Adobe to Acquire One of Its Biggest Rivals, Figma for $20 Billion

Adobe to Acquire Figma for $20Billion

Adobe and Figma officially announced on their website that they have entered into a definitive merger agreement for around $20 billion worth of cash and stock. Dylan Field, the CEO of Figma, stated that they had been working on this decision over the past few months before finally announcing it on Figma’s website. 

The acquisition is expected to improve Adobe’s collaborative features

During the pandemic, designers have increasingly relied on digital tools to collaborate remotely. This has increased the demand for cloud-based applications such as Figma and Canva. Despite the huge demand for this collaborative cloud-based app, Adobe has been struggling to tap this enthusiasm. In its quarterly report, Adobe showed a continued slowing down of revenue growth. Moreover, the Creative Cloud service’s new annual subscription sales were slightly lower than the company’s earlier projection.

As stated in Adobe’s official announcement, Adobe and Figma will work together to reinvent the future of creativity and productivity, accelerate web creativity, advance product design, and inspire global communities of creators, designers, and developers.

Both companies claimed they shared the same passion for developing the creativity and productivity space. Figma’s web-based, multi-player capabilities will accelerate the web delivery of Adobe’s Creative Cloud technologies, increasing productivity and accessibility for more people.

Adobe is determined to keep Figma running independently. The platform will operate as it always has. Dylan Field will remain acting as the CEO of Figma. The entire team will report to Field, and he will report to David Wadhwani (Adobe’s EVP & Chief Business Officer).  

Adobe stock fell after the announcement

Adobe stock plummeted after the company reported earnings and announced its acquisition of Figma. On September 15, the stock was down nearly 20%, marking its worst day since 2010. 

The proposed acquisition has sparked outrage among some Adobe investors concerned about the cost. Adobe officially stated that this merger and acquisition cost approximately $20 billion in cash and stock. Sceptics believe this is an exorbitant price for a company that is expected to generate only $400 million in annualized recurring revenue (ARR) this year. Many people consider paying Figma for 55 times its sales figure utterly ridiculous.

Some analysts believe Adobe is overpaying for Figma as a defensive measure. Some also thought that Adobe was motivated to pay an irrational price to acquire a powerful future competitor. 

The acquisition could potentially work well

Figma has an eye-opening growth rate of 100% year over year. Figma’s net retention rate (the amount existing customers spent relative to the previous year) was 150%, which is also among the best in the SaaS sector. 

Adobe expects the acquisition to boost the company’s earnings per share in the third year after it closes the deal. Additionally, the deal would generate significant revenue synergies, allowing Adobe to sell more of its products to Figma’s client base or accelerate Figma’s already impressive growth through its established sales channels. Given Figma’s growth and margin profile, Adobe sees it as a reasonable outcome.

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