EU Antitrust Probe Threatens Adobe’s Acquisition of Figma

Adobe’s proposed $20 billion acquisition of its rival Figma is set to face a lengthy EU antitrust probe, which could potentially derail the deal. European antitrust regulators are preparing to launch a formal investigation later this year, raising concerns about the impact on innovation and prices in the digital design market. This move adds to the mounting regulatory scrutiny worldwide, with the UK already launching an investigation and the US Justice Department preparing to block the transaction.

Extended Phase 2 Investigation

While most large acquisitions undergo a “phase 1” investigation that lasts a few months, the EU authorities appear to be planning a more detailed and lengthy “phase 2” investigation. This extended probe could raise significant hurdles for Adobe’s acquisition of Figma, potentially resulting in the deal being blocked entirely. The EU’s intention to proceed with a phase 2 investigation suggests deep concerns about the potential consequences of the acquisition.

Global Regulatory Hurdles

The proposed acquisition of Figma is facing challenges not only in the EU but also in other jurisdictions. The UK has already initiated an investigation into the affair, and the US Justice Department is preparing a lawsuit to block the transaction. This growing global regulatory scrutiny highlights the significance of the deal and the potential impact it could have on the digital design market.

Adobe’s Bid to Consolidate the Digital Design Market

Adobe’s interest in acquiring Figma and its cloud-based design tools is driven by its desire to consolidate its position in the digital design market. Figma, along with Australia-based Canva, is a leading manufacturer of design tools that offer superior performance compared to Adobe’s software, including the widely used image-editing system Photoshop. The acquisition would enable Adobe to tap into Figma’s advanced technology and expand its dominance in the market.

EU Concerns Over Threat to Competition

The EU’s initial decision to investigate the deal despite low European sales indicates concerns about the potential impact on competition. Regulators feared that the acquisition could significantly affect the market for interactive product design and whiteboard software. Subsequently, the EU has become increasingly worried that the transaction represents a “killer takeover,” where a large company acquires a smaller rival to eliminate competition entirely.

Adobe’s View and Defense

Adobe has strongly defended the acquisition, claiming that the two companies operate in separate markets. Internal research conducted by Adobe suggests that only a small percentage of Photoshop users also use Figma, indicating minimal user overlap. The company believes that the acquisition will enable it to enhance its product offerings and provide a more comprehensive solution to its customers.

Adobe has yet to file the settlement for scrutiny by EU regulators. However, company insiders indicate that Adobe could avoid a lengthy investigation if it can provide compelling evidence countering the EU’s concerns in the coming months.

Potential Consequences of the Acquisition

The acquisition of Figma at a valuation of 50 times its annual recurring revenue reflects Adobe’s eagerness to solidify its market position. However, if the acquisition is successfully completed, it could have several significant ramifications:

1. Market Consolidation: Adobe’s acquisition of Figma would further consolidate its dominance in the digital design market, potentially creating barriers to entry for new players.
2. Innovation Impact: Critics argue that the acquisition could stifle innovation in the market, as competition diminishes and Adobe gains more control over the direction of digital design tools’ development.
3. Price Implications: The merger could result in increased prices for digital design tools as Adobe enjoys a more dominant market position and reduced competition.
4. Investment in Startups: Adobe’s CEO has warned against blocking the merger, stating that regulatory action would lead to lower investment in startups. This claim raises concerns about the potential consequences for smaller innovative companies in the digital design industry.

Engaging Additional Piece: Exploring the Future of the Digital Design Market

While the acquisition of Figma by Adobe raises concerns and faces regulatory hurdles, it underscores the ever-evolving landscape of the digital design market. Here are some unique insights and perspectives on the future of this industry:

The Rise of Cloud-Based Design Tools

Cloud-based design tools like Figma and Canva have gained significant traction in recent years due to their ease of use, collaborative features, and enhanced performance. As more businesses and individuals embrace remote work and collaboration, cloud-based design tools are becoming the go-to choice for designers.

The Importance of Innovation

Innovation remains a vital driving force in the digital design market. As competition intensifies, companies need to invest in continuous innovation to differentiate themselves and provide unique value to customers. The acquisition of Figma by Adobe highlights the potential impact on innovation, as a dominant player could dictate the direction of development.

User Experience and Design Thinking

User experience and design thinking have become essential aspects of product development and marketing strategies. Companies that prioritize delivering exceptional user experiences and adopting design thinking principles are more likely to succeed in the competitive digital design market. As Adobe seeks to acquire Figma, its focus on user experience and design thinking is crucial to maintain customer satisfaction.

Emerging Technologies and Integration

The digital design market is continually evolving with the emergence of new technologies like virtual reality (VR), augmented reality (AR), and artificial intelligence (AI). The successful integration of these technologies into design tools can revolutionize the industry, enabling designers to create more immersive and engaging experiences for users.

The Importance of Collaboration

Collaboration is a key factor in the success of digital design projects. Design tools that facilitate seamless collaboration between team members and stakeholders are highly valued in today’s market. As Adobe and Figma navigate the acquisition process, it is crucial for them to prioritize collaboration features and ensure a smooth transition for their users.

Summary

The proposed acquisition of Figma by Adobe is facing extensive regulatory scrutiny, with EU antitrust regulators planning to launch a formal investigation. The deal’s potential impact on innovation and competition has raised concerns among regulators worldwide. Despite these challenges, the future of the digital design market remains promising, with cloud-based tools, innovation, user experience, emerging technologies, and collaboration playing pivotal roles in shaping the industry.

Adobe’s $20 billion deal to acquire rival Figma is set to face a lengthy EU antitrust probe, in the latest move that threatens the software giant’s bid to consolidate the digital design market.

According to four people with direct knowledge of the move, European antitrust regulators are preparing to launch a formal investigation into the takeover later this year, over concerns that the transaction will lead to less innovation and higher prices.

Many large acquisitions receive an interrogation, known in EU circles as a “phase 1” investigation, which typically takes a few months to complete. But those close to the situation suggest that EU authorities intend to press ahead with a more detailed “phase 2” investigation, which could take many more months and ultimately could derail the deal altogether.

The move is another blow to the proposed acquisition, which is already in the crosshairs of global regulators. The UK has launched a first investigation into the affair last month while the US Justice Department is also preparing a lawsuit to block the transaction.

Along with Australia-based Canva, Figma is a leading manufacturer of cloud-based design tools that promise better performance than Adobe’s software, including image-editing system Photoshop, which has dominated the market for years.

Last February, regulators in Brussels said the transaction should have been cleared by the EU despite European sales of the deal being too low to typically warrant an investigation. The EU justified that decision by saying there were concerns that it “threaten to significantly affect competition in the market for interactive product design and whiteboard software”.

Regulators have since become more concerned that the deal represented a so-called killer takeover in which a large company buys a smaller rival to eliminate competition, four people familiar with EU thinking said.

“Adobe is looking to buy a credible competitor,” said a person with direct knowledge of EU regulators’ thinking. “It’s bad.”

Adobe’s offering for Figma values ​​the company at 50 times its annual recurring revenue. The $20 billion price tag was double the amount the company was valued at in a 2021 private financing round and a tenfold increase from its 2019 valuation.

Adobe said earlier this year it expected “lengthy reviews” of the deal as it tightens its scrutiny over technology transactions around the world. Chief Executive Officer Shantanu Narayen has warned against blocking the mergertelling the Financial Times earlier this month that the regulator’s action would lead to lower investment in startups.

The company claims that the two businesses operate in separate markets. Internal research found that just 10 percent of Photoshop users were also using Figma, underlining the limited user overlap, multiple people with knowledge of Adobe’s defense said.

Adobe has yet to file the settlement for scrutiny by EU regulators, with people close to the process saying the company could still avoid a thorough investigation if it provides compelling evidence to counter their concerns in the coming months.

The European Commission said: “This transaction has not been formally notified to the Commission. If an operation constitutes a concentration and has a Community dimension, it is always up to the companies to notify it”.

Adobe said it was still in preliminary talks with EU, UK and US regulators, but that it remains “confident in the merits of the case and looks forward to a successful completion of the transaction.”

Additional reporting by Cristina Criddle in London