Adobe agrees to buy Figma in $20 billion software deal

By Team Newsable | First Published Sep 16, 2022, 11:40 AM IST

Adobe Inc. agreed to buy software design startup Figma Inc. in a deal valued at about $20 billion to help it expand tools for creative professionals. The deal announced by Adobe, which is a mix of half cash and half stock, and would mark the biggest ever takeover of a private software company.

The deal between Adobe Inc. and Figma, whose tools are used by software professionals to cooperate, was announced on Thursday. The economic model of Figma, according to Adobe CEO Shantanu Narayen, is "the future of work," and there are "tremendous prospects" to combine it with his company's products like document reader Acrobat and online whiteboard Figjam.

David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, which owns a 1.5 per cent stake in Adobe, said Figma's annual recurring revenue (ARR) was $400 million was a tiny fraction of Adobe's $14 billion, making it an unreasonable for Adobe to pay the equivalent of 11 per cent of its market value for 2.8 per cent more ARR.

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Three years after the deal's conclusion, according to Adobe, the acquisition should increase its profitability. It also predicted that by 2025, the design, whiteboarding, and collaboration segments of Figma's total addressable market will amount $16.5 billion.

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The cash-and-stock transaction would give Adobe ownership of a company whose online collaboration platform for ideas and design is utilised by businesses including Zoom Video Communications, Airbnb Inc., and Coinbase. It is the largest-ever purchase of a privately-owned software startup.

One of Silicon Valley's most opportunistic corporations, Adobe has acquired a number of startups as it has sought to protect its market share from rivals like Microsoft.

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Prior to Figma, their greatest acquisition was the $4.75 billion purchase of the software company Marketo in 2018. In order to narrow its emphasis on collaboration tools, it has also acquired several businesses over the previous 24 months, including video collaboration software Frame.io, social media marketing start-up ContentCal, and collaboration tool provider Workfront.

Figma, situated in San Francisco, will continue to be run by co-founder and CEO Dylan Field after the purchase, which is anticipated to finalise in 2023. If the acquisition is cancelled, each business will be required to pay a $1 billion termination fee.

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