Adobe’s Abandoned $20B Figma Deal

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In September 2022, Adobe announced plans to acquire Figma for roughly $20 billion in cash and stock the largest deal in design software history. The rationale seemed clear: combine Adobe’s creative suite and brand with Figma’s hypergrowth, browser-native collaboration engine. But the proposal immediately raised antitrust questions about reduced competition and innovation in product design tools. Over the next year, U.K. and EU regulators signaled serious concerns that the deal would harm future competition. In December 2023, Adobe and Figma terminated the agreement, leaving both companies independent and the design market more contested than ever.

In this edition of Business Knowledge

• Executive Summary: Why Adobe pursued Figma, why regulators pushed back, and how it ended.

• Background: Adobe’s legacy, Figma’s rise, and the competitive context.

• The Business Challenge: Pressures that made a mega-deal look attractive.

• The Strategic Bet: What Adobe hoped to gain and how it planned to do it.

• Execution: The review process, remedies explored, and momentum shifts.

• Results and Impact: What the termination means for both companies and the market.

• Lessons for Business Leaders: Playbook takeaways for high-stakes M&A in regulated markets.

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Executive Summary: Why Adobe pursued Figma, why regulators pushed back, and how it ended

Adobe’s planned $20 billion acquisition of Figma aimed to consolidate leadership in digital design and collaboration. The logic hinged on combining Adobe’s brand, distribution, and enterprise reach with Figma’s browser-native, real‑time collaboration and explosive adoption. Strategically, Adobe sought to neutralize a challenger while accelerating its own web-first roadmap.

Regulators in the U.K. and EU argued that removing Figma as an independent competitor could dampen innovation across UI/UX and adjacent creative categories. Negotiated remedies proved insufficient to address concerns about future product overlap and market power. In December 2023, the companies abandoned the deal, resetting the competitive landscape without a breakup fee and preserving a two‑horse race in design collaboration.

Background: Adobe’s legacy, Figma’s rise, and the competitive context

Adobe, founded in 1982, built a creative empire with Photoshop, Illustrator, After Effects, and a cloud subscription model that monetized professionals at scale. Its strengths brand equity, deep feature sets, and desktop-grade power also created complexity and slower web-native transitions. As collaboration shifted to the browser, Adobe faced pressure to match modern, multiuser workflows.

Figma, launched in 2016, grew by delivering collaborative, browser-based design with multiplayer editing, easy sharing, and a freemium motion. It became the default tool for product teams, startups, and enterprises seeking speed and co-creation. By 2022, Figma had both velocity and community threatening Adobe’s trajectory in UI/UX and beyond.

The Business Challenge: Pressures that made a mega-deal look attractive

1. Web-First Shift

Adobe’s core apps were powerful but desktop‑centric, while the market gravitated to lightweight, collaborative, browser-native tools. This shift risked ceding the next generation of users to a rival setting new norms.

2. Feature Velocity

Figma’s rapid iteration and plugin ecosystem outpaced Adobe’s cadence in UI/UX. Maintaining parity required either dramatic internal acceleration or external acquisition.

3. Customer Churn Risk

Product teams increasingly standardized on Figma across design, PM, and engineering. As more workflows moved to Figma, Adobe risked losing seat share and upsell pathways.

4. Platform Narrative

Adobe needed a credible, real-time collaboration story beyond cloud licensing. Owning Figma promised a simpler narrative and cross‑sell into Creative Cloud and Enterprise.

5. Competitive Signaling

With Microsoft, Atlassian, and others embedding collaboration deeply, Adobe faced ecosystem pressure. A bold acquisition looked like the fastest way to reposition for the next cycle.

The Strategic Bet: What Adobe hoped to gain and how it planned to do it

1. Consolidate UI/UX Leadership

Merge Adobe’s brand and enterprise contracts with Figma’s dominant product to define the category. The combined entity could set standards for design systems and collaboration.

2. Accelerate Web Roadmap

Leverage Figma’s browser engine and multiplayer tech across Adobe workflows. This would compress Adobe’s transition time from desktop-heavy to web-first experiences.

3. Cross‑Sell Flywheel

Pipe Figma’s user growth into Adobe’s broader suite (Illustrator, After Effects, Firefly). Enterprise bundles could lift ARPU while reducing churn.

4. Innovation Portfolio

Pair Figma’s velocity with Adobe’s research and generative AI (e.g., Firefly) to ship faster, integrated solutions. The thesis: together they could out‑innovate the field.

5. Defensive Neutralization

Remove a rising rival that threatened erosion of Adobe’s strategic moat in design. The acquisition would buy time and protect margins as the market shifted.

Execution: The review process, remedies explored, and momentum shifts

1. Regulatory Filings

Adobe and Figma entered multijurisdictional review, facing in‑depth probes from the U.K. CMA and the European Commission. Early signals indicated authorities viewed the deal as a “killer acquisition” risk.

2. Remedy Exploration

Adobe proposed behavioral remedies and highlighted the retirement of Adobe XD. Regulators questioned whether commitments could truly preserve future innovation and competition.

3. Stakeholder Diplomacy

The companies engaged customers, partners, and developers to argue ecosystem benefits. Despite outreach, skepticism persisted around reduced independent rivalry.

4. Timeline Slippage

Extended reviews stretched milestones, creating uncertainty for employees and customers. Prolonged scrutiny raised integration risk and opportunity costs on both sides.

5. Termination Decision

Facing likely prohibitions in the U.K./EU, both parties ended the deal in December 2023. They resumed independent strategies without a breakup fee or asset divestitures.

Results and Impact: What the termination means for both companies and the market

1. Independent Paths

Figma continued shipping rapidly with its community and enterprise momentum intact. Adobe doubled down on web collaboration, AI features, and interoperability to compete head‑to‑head.

2. Regulatory Precedent

The outcome reinforced stricter scrutiny of acquisitions involving nascent or potential competition. Future “category‑consolidation” deals in software face higher remedy bars and longer timelines.

3. Market Dynamics

Customers benefited from continued choice and faster innovation cycles as both firms raced to differentiate. Pricing power remained more balanced than it might have post‑merger.

4. Partner Ecosystems

Plugin developers and toolchains avoided consolidation risk that could have narrowed APIs or distribution. Open ecosystems remained a selling point for both platforms.

5. Strategic Messaging

Adobe repositioned around generative AI and collaborative workflows to answer Figma’s momentum. Figma leaned further into community, education, and developer surfaces to widen its moat.

Lessons for Business Leaders: Playbook takeaways for high-stakes M&A in regulated markets

1. Regulators Prioritize Potential Competition

Even if products don’t fully overlap today, authorities will assess future innovation collisions. Deals that erase dynamic rivalry face steep odds without structural fixes.

2. Behavioral Remedies Have Limits

Promises not to bundle or to maintain access rarely satisfy when innovation incentives are at stake. Expect regulators to prefer divestitures or to block outright.

3. Build, Partner, or Buy But Time the Bet

When a challenger is compounding, late acquisitions draw harsher review. Earlier partnerships or joint ventures can de‑risk outcomes.

4. Narrative Matters So Do Proof Points

A compelling integration story must be backed by concrete, verifiable safeguards. Without credible, enforceable commitments, trust with regulators is hard to win.

5. Have a Plan B Strategy

Assume a public, prolonged review with real odds of failure. Keep independent product roadmaps funded and morale strong to pivot if a deal dies.