The American software giant Adobe, officially known as Adobe Systems, is in the process of finalizing an acquisition of the web-based designer platform known as Figma. The Adobe Figma deal is anticipated to be valued at around $20 billion.
On Thursday, the company Adobe Inc., which is well-known for its multimedia and creativity software products, came to an agreement to purchase the cloud-based designer platform Figma for the price of $20 billion.
Once the deal is finalized Adobe will have ownership of a company whose web-based collaborative platform for designs and brainstorming is widely used by technology companies, including Zoom Video Communications (ZM.O), Airbnb Inc., and Coinbase.
Adobe Figma deal prompted investors’ concerns about the high price tag and resulted in a decrease in the market worth of more than $30 billion for the company.
Shantanu Narayen, the Chief Executive Officer of Adobe, hailed Figma’s business as “the future of work” and stated that there were “tremendous opportunities” in combining it with the products and services that Adobe already provides, such as the document reader Acrobat and the online whiteboard Figjam.
The venture capital firms Index Ventures, Greylock Partners, and Kleiner Perkins, among others, backed Figma and were rewarded handsomely when the company was sold for $20 billion.
Speaking about the acquisition, Josh Coyne, a partner at Kleiner Perkins who made his initial investment in Figma in 2018, said, “Because of this relationship, users of Figma will have access to the photography, illustration, and video technology developed by Adobe in a single location. And in return, Figma can offer its extensive web development expertise via the browser.”
Adobe investors, seem to be a little upset about the Adobe Figma deal, as it led to a 17% drop in the company’s stock price on Thursday. The majority of Adobe investors stated that they understood the reasoning behind the plan, but they believed that Adobe overpaid for a firm that was valued at approximately $10 billion in a private funding round just more than a year ago.
David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, which owns a 1.5% stake in Adobe, said in a comment: “It is unreasonable for Adobe to pay the equivalent of 11% of its market value for 2.8% more annual recurring revenue (ARR).“
Wagner expressed his dissatisfaction with the Adobe Figma deal as, according to him, the price paid for the company (Figma) was too high. He said, “We’re disappointed with the price paid for the company (Figma).”
Adobe stated that it anticipated the transaction would be beneficial to the company’s earnings three years after it was finalized. In addition, it stated that the entire addressable market for Figma’s design, whiteboarding, and collaboration services will reach $16.5 billion by the year 2025.
Adobe is consistently one of the corporations in Silicon Valley that makes the most acquisitions. Since its inception, the company has purchased a large number of companies to protect its market share against the efforts of other businesses.
In 2018, Adobe Inc. purchased the software manufacturer Marketo for $4.75 billion. It has also acquired other businesses over the course of the previous twenty-four months in order to sharpen its focus on collaboration tools. These acquisitions include the video collaboration software Frame.io, the social media marketing startup ContentCal, and the collaboration tool manufacturer Workfront.
The Adobe Figma deal is anticipated to be finalized in 2023, provided that it receives the necessary governmental clearances.
Figma, which has its headquarters in San Francisco, will continue to function on its own under the direction of co-founder and Chief Executive Officer Dylan Field. If either of the companies decides to back out of the agreement, they will each be responsible for paying a termination cost of one billion dollars.
