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Adobe’s $20B deal to acquire Figma under threat from EU investigation

105 points by thm 3y ago

justinclift 3y ago
https://archive.is/U2Xol https://archive.is/U2Xol
rvz 3y ago
This is a textbook example of horizontal integration, plain and simple and it is clear that this will be blocked by anti-competition regulators. Unsurprisingly predicted in [0] and the investigations are already happening in the US: [1] [0] https://news.ycombinator.com/item?id=33919862 https://news.ycombinator.com/item?id=33919862 [1] https://www.bloomberg.com/news/articles/2023-02-23/doj-preparing-suit-to-block-adobe-s-20-billion-deal-for-figma https://www.bloomberg.com/news/articles/2023-02-23/doj-prepa...
radq 3y ago
Looks like Adobe makes about 26% of their revenue from EMEA, so it's clearly worth it for them to continue operating there and deal with the regulatory overhead. But is it possible for them to have a different corporate structure that mitigates some of these challenges? For example, could they license their technology to an EU-based distributor instead of having direct operations in the EU?
- pgeorgi 3y ago
  Hacks work on computers where no leeway is given either way. In the legal world, this would be an indication that you knew that what you're doing will be challenged and might get an extra penalty for it.
- pavlov 3y ago
  Adobe’s annual revenue in EMEA is close to $5 billion. Figma’s global revenue is around $500 million. If they lost just 10% of EMEA revenue to antitrust avoidance shenanigans, it would be equivalent to losing the Figma revenue stream entirely. A publicly held company can’t really afford to play that kind of games.
  - Freeaqingme 3y ago
    I don't disagree with your analysis. However, I do wonder if Adobe purchased Figma because of the current revenue streams, or that they'd much rather either want to prevent having to face a new competitor, or alternatively, get all the proceeds of said competitor.
  - az226 3y ago
    And all EU based employees plus the cost of winding down existing contracts would be extremely expensive.
samwillis 3y ago
I can't see anyway this is going to be blocked. There is ample evidence of competition and innovation outside of Adobe and Figma in the market. Figma has nowhere close to a monopoly in its narrow slice of the market or even has a significantly dominant position. If anything seeing Figmas success and acquisition will encourage more startups to launch products in theses categories. That not to say I don't have legitimate concerns of what Adobe could do to Figma and its customers. And the EU is absolutely right to look into it, it's literally their job to check up on these large deals.
- ramboldio 3y ago
  > There is ample evidence of competition There is?
  - enraged_camel 3y ago
    Yeah lol I was surprised when I read that. Came across as a joke.
  - DaiPlusPlus 3y ago
    Does Microsoft Expression Blend count? Though that was discontinued over a decade ago, and was only capable of designing for WPF+Silverlight - it was also the first product I worked on at Microsoft - and I never heard of anyone ever actually using it for its intended purpose.
    - deleted 3y ago
      [deleted]
- deleted 3y ago
  [deleted]
- altacc 3y ago
  > narrow slice of the market Do you have some numbers to back that up as every UX designer I know uses Figma. I did a quick google and the first few results point to surveys with market shares of 63%, 35% & 60%, depending upon metrics used. Figma's growth rate has been huge in recent years, it's already a big beast. If Adobe buys it their market dominance will certainly affect whether startups decide to launch alternatives, unless Adobe shittifies Figma and kills it slowly, which given Adobe's recent history is a strong possibility.
preommr 3y ago
Fingers crossed this deal goes through - and I am pretty confident it will. I am building a design tool and I think my chances at success increase with Figma decaying at Adobe.
- andruby 3y ago
  I was wondering where you were going after that first sentence :) Good luck! I'll be happy to see some competition. I don't see a link in your profile.
- aurareturn 3y ago
  Personally, I think Adobe will do a pretty good job of supporting Figma. But the disruption to Figma/Adobe likely won't come from another traditional design tool. It'd have to come from a tool that does generative AI first, and maybe some tools to edit. Just a wild guess but in 1-2 years, maybe someone can generate a whole app design from style guide to actual screen/interaction designs. That'd be a true competitor to Figma/Adobe. I just can't see a competitor rising from nothing to compete with Figma/Adobe without being AI-first in 2023. Even Adobe is adding generative AI features into their products now.
  - adfm 3y ago
    Adobe’s acquisition and Apple’s headset are bulkheads. As compelling as generative AI technologies are, WebGPU makes it chooch.
- rvz 3y ago
  The DOJ in the US doesn't think so. [0] [0] https://www.bloomberg.com/news/articles/2023-02-23/doj-preparing-suit-to-block-adobe-s-20-billion-deal-for-figma?leadSource=uverify%20wall https://www.bloomberg.com/news/articles/2023-02-23/doj-prepa...
schoolornot 3y ago
Aren't Adobe and Figma US-based companies? Why does the EU have any say in this?
- onion2k 3y ago
  The fact their headquarters are in the US isn't the relevant bit - it's the fact that they operate in Europe that's important. Figma and Adobe could withdraw their offerings from Europe and they'd be free to do what they want, but that's not very likely. If you want to operate globally you have to accept the laws of the places where you do business. You can't just say "but HQ is in 'merica so screw you" and expect to continue trading in those countries.
  - SilverBirch 3y ago
    Have there been any examples of this? I'd be really interested to know what happens in practice if the EU say "No acquisition" and Adobe just goes ahead with the acquisition. Do Adobe's products get pulled off the shelf? Do they face a monetary fine? What happens 10 years down the road when Figma is completely integrated into Adobe and Adobe still aren't operating in the EU at what point does the EU say "Hey, you're allowed back"?
- calgarymicro 3y ago
  Because they both operate in the EU, have customers in the EU, make money in the EU, and have legal presences in the EU. Generally, any merger of large multinational corporations will require multinational approval - the US and EU at a bare minimum, often also the UK, Japan, China, and any other countries with strong regulatory regimes where one of the companies has a major/critical presence. Any one of these countries can block a merger if they see an antitrust issue; Qualcomm and NXP found this out the hard way with China a few years ago, and Microsoft and Activision Blizzard are finding that out with the UK right now. Of course, these companies could flip off China or the UK and just merge anyway, but then they'd risk being subject to crippling fines, having their local assets seized, and even being barred from doing business in that market altogether.
- djvdq 3y ago
pc_edwin 3y ago
The funny thing is, Adobe greatly overpaid for Figma and they know it so this is like a godsend. They would much rather just pay the $1 billion breakup fee and forget about that 2 years when all of tech got a little "loose" than be forced to go ahead with such an expensive mistake. Best case scenario it will take Adobe nearly a decade to grow into that valuation with their figma product. And even thats really pushing it.
- senttoschool 3y ago
  I'm not sure if this is true. They announced the deal in Sept 2022, when the Nasdaq had already dropped significantly. The Nasdaq is higher today than in Sept 2022. This means Adobe might actually have to pay a little bit more for Figma if they acquired them now. It was true for Elon trying to back out of Twitter's acquisition because tech valuations dropped significantly during the closing period. But this is Adobe and they didn't buy Figma for the memes nor did they roll out of bed thinking they should buy Figma that day like Elon probably did. I think Adobe bought Figma thinking that they might have acquired Instagram. Today, Meta would be in a lot of trouble if they didn't own Instagram. Figma could have developed a suite of tools via their cloud-native stack and competed with Adobe across all of their products eventually. Basically, I think Adobe bought out their long-term competitive threat. Quite frankly, at 9% of Adobe's total market cap, it's not that bad of a deal.
  - qwytw 3y ago
    But 20 billion is a huge amount, that's supposedly a 50 price to sales ratio if not more which is huge. Something like Snowflake which has an insane valuation is only half that... Only way Adobe could justify this is that it kills a dangerous competitor, which is what EU legislation is supposed to stop..
    - senttoschool 3y ago
      >Only way Adobe could justify this is that it kills a dangerous competitor, which is what EU legislation is supposed to stop.. I mean, that's exactly what my post above is saying. Figma has inherent tech advantages via their cloud-native stack. You can use the tools anywhere there is a browser. It's significantly more intuitive and easier to collaborate with multiple people. Their applications can eventually be accelerated server side such as GPU-farm acceleration for AI features. Figma is also building a community for sharing work, like the Github of design. There's nothing really stopping Figma from creating a competitor to Adobe Cloud Suite including Photoshop, Illustrator, Acrobat, and InDesign.
nness 3y ago
I'm starting to think the EU is loud but rather toothless when it comes to merges relating primarily to digital services and products. They've certainly blocked their share of telecommunication, retail, and airline industry merges — but after allowing the acquisition of Activision Blizzard by Microsoft, I wonder if its all bark and no bite.
- aurareturn 3y ago
  I don't think they're toothless. I think they're drunk on power after successfully forcing cookie-prompts and iPhone USB-C. One day, a large company will be bold enough to exit the EU and reset the power balance. To me, it seems like the EU has created so many regulations that their startups/tech companies can't compete with the US tech companies. So rather than remove regulations blocking innovation and investment, they want to regulate US companies to even the playing field.
  - surgical_fire 3y ago
    > One day, a large company will be bold enough to exit the EU and reset the power balance. I hope it's Google. Or Meta. Or Apple. Fuck it, I'll take those 3 leaving together. Move it!
    - aurareturn 3y ago
      That'll set Europe back to 2000.
      - jacooper 3y ago
        Lol, thats what you want to believe
      - hsjqllzlfkf 3y ago
        Yeah, because the only thing that happened in Europe for the past 20 years was social media and ads...?
      - 3y ago
user3939382 3y ago
I feel like Adobe abuses the market position it already has, their software is full of dark patterns, and I hope they get replaced.
dogma1138 3y ago
How the hell is Figma worth $20B?

105 points by thm 3y ago

https://archive.is/U2Xol https://archive.is/U2Xol

rvz 3y ago

This is a textbook example of horizontal integration, plain and simple and it is clear that this will be blocked by anti-competition regulators. Unsurprisingly predicted in [0] and the investigations are already happening in the US: [1] [0] https://news.ycombinator.com/item?id=33919862 https://news.ycombinator.com/item?id=33919862 [1] https://www.bloomberg.com/news/articles/2023-02-23/doj-preparing-suit-to-block-adobe-s-20-billion-deal-for-figma https://www.bloomberg.com/news/articles/2023-02-23/doj-prepa...

radq 3y ago

Looks like Adobe makes about 26% of their revenue from EMEA, so it's clearly worth it for them to continue operating there and deal with the regulatory overhead. But is it possible for them to have a different corporate structure that mitigates some of these challenges? For example, could they license their technology to an EU-based distributor instead of having direct operations in the EU?

pgeorgi 3y ago
Hacks work on computers where no leeway is given either way. In the legal world, this would be an indication that you knew that what you're doing will be challenged and might get an extra penalty for it.
pavlov 3y ago
Adobe’s annual revenue in EMEA is close to $5 billion. Figma’s global revenue is around $500 million. If they lost just 10% of EMEA revenue to antitrust avoidance shenanigans, it would be equivalent to losing the Figma revenue stream entirely. A publicly held company can’t really afford to play that kind of games.
- Freeaqingme 3y ago
  I don't disagree with your analysis. However, I do wonder if Adobe purchased Figma because of the current revenue streams, or that they'd much rather either want to prevent having to face a new competitor, or alternatively, get all the proceeds of said competitor.
- az226 3y ago
  And all EU based employees plus the cost of winding down existing contracts would be extremely expensive.

samwillis 3y ago

I can't see anyway this is going to be blocked. There is ample evidence of competition and innovation outside of Adobe and Figma in the market. Figma has nowhere close to a monopoly in its narrow slice of the market or even has a significantly dominant position. If anything seeing Figmas success and acquisition will encourage more startups to launch products in theses categories. That not to say I don't have legitimate concerns of what Adobe could do to Figma and its customers. And the EU is absolutely right to look into it, it's literally their job to check up on these large deals.

ramboldio 3y ago
> There is ample evidence of competition There is?
- enraged_camel 3y ago
  Yeah lol I was surprised when I read that. Came across as a joke.
- DaiPlusPlus 3y ago
  Does Microsoft Expression Blend count? Though that was discontinued over a decade ago, and was only capable of designing for WPF+Silverlight - it was also the first product I worked on at Microsoft - and I never heard of anyone ever actually using it for its intended purpose.
  - deleted 3y ago
    [deleted]
deleted 3y ago
[deleted]
altacc 3y ago
> narrow slice of the market Do you have some numbers to back that up as every UX designer I know uses Figma. I did a quick google and the first few results point to surveys with market shares of 63%, 35% & 60%, depending upon metrics used. Figma's growth rate has been huge in recent years, it's already a big beast. If Adobe buys it their market dominance will certainly affect whether startups decide to launch alternatives, unless Adobe shittifies Figma and kills it slowly, which given Adobe's recent history is a strong possibility.

preommr 3y ago

Fingers crossed this deal goes through - and I am pretty confident it will. I am building a design tool and I think my chances at success increase with Figma decaying at Adobe.

andruby 3y ago
I was wondering where you were going after that first sentence :) Good luck! I'll be happy to see some competition. I don't see a link in your profile.
aurareturn 3y ago
Personally, I think Adobe will do a pretty good job of supporting Figma. But the disruption to Figma/Adobe likely won't come from another traditional design tool. It'd have to come from a tool that does generative AI first, and maybe some tools to edit. Just a wild guess but in 1-2 years, maybe someone can generate a whole app design from style guide to actual screen/interaction designs. That'd be a true competitor to Figma/Adobe. I just can't see a competitor rising from nothing to compete with Figma/Adobe without being AI-first in 2023. Even Adobe is adding generative AI features into their products now.
- adfm 3y ago
  Adobe’s acquisition and Apple’s headset are bulkheads. As compelling as generative AI technologies are, WebGPU makes it chooch.
rvz 3y ago
The DOJ in the US doesn't think so. [0] [0] https://www.bloomberg.com/news/articles/2023-02-23/doj-preparing-suit-to-block-adobe-s-20-billion-deal-for-figma?leadSource=uverify%20wall https://www.bloomberg.com/news/articles/2023-02-23/doj-prepa...

schoolornot 3y ago

Aren't Adobe and Figma US-based companies? Why does the EU have any say in this?

onion2k 3y ago
The fact their headquarters are in the US isn't the relevant bit - it's the fact that they operate in Europe that's important. Figma and Adobe could withdraw their offerings from Europe and they'd be free to do what they want, but that's not very likely. If you want to operate globally you have to accept the laws of the places where you do business. You can't just say "but HQ is in 'merica so screw you" and expect to continue trading in those countries.
- SilverBirch 3y ago
  Have there been any examples of this? I'd be really interested to know what happens in practice if the EU say "No acquisition" and Adobe just goes ahead with the acquisition. Do Adobe's products get pulled off the shelf? Do they face a monetary fine? What happens 10 years down the road when Figma is completely integrated into Adobe and Adobe still aren't operating in the EU at what point does the EU say "Hey, you're allowed back"?
calgarymicro 3y ago
Because they both operate in the EU, have customers in the EU, make money in the EU, and have legal presences in the EU. Generally, any merger of large multinational corporations will require multinational approval - the US and EU at a bare minimum, often also the UK, Japan, China, and any other countries with strong regulatory regimes where one of the companies has a major/critical presence. Any one of these countries can block a merger if they see an antitrust issue; Qualcomm and NXP found this out the hard way with China a few years ago, and Microsoft and Activision Blizzard are finding that out with the UK right now. Of course, these companies could flip off China or the UK and just merge anyway, but then they'd risk being subject to crippling fines, having their local assets seized, and even being barred from doing business in that market altogether.
djvdq 3y ago

pc_edwin 3y ago

The funny thing is, Adobe greatly overpaid for Figma and they know it so this is like a godsend. They would much rather just pay the $1 billion breakup fee and forget about that 2 years when all of tech got a little "loose" than be forced to go ahead with such an expensive mistake. Best case scenario it will take Adobe nearly a decade to grow into that valuation with their figma product. And even thats really pushing it.

senttoschool 3y ago
I'm not sure if this is true. They announced the deal in Sept 2022, when the Nasdaq had already dropped significantly. The Nasdaq is higher today than in Sept 2022. This means Adobe might actually have to pay a little bit more for Figma if they acquired them now. It was true for Elon trying to back out of Twitter's acquisition because tech valuations dropped significantly during the closing period. But this is Adobe and they didn't buy Figma for the memes nor did they roll out of bed thinking they should buy Figma that day like Elon probably did. I think Adobe bought Figma thinking that they might have acquired Instagram. Today, Meta would be in a lot of trouble if they didn't own Instagram. Figma could have developed a suite of tools via their cloud-native stack and competed with Adobe across all of their products eventually. Basically, I think Adobe bought out their long-term competitive threat. Quite frankly, at 9% of Adobe's total market cap, it's not that bad of a deal.
- qwytw 3y ago
  But 20 billion is a huge amount, that's supposedly a 50 price to sales ratio if not more which is huge. Something like Snowflake which has an insane valuation is only half that... Only way Adobe could justify this is that it kills a dangerous competitor, which is what EU legislation is supposed to stop..
  - senttoschool 3y ago
    >Only way Adobe could justify this is that it kills a dangerous competitor, which is what EU legislation is supposed to stop.. I mean, that's exactly what my post above is saying. Figma has inherent tech advantages via their cloud-native stack. You can use the tools anywhere there is a browser. It's significantly more intuitive and easier to collaborate with multiple people. Their applications can eventually be accelerated server side such as GPU-farm acceleration for AI features. Figma is also building a community for sharing work, like the Github of design. There's nothing really stopping Figma from creating a competitor to Adobe Cloud Suite including Photoshop, Illustrator, Acrobat, and InDesign.

nness 3y ago

I'm starting to think the EU is loud but rather toothless when it comes to merges relating primarily to digital services and products. They've certainly blocked their share of telecommunication, retail, and airline industry merges — but after allowing the acquisition of Activision Blizzard by Microsoft, I wonder if its all bark and no bite.

aurareturn 3y ago
I don't think they're toothless. I think they're drunk on power after successfully forcing cookie-prompts and iPhone USB-C. One day, a large company will be bold enough to exit the EU and reset the power balance. To me, it seems like the EU has created so many regulations that their startups/tech companies can't compete with the US tech companies. So rather than remove regulations blocking innovation and investment, they want to regulate US companies to even the playing field.
- surgical_fire 3y ago
  > One day, a large company will be bold enough to exit the EU and reset the power balance. I hope it's Google. Or Meta. Or Apple. Fuck it, I'll take those 3 leaving together. Move it!
  - aurareturn 3y ago
    That'll set Europe back to 2000.
    - jacooper 3y ago
      Lol, thats what you want to believe
    - hsjqllzlfkf 3y ago
      Yeah, because the only thing that happened in Europe for the past 20 years was social media and ads...?
    - 3y ago

user3939382 3y ago

I feel like Adobe abuses the market position it already has, their software is full of dark patterns, and I hope they get replaced.

dogma1138 3y ago

How the hell is Figma worth $20B?