Adobe acquires startup Figma for $20bn – This deal was meant to expand Adobe’s web-based design capabilities to over the browser and add a large customer base to its portfolio. This deal was confirmed on 16th Friday, 2022 by Adobe.
“Adobe’s greatness has been rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions,” said Adobe CEO Shantanu Narayen. “
– The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity.”
Key Highlights:
l Adobe said Thursday it will acquire design software firm Figma in a deal worth about $20 billion in cash and stock.
l The company also reported earnings for its fiscal third quarter.
l Adobe shares are having their worst day since 2010.
On Friday, it is confirmed that Adobe is going to buy one of the startup companies called Figma. Adobe has agreed to close the deal, by buying a design software company called Figma for roughly around $20bn. This has already sent jolt through a sector that which was considered to be the one among the hardest hit sector in the tech sell-off that almost began late last year.
Figma is a San Francisco-based design company, which was founded in 2012, and allowed software developers and designers to collaborate with each other remotely and design whatever they need ranging from slides for presentations to user interfaces on mobile apps.
We already know that there is another startup from Australia called Canva, which has also brought a wave of new browser-based design tools that have opened up the creative process to millions of non-designers, expanding the market and presenting a potential threat to Adobe, the traditional leader in design software. To counter this, adobe has decided to acquire Figma to loop close the competition.
Out of the acquire amount, half of which will be paid in cash and half in stock, is double what Figma was valued at in its most recent private funding round last year and 10 times its valuation in 2019, even though there has been a recent collapse or downfall in software stocks. This offer closure values Figma at 50 times its annual recurring revenue, which Adobe said would top $400mn in 2022.
Acquisitions at multiples of 50 times revenue and higher were common in the software industry that peaked during the pandemic, but multiples for most companies have dropped back below 20 this year and acquisitions have become a nightmare.
The big premium contributed to a sharp fall in Adobe’s stock price early on Thursday, which was triggered by a cautious earnings forecast from the company. The downbeat projection wiped 16%, or $28bn, from its value.
“People in this environment are asking, ‘why large deals?’ There are questions,” said Shantanu Narayen, Adobe’s chief executive. But he claimed Figma would be a “transformative” deal for Abode and that its browser-based approach and collaborative tools would boost the company’s overall market.
Danny Rimer, a partner at Index Ventures, which says it is Figma’s biggest investor, said the company was on track for an initial public offering before talks with Adobe began.
Figma chief executive Dylan Field came up with the idea for the company after dropping out of Brown University with co-founder Evan Wallace at the age of 19, after accepting a $100,000 grant from Peter Thiel, the libertarian financier. Thiel began offering 20 “fellowships” a year more than a decade ago after deciding that the best scientists and entrepreneurs were wasting their time getting a traditional university education.
The idea that sophisticated design tools could be delivered in a web browser was widely dismissed when Figma started out, Field told the Financial Times, adding: “Literally no one thought we could do it.”
The company’s web-based tools would give Adobe a better shot at the “more modern, cloud based, composable and open future” that was opening up for design software, said Liz Miller, an analyst at Constellation Research.
The merger will allow Figma to bring Adobe’s capabilities in imaging, 3D and video on to its platform, said Adobe. The company is looking to tap into the millions of customers using Figma, thus, expand its markets, which enjoyed a boom during the pandemic as staff worked remotely. Its clients include Twitter, News UK, Google and Netflix.
In its third-quarter results announced on Thursday, Adobe posted net income of $1.1bn on revenues of $4.4bn, 13% growth year-on-year or 15% on a constant currency basis.
