Adobe halts its ongoing acquisition plans with Figma

In this post:

  • Adobe and Figma have jointly announced a termination of their $20 billion acquisition plans.
  • Figma will receive a $1 billion fee for the termination.

Adobe’s $20 billion bid to acquire Figma has officially collapsed due to regulatory obstacles in Europe. The companies jointly announced the termination of the acquisition plans, citing insurmountable challenges in obtaining necessary approvals from the European Commission and the U.K. Competition and Markets Authority.

Adobe blames the collapse on European regulations

Unveiled in September of the previous year, the deal drew attention for its substantial scale and the prospect of eliminating a major competitor for Adobe. Despite ongoing monitoring by the U.S. Department of Justice (DOJ), no formal legal action had been taken to block the acquisition. However, recent reports indicated that both Adobe and Figma engaged in last-minute discussions with the DOJ to avoid potential legal intervention.

Challenges were intensifying in Europe, where the U.K. competition authority expressed concerns in late November that the proposed acquisition would stifle innovation. This prompted an in-depth investigation, following a similar course of action initiated by the European Union (EU) in August. Regulatory concerns centered on the assertion that, while Adobe and Figma offered different products, Figma held a dominant position as the “clear market leader” in interactive product design tools.

Regulators argued that Figma’s influence constrained Adobe in the digital asset creation tools space, and acquiring Figma would eliminate it as a viable competitor. Dylan Field, CEO, and co-founder of Figma, acknowledged the decision in a blog post. Despite extensive efforts to highlight the differences between their businesses and products to regulators worldwide, they were unable to secure regulatory approval. Field stated that It was not the outcome they had hoped for.

Figma will receive a $1 billion fee for the termination

Dylan Field also noted that despite thousands of hours spent with regulators around the world detailing differences between the businesses, their products, and the markets they serve, there is no longer a path toward regulatory approval of the deal. As a consequence of the deal’s collapse, Adobe is obligated to pay Figma a termination fee of $1 billion, as stipulated in the contractual agreement. This fee would be triggered if the transaction failed to receive regulatory clearance or if it didn’t close within 18 months of the acquisition announcement in September.

Although the 18-month deadline had not yet elapsed, and no final findings had been issued by regulatory bodies, both companies decided to abandon the deal. Tom Smith, a former CMA legal director now working as a partner at the London-based law firm Geradin Partners, provided insights into the situation. He explained that abandoning a deal shortly before an inevitable prohibition is not unprecedented, as it prevents the merging parties from facing an adverse decision that could set a precedent.

Additionally, it saves on legal fees, though Smith noted that this might be a minor consideration in such a substantial deal. Adobe’s ambitious bid to acquire Figma has come to an end, primarily due to regulatory roadblocks in Europe. The termination of the deal reflects the challenges posed by concerns about market dominance and potential harm to innovation. The $1 billion termination fee, while significant, signifies the conclusion of a deal that faced increasing regulatory scrutiny and ultimately proved unfeasible.

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