Adobe's ambitious plan to acquire Figma for $20 billion, a move that was supposed to reshape the creative software landscape, fell through. It has been stalled by significant regulatory hurdles. The failed acquisition, announced back in September 2022, represented Adobe's strategy to expand its online creative offerings and take advantage of Figma's fast-growing market.
Adobe produces a wide range of digital marketing and creative tools, including Photoshop and InDesign. It operates in the following segments: Digital Media, Digital Experience, and Publishing & Advertising. The Digital Media segment offers creative cloud services that allow members to download and install the latest versions of products such as Adobe Photoshop, Adobe Illustrator, Adobe Premiere Pro, Adobe Photoshop Lightroom, and Adobe InDesign, as well as utilize other tools such as Adobe Acrobat.
What Adobe wanted
When it comes to enabling full browser-based, real-time collaboration, Adobe has long struggled to catch up. Figma, which Adobe was interested in, specializes in online software for designing applications and websites.
By comparison, Figma, with its real-time collaboration-enabled online platform and rapid prototyping capabilities, was way ahead of the curve - it had successfully penetrated markets at companies such as Airbnb, BP, Kimberly-Clark, Microsoft and Salesforce.
However, the deal faced serious objections from various regulators, including the European Commission and the UK's Competition and Markets Authority, over concerns of market dominance and stifling competition.
Adobe and Figma had to mutually part ways and agree to terminate the merger agreement. Adobe has to pay a fine of USD 1 billion for non-fulfilment of the agreement.
This decision, while disappointing for both firms, reflects the increasing pressure of the global regulatory environment against technology mergers and acquisitions.
There is no creative connection
According to Adobe officials, the merger with Figma would expand their product portfolio to include Figma's web capabilities for more players and accelerate the delivery of Adobe's Creative Cloud technologies on the web. Adobe chairman and CEO Shantanu Narayen said in a statement, "The combination of Adobe and Figma is transformative and will accelerate our vision of collaborative creativity."
Figma's web-focused approach captures a significant segment of users who have migrated from traditional desktop applications, such as Adobe's just Photoshop and Illustrator, to online platforms.
Adobe shares jump after botched merger
Adobe shares rose 2.5% after the news of the botched merger was announced, despite the company having to pay a $1 billion fine.*
We can expect growth to continue and the company's cash flow to remain solid, providing sufficient liquidity to, for example, improve the balance sheet or repurchase shares.1
On the positive side, Adobe has had the chance to "look under the hood" so to speak for 15 months as a developer of super-popular design software used by big brands like Netflix, Spotify and Coinbase.
Adobe's share price evolution over the last 5 years. Source: Tradingview.com*
Even after the pending merger, Adobe's business model and business remain robust.
Adobe is now likely to strengthen its own collaboration tool called XD and perhaps look around for some new acquisition opportunities along the way, given the slightly bitter taste left after paying a $1 billion fine for the failed merger with Figma.
Adam Austera, Chief Analyst at Ozios
* Past performance is no guarantee of future results
 Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.