Some investors felt Adobe’s purchase of Figma was overvalued, creative types that used the web-first design collaboration startup’s wares were nervous about its takeover, and it seems the US Department of Justice is too.
According to loquacious sources that spoke to Bloomberg on the condition of anonymity, the federal executive department of the US government is planning to block the proposed $20 billion sale – which would be the biggest ever buy of a private software biz.
The Creative Cloud maker met with the Justice Department this week, as is “common practice” before a suit is filed. The antitrust division is understood to be worried that should it proceed, folding Figma into Adobe would mean one less option for arty professionals.
The cash and stock acquisition was announced by Adobe in September, and a short few months later the DoJ made a second request for information after contacting customers, competitors and Figma’s private equity backers, who were presumably delighted at the $20 billion payday.
For clarity, Figma absorbed more than $330 million in investment over seven funding rounds since it was founded in 2016.
Now the DoJ may demand concessions and Adobe may acquiesce to get the deal over the line rather than see it blocked. The software-maker’s bid for Figma is also being scrutinized by the European Union antitrust team to “examine the potential cross-border effects of the transaction.” The deeper probe began mid-February.
Not to be left out, the UK’s Competition and Markets Authority, which blocked Meta’s buy of Giphy last year, is also more closely inspecting the agreement.
Adobe told us it expects the sale to stand up. A spokesperson said:
“The combination of Adobe and Figma will deliver significant value to consumers, advance new product categories and technologies and create new market opportunities, and we’ve been delighted to hear from customers across the design space who tell us they are excited about the benefits the transaction will unlock.
“Adobe and Figma focus on very different product areas today. Figma is a leader in interactive product design, focused on building a collaborative web platform. Adobe is a leader in the creative tools space, helping millions of users create amazing visual content. Together, our vision will help enable millions of consumers to transform their productivity with creativity.”
It added: “We are engaged in constructive and cooperative discussions with regulators in the US, UK and EU among others. We continue to expect to close the transaction in 2023, in line with previously stated guidance.”
We have asked the DoJ to comment.
The $20 billion purchase price for Figma equated to 50 times its forecast $400 million annualized recurring revenues in 2022. Even seen through the lens of a pandemic-led bonanza for tech business, this was an eye-wateringly expensive agreement. Some on Wall Street felt this was too high a price to pay for a relative upstart.
Figma is a collaboration design biz that built a browser-based app to manage file organization by showing projects and their files in a dedicated format. It’s a vector-based graphic editor and prototyping tool with no installation, patching or updates required. It has four million users, yet only a small fraction are paying customers.
Users feared Adobe would merge Figma with its XD software and hike prices. Figma co-founder Dylan Field said this wouldn’t happen. Users made their upset obvious on the community forum in the month after the sale was announced. ®
