In a joint statement, Adobe and Figma announced the mutual termination of the cash-and-stock transaction.
In the case of the Adobe-Figma deal, the U.K. CMA expressed concerns about the elimination of competition and reduced innovation in the product-design software sector. The disruption caused by this termination could have broader implications for the tech community.
Adobe has decided to abandon its planned $20 billion acquisition of Figma, a collaboration software company. This decision comes in the wake of concerns raised by the U.K. regulator that the deal would likely harm innovation, warning that it would eliminate competition in the product-design software sector.
In a joint statement, Adobe and Figma announced the mutual termination of the cash-and-stock transaction. The primary reason cited was the uncertainty about receiving regulatory approval from the European Commission and the U.K. Competition and Markets Authority (CMA). Both companies expressed their strong disagreement with the regulatory findings but agreed that it was in their best interests to move forward independently.
The U.K. regulator, in a detailed investigation, provisionally found that the acquisition would stifle competition in product-design software, diminish innovation, and eliminate Figma as a competitive threat to Adobe’s flagship products, Photoshop and Illustrator. The European Commission also echoed similar concerns in November and gave Adobe an opportunity to respond to the objections.
Adobe’s Chief Executive, Shantanu Narayen, emphasized that despite their disagreement with the regulatory findings, both companies believe it’s in their best interests to move forward independently. As part of the termination agreement, Adobe will pay Figma a substantial $1 billion termination fee.
This unexpected termination comes after Adobe’s agreement to acquire Figma in September 2022, in what would have been the largest acquisition for the Silicon Valley software giant, known for its ubiquitous workplace tools and PDF files. The deal surprised investors, leading to a nearly 17% drop in Adobe’s shares the day after its announcement.
While Adobe’s shares rose 2.47% after the termination news, it reflects a sigh of relief among investors who were concerned about the company paying too much for the acquisition. Adobe has been making significant strides in AI without relying on massive acquisitions. The company’s shares have risen more than 75% this year as it continues to leverage AI to enhance its core products.
Initially, Adobe aimed to strengthen its web-based collaboration software technology through the Figma acquisition. However, the company has since improved its existing tools and invested heavily in AI features like the image generator Firefly.
The termination of the deal comes at a time when global regulatory scrutiny of technology acquisitions is on the rise. Regulators and policymakers are paying closer attention to potential antitrust issues and their impact on competition.
The CMA decision follows its rejection of Microsoft’s $75 billion acquisition of Activision Blizzard. While Microsoft eventually gained approval for the deal after reworking some aspects, it highlighted the growing regulatory scrutiny of major technology acquisitions.
In the case of the Adobe-Figma deal, the U.K. CMA expressed concerns about the elimination of competition and reduced innovation in the product-design software sector. The disruption caused by this termination could have broader implications for the tech community.
The termination of the Adobe-Figma deal underscores the challenges technology companies face in navigating an increasingly complex regulatory environment. The implications of such disruptions extend beyond the companies involved, affecting global trade, supply chains, and ultimately, consumers. As technology acquisitions face heightened scrutiny, companies must carefully assess the regulatory landscape and potential antitrust concerns before pursuing major deals.
This turn of events for Adobe serves as a reminder that even tech giants are not immune to regulatory interventions, and the consequences of such actions can reverberate throughout the business world.