Adobe recently announced that it would purchase Figma for $20 billion, eliminating one of its major competitors in the field of digital design. This is big news in the world of digital creative technologies.
Early this morning, the WSJ and Bloomberg both reported that Adobe was close to announcing the acquisition of Figma. In the end, Adobe made the announcement official to coincide with its quarterly revenue.
The business reported third-quarter earnings of $4.43 billion in revenues and $3.40 in non-GAAP earnings per share, which were both above and below experts’ predictions. Although the company provided a cautious outlook for the upcoming quarter, with revenues projected to be $4.52 billion and EPS projected to be $3.50, it acknowledged that it might need to borrow money to finance this transaction. It cited “the overall macroeconomic environment” and “FX headwinds” as reasons for this. One indication of how Adobe probably believed the announcement of combining and eliminating a rival could give it a lift is how its stock is trading down close to 10% pre-market open.
These responses from their intended audience are a clear indication to Adobe and Figma that they should monitor how they integrate and guide their users to whatever the next step is.
According to Adobe, the acquisition will be made up of a split of 50/50 cash and stock, as well as 6 million additional restricted stock units that will vest over a four-year period in favour of the CEO and staff of Figma. Subject to “the obtaining of required regulatory clearances and approvals” and “the satisfaction of other closing conditions, including the approval of Figma’s investors,” it is anticipated to close in 2023.
Figma’s product strengths include design and prototyping for both people and teams, carried out in a very streamlined and contemporary, cloud-based environment. To date, it has amassed almost 4 million users. Adobe has been expanding and acquiring a lot of companies in the broader field of digital creation, which has allowed it to expand beyond the more generic and expansive realm of design and into marketing and other fields that are related to design in the longer creation chain. However, design is at the core of Adobe, and the company has created some of the most recognisable products in fields including imaging (such as Photoshop), fonts, illustration, video, 3D, and more.
The goal at this point is to seamlessly connect all to Figma, effectively making it the native platform that connects them all. Of course, Adobe previously had something similar with AdobeXD. What will happen to that after this deal complete is unclear.
According to Shantanu Narayen, chairman and CEO of Adobe, “Adobe’s brilliance has been rooted on our ability to build new categories and offer cutting-edge technology through organic innovation and inorganic acquisitions.” “Adobe and Figma working together is a game-changer and will help us realise our goal for collaborative innovation.”
Dylan Field, co-founder and CEO of Figma, continued, “With Adobe’s amazing innovation and expertise, especially in 3D, video, vector, imaging and fonts, we can further reimagine end-to-end product design in the browser while building new tools and spaces to empower customers to design products faster and more easily. According to Adobe, Field will continue to run the Figma company.
Figma’s price tag of $20 billion represents a significant increase from its previous valuation of $10 billion in June 2021, when it raised $200 million. However, Adobe is not merely eliminating a significant rival. It is gaining a rapidly expanding clientele.
By 2025, Figma’s entire addressable market is estimated to reach $16.5 billion, and the firm expects to add $200 million in net new annual recurring revenue this year, hitting $400 million by the end of 2022, with best-in-class net dollar retention of more than 150%. Figma has developed an effective, fast-growing company, with gross margins of about 90% and positive operating cash flows, the company claimed.
The agreement undoubtedly throws down the challenge to other well-known figures in the field of digital design. It will be interesting to see what happens to businesses like Canva and Sketch in particular.
