Jonathan Kanter, assistant attorney general of the Justice Department’s Antitrust Division, emphasized the importance of this outcome, stating, “The decision to abandon this acquisition ensures that designers, creators, and consumers continue to benefit from the competition between the two companies in the future.”
This dissolution of the Adobe-Figma deal represents one of the wins for antitrust officials. Adding to their success, biotech firm Illumina recently announced its intention to divest its subsidiary Grail through a spinoff or sale. Regulatory concerns over potential stifling of medical innovation prompted this move.
These victories signify a notable shift, following a series of losses suffered by antitrust agencies in their efforts to thwart mergers deemed anticompetitive over the past year. Despite objections from the Federal Trade Commission, a U.S. court ruled in February that Meta Platforms could proceed with its acquisition of virtual reality start-up Within Unlimited. Additionally, the agency failed to halt Microsoft’s $69 billion purchase of Activision Blizzard later in the year.
While regulators undoubtedly celebrate these triumphs, it is Figma and its users who may truly benefit in the end.
The Anticompetitive Nature of Adobe-Figma Merger
Let’s be straightforward: the proposed merger between Adobe and Figma, announced in September 2022, was likely anticompetitive from the outset. Figma had been consistently outperforming Adobe in the market due to its innovative web-based architecture that fosters superior collaboration among users. Unlike Microsoft and Meta’s deals, Adobe was already present in Figma’s market with a direct competitor called Adobe XD.
The staggering $20 billion price tag attached to the deal further underscored its problematic nature. Adobe was willing to pay such a substantial sum—equivalent to 100 times Figma’s projected annual recurring revenue at the time—presumably out of fear of future disruption from the start-up.
Figma’s Independence Ensures Innovation and Flexibility
Since the announcement of the deal, concerns have been raised by many Figma users regarding the potential impact on the start-up’s rate of innovation under Adobe. Larger companies often exhibit a slower and risk-averse approach when it comes to embracing new features and ideas. Furthermore, users expressed their fear that Figma’s core functionality may eventually be restricted to Adobe’s higher-priced Creative Cloud bundle, thereby strengthening Adobe’s dominance in the creative professional software category.
However, with the collapse of the deal, there has been a wave of optimism among Figma users on social media. It is widely believed that Figma will now be able to operate as a more agile and flexible independent company. The age of artificial intelligence presents numerous opportunities for technically proficient start-ups to thrive, especially those that can quickly adapt and iterate.
Even Adobe investors have displayed satisfaction with the outcome, as they believed that the company was paying an excessive price for Figma. This sentiment is reflected in the 2.7% rise in Adobe shares during afternoon trading on Monday.
Both Adobe and Figma released a joint statement on Monday, expressing their continued belief in the merits and procompetitive benefits of the proposed combination. However, they acknowledged that they strongly disagree with the recent regulatory findings. Nevertheless, both companies have decided that it is in their respective best interests to move forward independently.
The dissolution of the deal also grants Figma greater financial resources to compete with its rivals. According to the terms of the merger agreement, Adobe is obligated to pay Figma a substantial $1 billion cash breakup fee. This influx of funds can be utilized by Figma to invest in other software areas, fostering greater competition.
History has shown that a failed deal can boost competition. In 2011, AT&T paid T-Mobile a $4 billion cash and asset breakup fee when their merger was forced to terminate. This fee significantly contributed to T-Mobile’s disruption of the wireless business over the following decade.
In a blog post on Monday, Figma CEO Dylan Field expressed his excitement for the future and conveyed gratitude to the community for their unwavering support. He believes that the best and most innovative days for Figma are still ahead.