Adobe cancels $20 billion Figma acquisition amid regulatory concerns

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In a surprising turn of events, Adobe (ADBE) has called off its planned $20 billion acquisition of the collaboration-software company Figma. This decision comes after weeks of scrutiny from regulators, particularly the U.K. Competition and Markets Authority (CMA), which warned that the deal would likely harm innovation in the industry.

Both Adobe and Figma announced on Monday that they have mutually agreed to terminate the cash-and-stock transaction. The primary reason cited for this decision is the inability to see a clear path to receiving regulatory approval from the European Commission and the U.K. CMA. The U.K. agency, in particular, had raised concerns that the acquisition would eliminate competition in the product-design software market, reduce innovation, and remove Figma as a competitive threat to Adobe’s flagship products like Photoshop and Illustrator.

Despite their disagreement with the findings of the regulators, Adobe’s Chief Executive Shantanu Narayen stated that both companies believe it is in their best interests to move forward independently. This decision has been reflected in the market, with Adobe’s shares rising by 1.5% in premarket trading to $593.32.

As part of the termination agreement, Adobe will be required to pay Figma a $1 billion termination fee. This deal, which was announced in September 2022, would have been the largest acquisition for Adobe, known for its common workplace tools and PDF files. However, the acquisition faced criticism from some Figma users who were concerned that it would slow down innovation and lead to changes in pricing.

The regulatory scrutiny of this deal has been intense. The U.K. CMA, which had gained prominence after its involvement in Microsoft’s acquisition of Activision Blizzard, began its investigation in May, focusing on whether the acquisition would substantially lessen competition in the U.K. market. The European Commission also launched an in-depth investigation, expressing concerns about potential reductions in competition in the global markets for interactive product-design software and digital asset-creation tools.

In light of these regulatory challenges and the substantial termination fee involved, Adobe has decided to withdraw from the acquisition. This move underscores the growing regulatory scrutiny faced by tech giants in their efforts to expand through acquisitions, particularly in markets where competition and innovation are crucial factors.

(Source: WSJ | CNBC | MarketWatch | Financial Times)

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