Adobe Faces Significant Void as $20 Billion Figma Deal Collapses

Adobe and Figma have abandoned their anticipated $20 billion acquisition deal due to regulatory challenges, leaving Adobe with a significant void to fill. Figma, as the leader in collaborative design, will still receive a consolation prize of $1 billion, positioning the company to navigate the situation successfully.

For Adobe, however, the outcome could be less favorable. The company had a strong desire to acquire Figma, recognizing that its existing offering, XD, lacked the robustness of its competitor. Adobe aimed to leverage its corporate influence to control a lucrative segment of its core creator business by acquiring the market leader.

Despite putting on a brave face in its public statement, expressing continued readiness to capitalize on market opportunities, Adobe must be deeply disappointed with the collapse of the deal. The regulatory hurdles proved insurmountable after more than a year of discussions, leading the companies to mutually decide to walk away.

The European Union’s competition head, Margrethe Vestager, characterized the acquisition attempt as a potential termination of competition and a blatant power grab by a wealthy company. She stated that the combination of Adobe and Figma would eliminate current and future competition, resulting in higher prices, reduced quality, or less choice for customers.

This setback forces Adobe to return to its own design collaboration tool, XD, and rebuild after dismantling the XD team. The failed attempt to enter the collaborative design space using XD prompted the company to fully commit to Figma filling that product need. Adobe’s general counsel, Dana Rao, acknowledged the abandonment of XD, stating that if they were to enter the product design space, it would be through acquiring Figma.

While the collapse of the deal is undoubtedly a setback for Adobe, it leaves the company with additional funds that could be strategically utilized in a post-generative AI world. Brent Leary suggests that having the $20 billion back provides Adobe with flexibility to shape the content creation process in the evolving landscape.

Ray Wang sees potential alternative paths for Adobe, including the consideration of acquiring other collaboration startups like Miro, Webflow, or InVision. These startups, with significant funding, could offer a head start in the collaboration space without attracting the regulatory scrutiny faced in the attempted Figma acquisition.

Figma, on the other hand, has continued to progress independently since the announcement of the deal. The company has hired 500 people and introduced new capabilities, including tools for developers and a generative AI layer on top of its FigJam whiteboard tool.

John Lilly, an early investor in Figma, expresses enthusiasm for the company’s independent trajectory, highlighting its transformative impact on design over the past decade. As Figma moves forward on its own, Adobe is left to reevaluate its design collaboration strategy, starting anew and facing a position it likely did not foresee at this point. The market dynamics, regulatory challenges, and the evolving landscape of design collaboration will undoubtedly shape Adobe’s next moves in this competitive space.