$20 billion deal between Adobe and Figma was mutually terminated due to regulatory concerns

Figma and Adobe mutually decided to end the $20 billion acquisition because of the many regulatory roadblocks caused by antitrust concerns.

Adobe (NASDAQ: ADBE) and Figma decided to back out of the $20 billion purchase transaction more than a year after it was announced due to growing regulatory concerns in the US, UK, and Europe. Curiously, Adobe’s stock rose 1.8% before Monday’s market start, suggesting that investors saw the resolution of the acquisition drama as a good development for the firm.

The twenty billion-dollar merger between Adobe and Figma was put on hold after “no clear path” to approval from UK and EU antitrust authorities. According to Britain’s leading antitrust watchdog, the Competition and Markets Authority (CMA), Adobe has decided not to submit any more suggestions to resolve regulatory concerns.

“Adobe and Figma strongly disagree with the most recent regulatory findings. However, we both feel that moving forward independently is in our best interests,” Adobe CEO Shantanu Narayen said.

The US Department of Justice (DOJ), the Competition and Markets Authority (CMA), and the European Commission are among the worldwide competition authorities that have begun investigating the September 2022 agreement.

The second group said that Adobe’s planned separation from its design service was evidence of a “reverse killer acquisition” due to the approaching takeover. The commission went on to say that Figma would no longer be a viable competitor to two of Adobe’s flagship editing products and that the merger would end any possibility of it being a formidable rival.

Last month, the UK’s CMA expressed similar worries, stating that the acquisition might have a negative impact on the digital design industry as a whole in Britain. The watchdog went into more detail, saying that the merger may “eliminate competition” and “reduce innovation” while also “removing Figma as a threat to Adobe’s flagship Photoshop and Illustrator products.”

However, the acquisition was a source of worry for more than just the authorities. Following the purchase, Figma users were concerned that Adobe might increase the platform’s pricing. Adobe, on the other hand, refuted the allegations and said that it will maintain its free cloud-based design service.

Adobe must pay Figma $1 billion in cash as a reverse termination fee as a result of the termination. In response to the announcement, Adobe stock increased little in premarket trade, rising 1.8% as of this writing.

The company’s stock has blown away the S&P 500 thus far in 2023, with a 73% year-to-date surge. Much like other digital businesses, Adobe’s generative AI service Firefly saw a surge in demand during the recent AI boom, which is partly responsible for its remarkable success.

Shares fell after the firm provided a weak forecast for 2024, even though the financial results for fiscal Q4 were revealed last week, surpassing Wall Street’s expectations. Regardless, Jefferies analysts are so positive about Firefly’s uptake that they have boosted Adobe’s stock price objective to $700.

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