Adobe terminates acquisition of cloud design software maker Figma amidst mounting regulatory challenges in EU, UK
Adobe and Figma have mutually terminated their merger agreement, announced in September 2022, in which Adobe had proposed to buy the maker of cloud-based design software for some $20 billion (£16bn), saying they saw no clear path to regulatory approval in the UK or the EU.
As part of the termination Adobe is to pay Figma a fee of $1bn.
Shares in the Photoshop and Illustrator maker rose more than 1 percent in early trading on Monday.
The deal fell foul of regulators who saw it as an example of dominant technology companies acquiring smaller firms that could grow into serious competitors.
Adobe denied it competed with Figma in any meaningful way, saying in November its only relevant product was Adobe XD, which has lost $25m over the past three years and has only five full-time employees.
Investors had also balked at the acquisition’s high premium, causing a sell-off at the time of its announcement that wiped nearly $30bn off Adobe’s market capitalisation.
Designers had greeted the deal with similar concerns to those of regulators, remarking on social media that Adobe had a “stranglehold” on design software.
“Figma is amazing and free. And I’m sure that will be changing soon,” a user wrote on Reddit after the deal was announced.
The deal attracted regulatory probes in the EU and the UK, where the Competition and Markets Authority (CMA) suggested remedies including significant divestment of assets, source code and engineers to “restore the conditions of competiton”.
Adobe rejected the proposals in a letter dated last week.
Bloomberg reported in February that the US Department of Justice was preparing a similar challenge.
“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 Adobe chair and chief executive Shantanu Narayen.
Figma chief executive Dylan Field said the company had spent thousands of hours with regulators but “we no longer see a path toward regulatory approval of the deal”.