the merger.

“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, chair and CEO, Adobe. “While Adobe and Figma shared a vision to jointly redefine the future of creativity and productivity, we continue to be well positioned to capitalize on our massive market opportunity and mission to change the world through personalized digital experiences.”

“While we leave that future behind and continue on as an independent company, we are excited to find ways to partner for our users,” Figma CEO, Dylan Field, added.