[raiyu]

Anyone else think this has nothing to do with the regulatory agencies but instead the market has dramatically shifted in the past 15 months in terms of valuations and this is a nice cover to cancel the deal?

Figma still gets $1B "investment" without giving up any equity or control and Adobe gets to walk away from a massive $20B fee.

Adobe makes $17B a year in revenue, they would need some pretty strong growth out of Figma to justify the price tag especially after valuations came down.

But it is nice to "blame" the regulatory agencies for the breakup so that both companies save face.

Also just seems unlikely that it was regulatory. Sure Adobe has the market cornered but it doesn't seem like this is where the agencies would suddenly choose to care so much. And if it was regulatory, then shouldn't those agencies come out and say "We blocked this, no go."

[lolinder]

> Sure Adobe has the market cornered but it doesn't seem like this is where the agencies would suddenly choose to care so much. And if it was regulatory, then shouldn't those agencies come out and say "We blocked this, no go."

Both the EU and UK had already provisionally found that the deal was a problem, and the DoJ was expected to file suit. The companies had a meeting with the DoJ last Thursday [0]. They previously met with the EU on the 8th, and had a deadline to submit a settlement offer to them (not sure what that means) on the 21st.

Maybe all of those meetings were actually going better than they're trying to make it sound, but the regulators certainly appear to have been paying very close attention to this one, and the timing of the deal cancellation is about right for it to be due to regulatory pressure.

[0] https://www.politico.com/news/2023/12/15/adobe-figma-meet-wi...

[mbesto]

> Adobe makes $17B a year in revenue, they would need some pretty strong growth out of Figma to justify the price tag especially after valuations came down.

That's not it works.

1. Adobe is at $19B in revenue

2. Adobe's market cap is $272B and just shy of its ATH.

3. Acquisitions, especially at this level, are usually paid with debt and equity, not just cash.

4. The proposed acquisition smells of both one for value (e.g. we buy you and we add $20B to our market cap...ok thats not exactly how it works, but that's the general ide) and one for defense (protect our existing market cap).

5. You have no idea what Figma's revenue and growth rates our (speculation says $400M rev). If you borrow at 10% interest to acquire the biz and the company is growing their profit annually at 20%, then Adobe can still net out in the long run. (again, not that simple, but illustrative is the point)

Could Adobe have overpaid given the timing? Absolutely.

Could Adobe have realized this and when it came time to go through anti-trust they just threw the b-team lawyers at it? Totally plausible.

> And if it was regulatory, then shouldn't those agencies come out and say "We blocked this, no go."

Not necessarily. Behind closed doors, they might have said "during our reviews with regulators we've been advised that the fight with regulators would be too risky and costly if we didn't succeed"

[turnsout]

There are multiple factors that could sour this deal from a financial standpoint. ARR multiples have been falling, interest rates have risen, and Adobe's performance has been quite strong without Figma.

Meanwhile, from what I've observed, Figma is approaching 100% market penetration among designers, so they will need to look beyond their core to sell things like Figjam to "normal" people. With full access to financials, Adobe may have seen the growth curve tapering off much sooner than expected. Just a hunch.

[chicken3pointer]

Nah, I think this is truly a case of regulatory agencies shutting the deal down. Adobe knows Figma is best-in-class in their category, and even in the current market downturn, $20b still feels like a good bet to own the winner in and up and coming category for the next 5-10 years

[zpeti]

I dunno, seems like there are massive risks to Figma as a business at this point with the developments in generative AI. I'm not that confident spending $17bn is justified if its going to take 10-20 years to make it back. Some generative AI startup could easily leapfrog figma.

And Adobe already has its own massive trove of copyright images that it can use for much better generative AI.

I think the last year has put adobe in a much stronger position and figma in a much worse position.

[rafram]

Generative AI isn’t useful without a good editor for humans to manually tweak and integrate the AI’s output, and Figma is essentially the only name in the game for that.

[iAMkenough]

Who gets a better deal on compute costs, Figma or Adobe? If prices skyrocket, who is better prepared to pivot?

[evantbyrne]

Sketch still exists and is not only very good, but in many ways better.

[satvikpendem]

In what ways is it better? I've found Figma to be vastly superior, especially since they treat design like development, automating tedious processes like manually tweaking the layout and instead having a version of flexbox literally built into the design ("auto constraints"). They're bringing web dev and mobile dev ideas into design software.

[evantbyrne]

My information might be out-of-date, because I gave up on Figma years ago, and I recalled Sketch being significantly more powerful as an actual design tool. But now I'm looking up differences and it seems Figma has improved in areas it was weak in previously, like not having color profiles. From their feature lists they seem about identical.

[disgruntledphd2]

They were being investigated in the UK, the EU and the US.

It seemed very unlikely (to me, at least) that all three would approve.

That being said, if valuations hadn't changed so much then maybe they'd have stuck it out.

[cj]

This sounds on point.

In the small startup M&A market, maybe 50% of deals are falling through? Of the 50% that don't fall through, the vast majority are closing only after being renegotiated in the last hour, e.g. buyers promising to pay $x, but in the last hour the buyer changes their offer to $x/2.(These are deals with zero regulatory review)

Most common issues is buyers backing out because they couldn't secure the debt to finance the deal like they expected they could, multiples decreasing in the market, investor sentiment shifting away from riskier tech ventures, etc.

If those trends in small company M&A also apply to large company M&A, the parent's hypothesis is very valid.

[finnh]

Where are you getting those numbers from? The valuations of small acquisitions are closely held information; afaik there is no place to just look this stuff up.

[cj]

1st hand info / network. I'm a CEO. YC Founder and Techstars founder. My CFO is a fractional CFO that works with other startups clients, same stories.

This kind of information and what really goes on behind the scenes is rarely revealed. Mainly because if I told you about the shitstorm story of a top tier VC trying to buy my company and the deal exploding, that VC will do everything in their power to bury the story and make sure I'm personally not able to operate in the industry in the future.

The people at the top of tech are cut throat individuals. (And the people at the "top of tech" are not CEOs... they're the investors. The people who sit on boards who you never hear about. And that's the way they like it)

[finnh]

Thanks. I've sold two companies, and gotten a pressurized squeeze from a major player (which we said no to - we were profitable so didn't have runway problems), but I've never heard of dropping an offer valuation at the last minute.

Nasty business!

[cj]

I can give you one worse: a board member (and deal lead, from <redacted> Ventures) telling me there are only 3 people on the board.

3 months later a month before the deal is supposed to close, 2 more board members come out of the woodwork and shut the deal down. No idea they were on the board. Was outright lied to. (I have the call recordings to back that up)

Mind you these are top tier brand-name VCs. They hide behind their reputation, and it works because people like me are extremely hesitant to write comments like this calling out specific firms and people.

[finnh]

ugh sorry to hear that. That squeeze I mentioned before (lowball offer at "this is what it will cost us to copy you") was, thankfully, for a company that we bootstrapped so we had no VC pushing us to close. And we bootstrapped because of my experience at my previous, VC-backed company.

[jibolash]

Curious why you are referring to the termination fee as an investment, does Adobe get anything back in return for it?

Along those lines, maybe that would have been a better course of action in the first place, give Figma some money as an investor and own a piece of the upside as Figma grows, would probably have faced little or no regulatory resistance

[klabb3]

I could believe this but if so why wouldn’t Figma fight to get the deal through? $20B is a lot to leave on the table, assuming they’d already emotionally accepted to lose control of the company? Why settle for the $1B “fuck off” consolation?

[brandensilva]

What would you want Figma to do that Adobe cannot do itself?

In the end 3 probes is way too much legal tape for even Adobe to step into hence the abandoned deal being cheaper in the long run than fighting to acquire Figma.

[retinaros]

you are right also with genAI trend adobe is drinking the kool-aid like everyone else and most likely all investment will go to that. to be fair they are the best company to ride this wave and the new photoshop features already proves that

[huevosabio]

Regulation doesn't have to say "no" to suppress activity, it can also make it painfully long.

[bbarn]

It's not completely implausible what you're getting at is right, even if your numbers don't quite make sense.

Consider also the fact - news of this merger was almost universally received poorly by Figma users. The internet was awash with "open source equivalents" - "You don't need Figma" articles, etc.

[tootie]

I mean, the Fed is a kind of regulatory agency, so it's not a total lie :)