Adobe Faces Major Challenge as Figma’s $20B Deal Falls Through

Adobe and Figma ended their $20 billion acquisition dream this morning after regulators signaled it would continue to be rough going. Figma still gets a $1 billion consolation prize as part of the deal, and as the leader in collaborative design, should land on its feet just fine. Adobe put on a brave face in their public statement, but it has to be deeply disappointed with this outcome. Figma, for its part, has not stood still since the deal was announced, proceeding and planning as the independent company it is. If he is right, that’s precisely why Adobe wanted to buy the company because it saw that too.

Adobe and Figma’s $20 billion acquisition dream came to an end this morning after facing harsh opposition from regulators. Figma may have received a $1 billion consolation prize, but as the pioneer in collaborative design, they are sure to land on their feet.

However, for Adobe, the future may not be as bright. They had their hearts set on acquiring Figma, recognizing their success and aiming to boost their own offering, XD, which was not nearly as robust. They saw this as a lucrative opportunity to take control of a thriving market.

Unfortunately for Adobe, the path to acquisition was littered with regulatory roadblocks, and after more than a year of meetings, it became apparent that their plans would not come to fruition. In a joint decision, both companies decided to walk away from the deal.

In their public statement, Adobe maintained a positive outlook, but it’s safe to say that they are disappointed with this outcome. “While Adobe and Figma shared a vision to redefine the future of creativity and productivity, we remain well-positioned to capitalize on our vast market opportunity and our mission to revolutionize the world through personalized digital experiences.”

It remains to be seen if Adobe can maintain the same strong position without Figma by their side. They were willing to pay a hefty price to bring them into the fold, but they could not sway the regulatory authorities who saw this as a blatant power move by a wealthy company trying to dominate the market.

Margrethe Vestager, the EU’s competition head, and executive Vice President, did not mince words in her public statement, viewing the proposed acquisition as an attempt to eliminate competition. “By merging these two companies, it would have terminated all existing and potential competition between them. Our thorough investigation revealed that this would lead to higher prices, diminished quality, or limited options for consumers.

The founder and principal analyst at Constellation Research, Ray Wang, believes that this is a major setback for Adobe, forcing them to turn back to their own design collaboration tool, XD. “As we enter an era of generative AI, the focus is not on content creation, but rather on the organization and coordination of content. This failed deal will set Adobe back by at least two years and put pressure on them to revamp XD to cover this essential market,” he states.

In October, Dana Rao, Adobe’s general counsel, told TechCrunch that they had essentially dismantled the XD team and were fully committed to having Figma fulfill this product need. “We attempted to enter the collaborative design space with XD, but it did not work out. We ultimately abandoned the product, which only generated 15-17 million dollars annually for us. We currently have only five full-time employees dedicated to maintaining it for contractual obligations. This is why we saw purchasing Figma as our path into the product design market,” he explained at the time.

However the acquisition’s failure does have a silver lining for Adobe – they now have extra funds to play around with. In a post-generative AI world, perhaps this money could be put to better use. Brent Leary, co-founder, and partner at CRM Essentials think this could be a blessing in disguise for the company. “The deal was announced before the emergence of ChatGPT, and the world has since changed dramatically. This may actually work out better for Adobe, with $20 billion to maneuver and shape the future of content creation post-ChatGPT,” he suggests.

Wang believes that Adobe could also consider acquiring another collaboration startup, such as Miro, WebFlow, or InVision. These companies have raised $476 million, $335 million, and $356 million, respectively (according to Crunchbase data). While none of them would be a perfect replacement for Figma, they could give Adobe a head start in the collaboration space without attracting the same kind of regulatory scrutiny.

Meanwhile, Figma has continued to move forward independently, making strategic hires and developing new features. Since September 2022, they have hired 500 new employees. They have also expanded their capabilities, including tools for developers and a generative AI layer on top of their popular FigJam whiteboard tool.

John Lilly, an early investor in Figma, is thrilled for the company’s future as an independent player. “This team is truly special. Over the past decade, they have completely revolutionized the design process, and the market for product design is rapidly expanding,” he tells TechCrunch.

If Lilly’s prediction is correct, then it’s clear why Adobe wanted to acquire Figma in the first place. However, as Figma moves forward on their own, Adobe must now rethink their design collaboration strategy and start almost from scratch. Unforeseen circumstances may have thrown a wrench in their plans, but Figma remains a promising startup with a world of potential, regardless of the failed acquisition.

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Kira Kim

Kira Kim is a science journalist with a background in biology and a passion for environmental issues. She is known for her clear and concise writing, as well as her ability to bring complex scientific concepts to life for a general audience.

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