Adobe has called off its planned $20 billion acquisition of design software rival Figma due to challenges in securing regulatory approvals from the European Commission and the UK Competition and Markets Authority (CMA).
The decision, announced jointly by the companies, followed concerns raised by the CMA that the merger would substantially reduce competition in product design, vector-editing, and raster-editing software. The regulatory body argued that the merged entity would have less incentive to develop and improve its products, particularly impacting Adobe’s entrenched leadership in Illustrator and Photoshop markets.
“In particular, the Merger would eliminate an important dynamic competitive threat to Adobe’s Illustrator and Photoshop in markets where Adobe has had an entrenched leadership position for decades,” the CMA said.
Despite Adobe and Figma disagreeing with the regulatory findings, they mutually decided to terminate the deal in their respective best interests and will proceed independently. In a filing with the CMA, the companies asserted that they were not close competitors and that the merged company would continue to face competition from other product-design tools.
“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” Adobe’s CEO and chair Shantanu Narayen said in a statement.
This development highlights the challenges and regulatory scrutiny faced by tech companies engaging in significant acquisitions. The termination underscores the complex balance these companies must navigate to maintain a competitive landscape while pursuing strategic growth opportunities.
The $1 billion termination fee, disclosed in an earlier SEC filing, reflects the financial implications of such decisions. Both Adobe and Figma are now expected to focus on alternative strategies to strengthen their positions in the design software market. The case serves as a reminder that even industry leaders are subject to regulatory scrutiny, shaping the dynamics of the tech market and influencing corporate strategies.