Software provider Adobe Inc. (ADBE) has entered into definitive merger agreement with web-first collaborative design platform Figma. Adobe will pay approximately $20 billion in stock and cash, as announced on Sept. 15, 2022. This is another big tech merger unveiled in 2022, following Microsoft Corporation's (MSFT) acquisition of Activision Blizzard, Inc. (ATVI) and Broadcom Inc.'s (AVGO) acquisition of VMWare, Inc. (VMW).
Adobe's purchase of privately held Figma is expected to close in sometime in 2023. The transaction is subject to regulatory clearances and approvals, among other conditions, which include the approval of Figma's stockholders.
- Software company Adobe (ADBE) plans to acquire collaborative design platform Figma.
- Adobe will pay about $20 billion, half in stock and half in cash.
- Subject to approvals, the deal is expected to close sometime in 2023.
- The initial reactions of the markets was negative, with Adobe shares down sharply.
Details of the Deal
The roughly $20 billion payment from Adobe will comprise approximately half cash and half stock. About 6 million additional restricted stock units will be granted to Figma's CEO and employees. These units will vest over the four years subsequent to closing. Adobe expects that the cash consideration will be financed through cash on hand and, if necessary, a term loan.
Adobe says that its "mission is to change the world through digital experiences." The company asserts that "the digital economy runs on Adobe's tools and platforms." In particular, Adobe cites its main accomplishments as ranging from: "revolutionizing imaging and creative expression with Photoshop; to pioneering electronic documents through PDF; to creating the digital marketing category with Adobe Experience Cloud."
Adobe states that Figma's mission is to help teams collaborate visually and make design accessible to all. It also notes that Figma pioneered product design on the web and that it facilitates collaboration through "multi-player workflows, sophisticated design systems and a rich, extensible developer ecosystem." Adobe also indicates that Figma's platform is used by millions of designers and developers and that it also has "a loyal student following." The combined company, Adobe claims, "will reimagine the future of creativity and productivity, accelerate creativity on the web, advance product design and inspire global communities of creators, designers and developers."
Negative Market Reaction
Shares of Adobe dropped sharply on Sept. 15, 2022, down by approximately 16% by early afternoon from the prior close. Year to date in 2022, shares of Adobe are now down by nearly 45%.
The negative reaction of the markets on Sept. 15 appears to be a combination of concern that Adobe is overpaying for Figma and disappointment over Adobe's earnings report for the third quarter of its current fiscal year. Adjusted earnings per share (EPS) beat estimates by 1.5% and were up year over year (YOY) by 9.3%, but revenues were down YOY by 4.1%.