Adobe Acquiring Figma With (Regulated) Speed

Adobe’s (NASDAQ: ADBE) largest acquisition ever is being choked with uncertainty.

September 15th, 2022 was the announcement of Adobe acquiring Figma with cash and stock for $20bn USD. A price that is 50 times Figma’s annual recurring revenue. At that point in time, Figma was the most expensive acquisition offer for a private company, since facebook acquired whatsapp for $19bn USD in 2014. 

How’s the acquisition proceeding? Adobe’s currently in the center of scrutiny from three different directions by regulators, so, not advancing at the fastest pace. According to regulatory bodies, Adobe’s trying to take a potential rival out of the game.

Offense from the left, The UK’s CMA (Competition and Markets Authority) with a fast break, was the first to launch an official inquiry into the Adobe and Figma acquisition deal, in May 2023.

On the right, the U.S. DOJ (Department of Justice) is preparing an antitrust lawsuit to block the acquisition of Figma.

While pressing forward from the center of it, the EU has anti-competition concerns that, “Adobe is trying to buy a credible competitor,” and that “it’s bad,” said by a person who’s in direct contact with EU regulators. The acquisition is deemed concerning, because Figma (a cloud-based UI and UX design application, with excellent design, prototyping, and code-generation tools) has potential for better performance than Photoshop, which is astounding, considering Photoshop has ruled the market for years. EU believes that if Adobe swallows Figma, it’ll create less innovation and higher prices, and therefore is pushing the tempo to initiate a formal “Phase 2 investigation” according to European Union circles, which is much longer and arduous, than Phase 1 investigations. 

Adobe Systems Inc. on the defensive, conjectures that Figma and Adobe are conducting in two unique markets. According to internal research, they apparently only have 10% overlap in users who also used Figma. CEO of Adobe, Shantanu Narayen further believes that regulatory actions like this will have a counter-effect, “reduce investor funding into startups,” in future.

On top of this, the EU commission created gaps in their defense, by stating that the commission wasn’t “formally notified” about the acquisition by Adobe, which is the responsibility of the company. Adobe rebounded with, conversations were only “preliminary.” 

Pivoting to a remarkably different opinion, in spite of the perilous confrontation, it seems Adobe is “confident in the merits of the case and looks forward to successfully completing the transaction.” Going a step further, Adobe confirmed they’ll be fine with or without figma. Meanwhile, let us not forget the Adobe stock has been on the rise since May, 2023, despite the delays.

Are the regulators wrong because this type of investigation does discourage funding into startups? Or could regulators be enforcing the right changes, saving us from the future demise of more innovative products that can only be produced through fair competition?