Following news that Adobe had abandoned its $20b acquisition of rival Figma, MBK Search looked back over what UK and EU regulators said, the response, and what comes next.
What did the regulators say?
The UK and Europe’s competition watchdogs both raised doubts about the deal.
In its provisional findings the Competition and Markets Authority (CMA) said the deal could substantially reduce choice and innovation in areas like cloud-based graphic design software.
Similarly, the European Commission’s preliminary view was that the deal may also significantly lessen competition in global markets for interactive product design tools and other creative software.
Product design lead under threat
The CMA highlighted risks to competition in the market for “all-in-one” product design tools aimed at professionals. Figma currently leads this fast-growing market, holding over 80% market share with its Figma Design offering. Adobe has a smaller 5-10% share but was developing Project Spice to compete with Figma.
Echoing this, the Commission found Figma was the clear market leader in interactive product design software, with Adobe one of its largest competitors. A merged entity would create a dominant player, while Adobe has said it will discontinue its tool XD.
Vector and raster raise concerns + eliminate emerging threat
The CMA also raised concerns in the vector and raster graphics editing markets. Though Figma currently has limited functionality, the CMA found evidence Adobe saw it as a growing threat as it improved.
Similarly, the Commission believes the deal would strengthen Adobe’s dominance in vector and raster software by eliminating Figma as an emerging competitor. Figma already exerts significant influence on Adobe’s Illustrator and Photoshop products.
What remedies did the CMA seek?
Prohibition seen as comprehensive solution
The CMA said blocking the deal would comprehensively prevent feared competition drops across affected markets. A ban would also avoid risks linked to carved-out asset packages failing to replicate pre-merger rivalry.
On divestments, the CMA generally prefers buyers to acquire whole existing businesses rather than looser collections of assets. Its starting view was that finding a package of Adobe assets able to fully replace its future innovation efforts could prove highly challenging.
Any Figma selloff substantially similar to prohibition
The watchdog noted that Figma’s activities reside almost wholly within product design software for professionals. As such, divesting Figma operations would essentially mirror prohibiting the transaction altogether.
But the CMA felt asset carve outs on either side could struggle to fully replicate each company’s financial firepower and expertise. It therefore invited views on whether effective selloff remedies short of an outright ban were feasible.
What did Adobe/Figma say in response?
In a joint statement, Adobe CEO Shantanu Narayen and Figma chief Dylan Field said it had become “increasingly clear” that authorities remained unconvinced by the deal’s merits.
With a March deadline looming for the CMA to release final recommendations, the prospect of demands for substantial amendments or even an outright block likely contributed to the decision to withdraw.
Nonetheless, both Adobe and Figma expressed disappointment at having to abandon the agreement.
Figma’s Field said he continued to believe in the strategic rationale behind combining the firms. Adobe said it remained impressed by Figma’s product capabilities.
And the technology giants left the door open to partnering in other ways to support their customer bases going forward.
But the collapse of the deal nonetheless represents a major setback for Adobe. It removes an opportunity to acquire a rising rival whose web-based tools were seen as an emerging threat.
What’s next for Adobe and Figma?
Speaking to TechCrunch, Ray Wang, founder and principal analyst at Constellation Research, says this is a huge setback for Adobe and forces them to return to their own design collaboration tool, XD. “Adobe realized that in a world of Generative AI the value is not the content creation, but the work coordination of content. This deal sets Adobe back two years and will incentivize them to revamp XD to cover this crucial market,” he said.
TechCrunch reports that Figma has continued to operate and expand independently. “Figma, for its part, has not stood still since the deal was announced, proceeding and planning as the independent company it is. In fact, the startup has hired 500 people since September 2022. What’s more, it has developed new capabilities, including tools aimed at developers and a generative AI layer on top of its popular FigJam whiteboard tool.”
John Lilly, an early Figma investor, also told TechCrunch: “This team is just an extremely special team. Over the past decade they’ve changed how design works completely — and this market for designing products is getting way bigger, fast.”
