More than a year later, the $20B Adobe-Figma deal is still stuck in regulatory limbo

In September 2022, Adobe dropped the bombshell news that it intended to buy Figma for $20 billion. It was a huge chunk of money for a startup that had recently been valued at half that amount, and it was a deal that would make investors and some Figma employees wealthy beyond their wildest dreams. But first it had to pass regulatory muster — and that has proven stubbornly difficult.

In fact, more than 13 months after the deal was announced, the two companies remain separate entities. A year is a long time in the tech world. Figma hasn’t been idly waiting for its corporate suitor and has continued to work on the platform, hiring 500 new people since the deal was announced for a total of 1,300 employees today.

The company also hosted the Config conference in June, attracting more than 8,000 attendees to the event where it announced a new developer mode, putting the tool in front of developers for the first time. With developers representing a new area for both companies, it could make Figma even more attractive to Adobe, should the deal go through.

Regardless, when the deal was announced, there were immediate questions about whether Adobe was taking a key competitor off the market using blunt force market power, or if it was filling a missing piece in its product line. It would be up to the regulators to make that determination, however, and they immediately went to work. Adobe and Figma representatives have spent good chunks of the last year on airplanes going to talk to various regulatory bodies, trying to convince them that the deal is, in fact, not anticompetitive.

While the two companies can’t speak to each other — they both operate entirely independently throughout this process — it didn’t stop Figma from writing a blog post exploring what it might look like if the two companies were together, especially since in the interim, Adobe added Firefly, its generative AI offering, to the Creative Cloud fold.

At this point, it’s still up to the regulators, and those regulators are still reviewing the filings more than a year later, leaving the deal in suspended animation. How the various regulatory agencies decide will go a long way toward determining whether Adobe and Figma remain separate entities or finally come together with a ton of money changing hands.

What’s the holdup?

When a deal involves a company many perceive to be a competitor that has succeeded in capturing the hearts and minds of a significant market, and where a truckload of dough is changing hands, well, it’s going to get the attention of regulators in the U.S., the EU and the U.K. And that’s exactly what happened with this one.

“It’s been a long process. We announced the acquisition in September ’22. We went into HSR filings immediately afterward [with the United States Department of Justice],” Dana Rao, Adobe’s general counsel, told TechCrunch+. In December, the U.K. came knocking and the EU in January, and they’ve been talking ever since.

As for Figma, like Adobe, it’s also working through the process with the understanding that the two companies can’t work together until the deal closes, a person close to the company told TechCrunch+. This person says that Figma is still very much committed to getting the deal over the finish line and will continue to work with regulators to make that happen.

Attorney Zarema A. Jaramillo, whose firm Lowenstein Sandler works with companies on mergers and acquisitions (she’s not involved in this deal), said regulators are taking longer than usual to decide if they should sue to stop the deal.

“This one seems to be taking quite a while,” Jaramillo said. “And I do think that to some extent, it’s because there are multiple enforcers that are involved.” She said the various regulatory authorities, including the Department of Justice and FTC in the U.S., often coordinate with their European and British counterparts, sharing information and deciding who will take the lead on a particular case. But it is a legal investigation where the various parties gather evidence and decide if there is a case or not.

And each case is different. When the Justice Department sued to stop Mastercard’s deal to buy Plaid for $5.3 billion in 2021, Mastercard walked away. But as we’ve seen more recently with the $68.7 billion Microsoft-Activision pact, Microsoft was able to placate the U.K. Competition and Markets Authority (CMA), and the deal is going through.

As for the Figma and Adobe deal, the EU said that it will conclude its investigation on February 5. The CMA and Justice Department investigations are ongoing.

So what’s the deal with the deal?

Is the deal anticompetitive? Well, it depends who you ask, but Adobe certainly doesn’t think so. It sees Figma as an adjacency and not a logical part of the Creative Cloud. “We think the underlying thesis of this deal is Adobe and Figma sell different products to different people, and this is an exciting adjacency for Adobe to get into,” Rao said.

While he acknowledges that Adobe had a competing product when it made the offer, he says that product, Xd, was not successful, as it was not popular with the target designer market. It is now winding down and the intent is to run Figma separately from Creative Cloud.

“We’ve already publicly stated that we’re going to run Figma as a stand-alone entity within Adobe, and we’ve talked about how we’re always going to offer it in our offering packages as something you can buy independent of the Creative Cloud,” he said, an argument that he hopes will ultimately satisfy regulators.

Of course, as TechCrunch+’s Alex Wilhelm wrote of the deal earlier this year, he believes it is anticompetitive precisely because it takes a key startup off the market, creating a worse situation for consumers. And that’s something the CMA in particular is keen to look at in any deal.

“If the deal goes through, Adobe will be stronger than before — with a wider product mix and access to what is presumed to be a younger customer cohort, not to mention reaccelerated revenue growth — which doesn’t sound great for innovation, right? After all, Figma became Figma because it was independent not because it was merely a fief of a legacy tech giant,” Wilhelm wrote.

In other words, inside of Adobe, Figma won’t have the ability to challenge its erstwhile rival as it might have as a solo enterprise.

If the deal fails

There’s likely a similar debate going on inside the various regulatory bodies scrutinizing this deal. It will come down to whether they believe these companies are better together or apart. In the meantime, $20 billion is on the line. After a year, it’s fair to ask whether this deal is still attractive to Adobe.

Gartner analyst Brent Stewart thinks it definitely is, pointing out that Adobe had a strong presence at Figma’s Config conference. And even if it was quiet about Figma at its own Max conference, he doesn’t see any sign that Adobe has cooled on the deal.

“Adobe knows full well where the market is headed and how critical Figma (and its customers) are to its future success,” he said.

Ehab Bandar, founder at design consultancy, says if the deal were to fall through, it would be a huge loss for Adobe. “The deal remains a strong one for both Adobe and Figma; however, a no deal would be devastating for Adobe,” Bandar told TechCrunch+. “For one, its lock on the enterprise digital creative suite market will become weaker. Figma, the product, is still the gold standard for designers, and since the deal, it has set its sights even stronger on the enterprise and international markets.”

Stewart agrees that it would be a big blow for Adobe, if the regulators nix the deal, resulting in the company losing access to a broad and lucrative product design market, where it really doesn’t have a viable presence right now. It would basically force Adobe back to the drawing board.

“If the deal falls through, [Adobe] will need to either revive Xd (perhaps under a new name) or create a completely new digital product design platform to fill this slot in Creative Cloud, a category in which they have never succeeded.”

Stewart and Bandar are basically arguing the two sides of this acquisition argument: Adobe needs Figma, yet it hasn’t been able to successfully build a similar product on its own and is taking a key company off the market. The regulators will ultimately have to sort that out and decide which side of the argument they fall on.

Rao says he’s working as hard as he can to bring the deal to fruition. “We’re filing briefs, we’re having depositions, we’re doing everything we can to present the case in the right way, and we’re fully committed to doing everything that’s required to get there,” he said.