Adobe-Figma Deal Canceled: What Happens Next?

December 28, 2023

In September 2022, Adobe announced plans to buy Figma for $20 billion. Figma is a popular online design and team collaboration tool. Many designers use it to create prototypes and designs.

The deal was set to be finalized in 2023. But on December 2023, it was called off unexpectedly. Adobe and Figma agreed to cancel their merger agreement.

This surprised the design and tech communities. Now users are wondering, what does this mean for the future of these companies and their products? Here’s an overview of why the acquisition fell through and what might happen next.

Why was the Adobe Figma Deal Canceled?

After the deal was announced last year, it received pushback from Figma users and others in the industry. Critics raised concerns about Adobe gaining too much control in the design space.

Some Figma users worried the quality of the platform would decline under Adobe. Others didn’t like an established company buying up a smaller competitor. Figma’s market value is less than one-tenth that of Adobe, but its cloud-based design software is a direct competitor with Adobe products.

Regulators also scrutinized the acquisition. In March, the United States Department of Justice filed a second request for more details about the deal. The UK’s regulator opened an in-depth investigation too. Both UK and EU regulators had major red flags.

According to Verge, in an interview on the Decoder podcast with The Verge editor-in-chief Nilay Patel, Adobe general counsel Dana Rao said that the company couldn’t prove to European regulators that the acquisition wouldn’t harm competition in the future, that Adobe or Figma wouldn’t eventually do more to compete with one another.

Facing this backlash, Adobe and Figma decided to walk away. Adobe said the deal was no longer viable due to the regulatory environment. Figma agreed it was best not to move forward.

“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 Shantanu Narayen, chair and chief executive of Adobe.

Adobe Figma Deal Cancelled

What Does This Mean for Adobe?

With the Figma deal dead, Adobe now needs a new strategy for the design software market.

Adobe already offers popular creative products like Photoshop, Illustrator and XD. But Figma presented growing competition, especially among product designers.

Adobe will likely continue improving its offerings to keep users from defecting to Figma. We will probably see more investment in Adobe XD, their platform for design prototyping.

Under the merger agreement, Adobe will pay Figma $1 billion as a breakup fee.

What’s Next for Figma?

Meanwhile, Figma regains its independence. The company seems focused on building out its product capabilities and user community. In their official statement Figma Company said,

“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.”

Figma recently launched a whiteboard feature for more collaborative design work. More new features are likely on the horizon. Leadership changes are happening too. Figma’s CEO Dylan Field will become executive chairman of the board. The role focuses on guiding long-term strategy. Co-founder Evan Wallace takes over as CEO to run daily operations.

In the short term, Figma is expected to remain private and self-funded. Their independence allows more flexibility in decision-making.

How Will This Affect Designers and Users?

For now, designers who use Adobe or Figma tools probably won’t notice any changes but can expect innovation. The rival platforms will continue co-existing.

Photoshop and Illustrator still clearly lead in image editing and illustration. But Figma has momentum in interface and UX design. Each company will keep trying to improve and poach users from the other.

More broadly, the canceled deal maintains competition in the market. This is seen as a win for customers. A lack of choice could have driven up prices or reduced innovation. Some effects may take longer to emerge. If the rivalry ramps up, we could see a wider feature gap between the two provider’s offerings. This may eventually force designers to pick a side.

Other Impacts on the Tech Industry

The collapsed acquisition also signals a shifting environment for mergers and acquisitions in the tech sector overall. Regulators are taking a harder look at deals involving large players buying upstarts. This scrutiny sunk the Adobe-Figma deal but may deter others too.

We will likely see tech companies get more careful and strategic with mergers. Processing the regulatory approvals will require thorough planning upfront.

The canceled deal also highlights how users can influence these transactions. Customers spoke up with their concerns, and it impacted the outcome. User opinions may start holding more weight in whether deals happen. This gives customers more power in shaping the tech market.

Adobe-Figma Deal Summary

It’s an interesting time in the design software space after Adobe and Figma’s $20 billion deal abruptly ended. The breakup maintains Figma’s independence and removes a potential rival for Adobe.

Designers and customers will be watching eagerly to see what the future holds. Competition and innovation may rise across the market, ultimately benefiting users. But the two companies’ next moves could also lead to more fragmentation down the road.

For now, Figma and Adobe say it’s business as usual. But lasting impacts from their canceled merger may emerge in the months and years ahead.

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