Why did Adobe abandon the deal of the year with Figma?

  • Adobe and Figma end $20 billion merger amid regulatory pressure.
  • Regulators feared innovation loss due to Adobe’s design software dominance.
  • Figma emerges victorious, Adobe faces strategic considerations post-termination.

In an unexpected turn of events, Adobe and Figma jointly declared the termination of their highly anticipated $20 billion merger, succumbing to mounting regulatory pressure from the UK and EU. As the dust settles, Adobe finds itself writing a hefty check of $1 billion as a reverse termination fee to Figma.

Figma’s victory lap

Figma has gained a legion of loyal fans by catering to the needs of designers and teams through its powerful collaboration, flexibility and user-friendliness. They celebrate this as a clear win for product design platforms and consumers, claiming that “Adobe blinked first”. Going forward, more companies will innovate in the UX/UI space. The timely intervention of regulators put an end to Adobe’s delusion of monopolising the market. If anything, Adobe will need to restart the stalled development of Adobe XD and is still worried about Figma’s continued growth weighing them down; Adobe previously abandoned Macromedia Fireworks, leaving a huge void in the lightweight vector design tools space. This failed merger seems to be yet another sign that the brutal economic tactics used to suppress competitors are beginning to fail.

The great Adobe escape

But at the same time, there are still observers who take the opposite view. The reality is that Figma got screwed – Adobe did not overpay for Figma after the market downturn. Calling off the merger may have been a calculated strategic move to avoid overpaying for Figma in an uncertain market. That’s not to say it’s not a win for consumers, but it’s definitely a loss for the Figma team. Because the truth is, as some users mentioned, “The problem is like Facebook paying huge amounts for Whatsapp. The company isn’t really worth that much money. It is worth so much to Adobe because of the threat it poses”.
Some users from India also expressed regret at not being able to use full paid versions of content because of Figma’s two-year inability to resolve issues with the local regulatory process. They were hoping for a new turnaround with the Adobe acquisition. Perhaps Figma’s next step is to improve the platform’s infrastructure in countries around the world. “Figma’s CEO seems to prefer being acquired to driving the business forward, almost as if he’s looking for early retirement.” , from X.

Antitrust saga unfolds

Regulators, alarmed by Adobe’s near-monopoly in the design software sector, were unwilling to greenlight the mega-deal. The concern centered around the potential stifling of innovation if Adobe absorbed Figma, a dynamic product design platform that had outshone Adobe’s XD application in popularity. Designers, echoing these apprehensions, feared a post-merger creative slump.

The UK’s Competition and Markets Authority (CMA) proposed remedies to salvage the deal, including a significant divestment of assets, source code, and engineers. Adobe, boldly rejecting these suggestions in a December 14th letter, set the stage for a showdown on December 21st.

Simultaneously, the European Commission and the US Department of Justice were gearing up for their own investigations. In the latest update, the Commission notes that Adobe and Figma have decided to terminate their agreement and that the EU has now closed its formal antitrust investigation into Adobe’s acquisition of Figma.


Coco Yao

Coco Yao was an intern reporter at BTW media covering artificial intelligence and media. She is studying broadcasting and hosting at the Communication School of Zhejiang.

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