Both the WSJ and Bloomberg reported earlier this morning that Adobe was close to announcing a deal to acquire Figma. In the end, Adobe confirmed that the news coincides with its quarterly earnings. Those third-quarter earnings saw the company post revenue of $4.43 billion and non-GAAP earnings per share of $3.40, which respectively met and exceeded analysts’ expectations. However, the company said it may need to finance that deal with a loan and provided a tepid outlook for the next quarter, with revenue expected to be $4.52 billion and EPS of $3.50, citing “the overall macro environment ” and “FX headwinds”. Its stock is trading down nearly 10% in premarket trading — a sign of how Adobe likely hoped news of a merger and acquisition of a rival could give it a boost. Investors aren’t the only ones who are a little worried… I just hope the new interface isn’t so complicated. I love how simplified Figma is — Petite🌹 (@Meddivva) September 15, 2022 These are the kinds of reactions – from their target community – that are a strong message to Adobe and Figma to definitely watch how they integrate and lead their users to whatever the next step is. The acquisition comes in the form of a half-cash, half-stock deal, Adobe said, and will also include 6 million additional restricted stock units granted to Figma’s CEO and employees that will vest over four years after closing. . It is expected to close in 2023, “subject to receipt of required regulatory approvals and approvals and the satisfaction of other closing conditions, including the approval of Figma shareholders.” Design and prototyping, for individuals and teams, performed in a highly streamlined and modern cloud-based environment, are the strengths of Figma’s product, and it has amassed around 4 million users to date. Meanwhile, Adobe has been building and acquiring a number of businesses in the wider world of digital creation, and this has taken it not only into the broader and more general reaches of design, but also into marketing and other design-adjacent areas in the larger creation chain. Adobe’s DNA is design, however, and it has created iconic products in areas such as imaging (like Photoshop), fonts, illustration, video and 3D, and more. The idea now will be to create a seamless connection between them and Figma, essentially making it the native platform to bring it all together. Adobe, of course, already had something like this, in the form of AdobeXD. It’s not clear what happens to it when that deal closes. Indeed, if all of this catches the attention of the antitrust authorities it will be worth watching: Adobe is already dominant in so many of the tools used, and now it will be the dominant player also in the platform for importing and providing all of these tools. “Adobe’s greatness is rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions,” Shantanu Narayen, president and CEO of Adobe, said in a statement. “The combination of Adobe and Figma is transformative and will accelerate our vision for collaborative creativity.” “With Adobe’s incredible innovation and expertise, especially in 3D, video, vector, illustration and fonts, we can iterate end-to-end product design in the browser, while creating new tools and spaces to enable customers to to design products faster and more easily,” added Dylan Field, co-founder and CEO, Figma. Field will remain and continue to lead the Figma business, Adobe said. The $20 billion price tag is a significant jump for Figma, which was last valued at $10 billion in June 2021 when it raised $200 million. But Adobe is doing more than fending off a major competitor. He chooses a fast-growing business. He notes that Figma’s total addressable market is $16.5 billion by 2025 and that “the company is expected to add approximately $200 million in net new net ARR this year, surpassing $400 million in total ARR after exiting 2022 , with best-in-class net dollar retention of over 150 percent. With gross margins of approximately 90 percent and positive operating cash flows, Figma has built an efficient, high-growth business,” it said. The deal certainly lays down the gauntlet for other big names in the world of digital design. In particular, it will be interesting to see what comes next for companies like Canva and Sketch. Field is set to speak at our Disrupt event this year: we hope (!) he still makes it — it’ll be one hell of a session if he does. The companies are holding a conference call later today and we’ll be listening and adding interesting details as and when they come up. More to come.
