Adobe abandoned its $20bn proposed acquisition of Figma’s product design software, claiming that there was no “clear path” to obtain necessary regulatory approvals from UK and EU watchdogs.
The deal was investigated by both UK and EU competition authorities due to fears that it would suppress competition and innovation on the markets for product design, image-editing and illustration.
Adobe offers a wide range of tools for digital marketing, including Photoshop and InDesign. Figma is a software that allows you to design apps and websites online.
Adobe has refused to provide remedies for concerns raised by the UK Competition and Markets Authority last week. Adobe argued that a divestment was “wholly excessive”.
The two companies released a joint statement a few hours later terminating the agreement, citing regulatory issues. Adobe is required to pay Figma $1bn as a termination payment under the merger agreement. Adobe shares rose by 3 percent on Monday.
Adobe’s chief executive and chair, Shantanu Narayen said, “Adobe strongly disagrees with the recent regulatory findings. However, we believe that it is in both of our best interests to proceed independently.”
Recently, competition regulators have sent mixed messages about Big Tech companies hoping to acquire promising startups and potential competitors at a period when the public markets are largely closed for new listings.
The EU’s antitrust regulator has lodged a formal complaint against Amazon’s proposed $1.7bn purchase of Roomba maker iRobot. Microsoft, however, was able complete its $75bn acquisition of games manufacturer Activision after making revisions to the agreement to appease UK regulatory authorities.
The European Commission published a statement last month stating its objections to the merger, claiming that the takeover would “significantly reduce the competition on global markets”.
Adobe’s willingness to pay a huge amount for San Francisco-based Figma was seen by critics as an attempt to eliminate the software giant’s most promising rival in decades.
The merger was negotiated initially during the Covid-19 Pandemic boom of tech investment. It would have valued Figma around 50 times its annual revenue and doubled its last round of private funding in 2021.
CMA spokesperson stated: “During the detailed Phase 2 investigation the CMA found that the deal between Adobe Figma and Figma could impact the UK digital design industry, by reducing innovation and new competitive products.
Margrethe Vestager added that the acquisition of these two companies would have ended all competition and prevented any future competition.
On Thursday of this week, the companies were to appear before the CMA and contest its provisional findings.
In its November proposed remedies, the CMA stated that it would consider either prohibiting or requiring the divestiture or overlapping operations such as Adobe Illustrator or Photoshop or Figma Design’s core product.
Figma’s chief executive Dylan Field expressed his amazement at the idea that “buying a company to divest it” was a good idea.
Field released a statement on Monday expressing his “disappointed” in the result.
The CMA published earlier on Monday the responses of the companies to its preliminary findings. Adobe and Figma claimed that the CMA made “serious mistakes of law and facts” and “took an irrational view of the gathering and assessment of evidence”.
They wrote: “To require a multibillion dollar global divestment from Photoshop or Illustrator to address an uncertain, speculative theory about harm is wholly disproportional.”