• Chesapeake Group

Adobe to acquire Figma


Overview:


On 15 September 2022, Adobe announced that it has entered into a definitive merger agreement to acquire Figma, a leading web-collaborative design platform, for c.$20bn in cash and stock .


The combination of Adobe and Figma will usher in a new era of collaborative creativity.


About Adobe:


Founded in 1982, Adobe is one of the largest and most diversified software companies in the world and the global leader in creative, digital document and digital experience solutions.


Its vast product portfolio across Adobe Creative Cloud, Adobe Document Cloud and Adobe Experience Cloud gives millions of customers—from individual creators to global brands— everything they need to design and deliver exceptional digital experiences.


It is headquartered in San Jose, CA and employs over 26,000 personnel worldwide.


About Figma:


Founded in 2012, Figma is a design platform for teams who build products. Born on the web, it helps teams brainstorm, design, and build better products by making the design process faster and more efficient while keeping everyone on the same page.


It is headquartered in San Francisco, CA and employs over 850 personnel worldwide.


Rationale of the transaction:


The move pulls Adobe into the cloud, an area where it’s historically struggled to gain traction, while reaching a new cohort of design software customers. Beyond just taking a potential existential threat off the table, buying Figma also creates an opportunity to grow that business by integrating it into Adobe’s wider user base.


When it moved to the cloud in 2011, Adobe succeeded in convincing the Wall Street it was worth taking a dent to revenues over a number of years to break into a new market. However, this time weaker earnings forecast coupled with softer market sentiments have caused the stock to fall by c.30% in the last 15 days.


With Figma expected to cross $400m in ARR in CY 22, the deal is highly priced at an EV / Sales multiple of 48.5x.


Adobe has also announced a retention package in the form of 6 million restricted stock units worth $2.3bn to Figma CEO Dylan Field and employees. The stock units vest over four years with half earmarked specifically for Dylan Field.


There is also a risk that antitrust regulators will try to intervene if they see Adobe’s move as a way to take out competition. In that regard, the purchase has similarities with Facebook’s acquisition of Instagram and WhatsApp, and Google’s takeover of YouTube. Although there is some product overlap, Adobe’s relative weakness among the product designers that Figma appeals to indicates it is unlikely to be a deal breaker.


The Chesapeake Group was not an advisor in this transaction.