Adobe and Figma are calling off their $20 billion merger since the deal was unlikely to get regulatory approval from the European Commission and UK Competition and Markets Authority.
In a statement, the companies said they both "continue to believe in the merits and procompetitive benefits of the combination" but there was no clear path to approval. Adobe and Figma announced plans to merge in 2022.
Adobe will pay Figma a $1 billion breakup fee, according to an SEC filing. CEO Shantanu Narayen said:
"While Adobe and Figma shared a vision to jointly redefine the future of creativity and productivity, we continue to be well positioned to capitalize on our massive market opportunity and mission to change the world through personalized digital experiences."
Constellation Research CEO Ray Wang said Adobe will likely build a competing product to take on Figma.
“The UK's CMA ultimately played a key role in stopping Adobe's acquisition of Figma. From a competitive point of view, this move makes no sense as the products are tangential. Adobe builds creative tools and Figma enables work coordination among creatives. This type of regulatory overreach stifles innovation across sectors. Adobe will now have to pay Figma $1B and then build a competitive offering to challenge Figma."
Constellation Research analyst Liz Miller said:
"I'm not sure the regulators could have misunderstood markets, solutions or categories more than in this case. But then again, considering how many times marketers and creatives must explain their jobs as NOT being advertising it shouldn’t really shock anyone. The reality is that this is a bit of a melancholy decision: the opportunity to truly shake up the product development space was considerable with this deal and for many mutual customers who got a taste of what could be when the teams would informally brainstorm pre-deal-closure.
So now what? Adobe will power forward with tools already announced in 2023 that focused on the intersection points of analytics and product design. We will likely see more focus on how insights from product performance can be automated into workflows and actions. The goal is to create more self-driving, self-healing and self-advancing digital products that understand when unintended points of user friction and frustration derail experience and engagement. The backbone of a solid solution in AdobeXD still exists, but only time will tell if Adobe has the appetite to truly take on that market. As we have seen throughout the regulatory questioning, there is plenty of market and customer appetite for a Figma alternative. But Adobe may not want to derail focus that has been advancing revenue.
This DOES open the door to some interesting options specific to where that cashflow may go. Is another acquisition already in Adobe’s view? Based on the earnings call last week, the digital media and document sides of the business are growing, but it seems that while digital experience is growing that growth is sluggish in comparison to competitors in the marketing and customer engagement/experience spaces. Perhaps a shake up on that side of the cloud is next."