Adobe stock fell on news that the U.S. government is preparing to file a lawsuit to block the $20 billion Adobe-Figma deal announced last year.
Investors are ready to criticize Adobe both for making the deal and for not making the deal. Other authorities are also taking a hard look at the deal.
According to TechCrunch, Adobe’s plan to buy digital design rival Figma has caught the attention of the European Commission (EC), which has announced that the proposed merger threatens to significantly impede competition in the market for interactive product design and whiteboarding software.
The UK also reportedly reviewed the deal in December. If the United States files suit, the deal could fall apart. From a startup perspective, the news is not the worst, and from a venture capital perspective, it is terrible. But from a competition perspective, the question isn’t whether the deal is anti-competitive; it’s whether we should care.
What is Figma?
Figma is a cloud-based design software that has become increasingly popular in recent years. It is known for its collaborative features, allowing designers to work together in real time on the same project. This makes it a popular choice for design teams working remotely. Additionally, Figma’s ease of use and intuitive interface make it a favourite among designers of all skill levels.
What is Adobe?
Adobe is a well-known software company that specializes in creating creative software. It is most known for its popular design software, such as Photoshop and Illustrator. Adobe has been a leading player in the design industry for many years.
The Details of the Adobe-Figma Deal
Adobe announced its acquisition of Figma in late February 2022. The details of the deal have not been fully disclosed, but it is reported that Adobe paid $20 billion for Figma. This acquisition is a significant move for Adobe, as it expands its offerings to include cloud-based design software, which has become increasingly popular in recent years.
Perspectives of the Adobe-Figma Deal
Let’s talk about the three perspectives of this deal potentially becoming regulatory roadkill from a startup, venture, and competitive perspective.
Perspectives for startups
No startup wants to lose a $20 billion exit price when the number is double its prior valuation and the underlying economy is lacklustre. So Figma wants to get the deal done.
For startups in general, however, the news that Adobe’s acquisition of Figma might not go through isn’t the worst news. Why is that? Because we’ve seen this story before, and the startup in that example is doing just fine.
Plaid is an example; Visa wanted to buy Plaid for a lot of money, but the deal fell through after it ran into regulatory issues. Plaid then went on to raise capital at a valuation that was a multiple of the price at which it had planned to sell itself. Startups that land big, splashy potential exit prices from competing incumbents are the very startups that will do well without the deal.
Perspectives for venture
For venture capitalists, the potential demise of Adobe-Figma deal is terrible news. Some 32 investors put capital into the startup, per Crunchbase data. Every single one of those investors is looking forward to returning not only cash to their limited partners but also evidence that some of their paper marks are legit. A big deal recycles cash in the LP-venture-startup loop and makes investors look good. Not having the deal go through does not.
Adobe is not buying Figma to increase competition in its market; instead, it’s buying something that could compete with it to prevent just that. If the deal goes through, Adobe will be stronger than before – with a wider product mix and control over the market.
The Adobe-Figma deal – The Concerns of the Design Community
The design community has expressed concern about the Adobe-Figma deal. Many worry that this acquisition will lead to a lack of competition in the design software market. This could potentially harm smaller design software companies, as they may struggle to compete with Adobe’s resources and market dominance.
Additionally, some designers worry that Adobe will integrate Figma’s features into its existing design software, potentially making it more difficult for designers to switch to other software options. This could further solidify Adobe’s dominance in the design software market.
In conclusion, the Adobe-Figma deal is certainly questionable in terms of anti-competitive practices. However, as investors, startups and consumers, we should be more concerned about the long-term impact on innovation and the market. The solution is healthy competition, not monopolistic acquisitions.