Adobe Abandons Figma Acquisition
Adobe’s $20 billion buy of web-first design collaboration start-up Figma will harm software developers if it goes ahead as proposed, according to a provisional ruling on the merger by Britain’s competition regulator.
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The CMA adds in its report: “The inquiry group also provisionally concluded that Adobe abandoned development of new product design software which could have competed even more closely with Figma and, given the timing of the decision, did this as a consequence of the merger.
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The EC has a new February deadline to conclude its own probe. And of course the Dept of Justice’s anti-trust team is also taking a keen interest in the $20 billion sale, which would be the most expensive for a private company in enterprise software history.
Dylan Field (Hacker News, Slashdot):
Figma and Adobe have reached a joint decision to end our pending acquisition. It’s not the outcome we had hoped for, but despite thousands of hours spent with regulators around the world detailing differences between our businesses, our products, and the markets we serve, we no longer see a path toward regulatory approval of the deal.
We entered into this agreement 15 months ago with the goal of accelerating what both Adobe and Figma could do for our respective communities. While we leave that future behind and continue on as an independent company, we are excited to find ways to partner for our users.
“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” said Adobe chair and CEO Shantanu Narayen in a statement.
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In a letter dated December 14th, Adobe rejected remedies suggested by the UK’s Competition and Markets Authority (CMA) to approve the merger following an in-depth antitrust probe. The authority wanted Adobe to make a significant divestment of assets, source code, and engineers to “restore the conditions of competition.”
European Commission Executive Vice-President Margrethe Vestager, who oversees competition policy, said in a statement, “By combining these two companies, the proposed acquisition would have terminated all current and prevented all future competition between them. Our in-depth investigation showed that this would lead to higher prices, reduced quality or less choice for customers.”
The writing has been on the wall for sometime — the regulators on both sides of the Atlantic have been hemming and hawing about not only this specific transaction, but also about any “mergers” or “acquisitions” in the technology sector.
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The implications of the failure of the Adobe-Figma deal are pretty clear for the startup ecosystem. If “big tech” and the next layer of technology companies (such as Adobe) can’t buy “startups,” the liquidity environment is going to change for the startup founders, and of course, the venture investors. Deals, especially mid-sized deals, are part of the equation. The innovation ecosystem depends on sustained outcomes — a positive outcome of even one in a hundred startups keeps the innovation engine chugging along.
Large technology companies will be forced to do what they can with their resources — get bigger. By using their mountains of cash, they can enter new markets, and even if they can’t make an impact — they can muddy the waters. Of course, they can do what Microsoft has done with OpenAI — own 49 percent of OpenAI, and get all the benefits without the regulatory headaches.
What about the startups? Well, if the outcomes are going to become scarce, then investor dollars are going to be focused on likely winners — ones that can probably go public.
It seems unwise to treat this as a case of a smaller company not being allowed to grow up because of big government regulators. Adobe was clearly trying to buy its first major competitor since Macromedia — which it also acquired. Technology companies, even very big ones like Adobe, will certainly be allowed to merge and acquire, but it is right for competition authorities to ask questions about what impact it will have for individuals.
Adobe owes Figma a $1 billion termination fee, but it’s unclear to me whether Figma was adequately prepared to go it alone as an independent company. Who else could and would acquire them for a similar price?
Previously:
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Disagree with Om Malik's FUD. But would it be so bad if we returned to startups bootstrapping and building solid businesses rather than seducing rich corporations by using VC money to scorch the earth under their less well funded competitors?
Om Malik is heavily biased but I think he's speaking from a genuine belief that VC is the best way to create innovation. I think access to money is an important part, but I also think it's gotten way out of hand and that most VC dont give a flying fuck about what's being done, as long as they have a 10% chance of insane profits.
It would be great if "sustainable business model that isn't surveillance capitalism" became an important metric for VC investment.
Figma is a great example of that. Alas, VCs aren't interested in a business that does well and grows over time. They want rocket money.
This is excellent news. I'm happy to see that the government agencies that are supposed to stop this bs are starting to get their teeth back, including the FTC.
"The innovation ecosystem depends on sustained outcomes"
Yeah, and now we can go back to that.
"would it be so bad if we returned to startups bootstrapping and building solid businesses"
Bingo. Become successful because you build a good business, not because you burn money on unsustainable practices in hopes of getting big enough to be bought before it all goes down in flames.
