Figma and Adobe Reach a $20 Billion Software Deal Agreement
The deal between Adobe Inc. and Figma, whose products are used by software developers to collaborate, was announced on Thursday. Investor concerns about the high price tag caused the market value of the company that makes Photoshop to decline by more than $30 billion.
Shantanu Narayen, CEO of Adobe, called Figma’s business “the future of work” and claimed there were “tremendous opportunities” to combine it with his company’s products, such as document reader Acrobat and online whiteboard Figjam. Adobe’s stock fell by 17% because investors don’t feel it’s a right decision. Many of them claimed to understand the strategy’s justification, but they claimed Adobe paid too much for a business that had been valued at roughly $10 billion in a private fundraising round just over a year earlier.
According to David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, which holds a 1.5% stake in Adobe, the annual recurring revenue (ARR) of $400 million from Figma was a negligible portion of Adobe’s $14 billion, making it unreasonable for Adobe to pay the equivalent of 11% of its market value for 2.8% more ARR. “We are disappointed with the price paid for the company (Figma),”Wagner said.
Three years after the transaction’s closing, Adobe stated that it anticipated the acquisition to increase its earnings. As for design, whiteboarding, and collaboration, it was also stated that Figma’s total addressable market would amount to $16.5 billion by 2025.
The cash-and-stock transaction will give Adobe ownership of a business whose online collaborative platform for ideas and design is used by companies like Zoom Video Communications, Airbnb Inc., and Coinbase. It is the largest-ever buyout of a privately-owned software start-up. One of the most opportunistic businesses in Silicon Valley, Adobe has acquired a number of companies as it has sought to protect its market share from rivals like Microsoft. Prior to Figma, its largest acquisition was Marketo, a software company, for $4.75 billion in 2018.
In order to narrow its focus on collaboration tools, it has also acquired other businesses over the past 24 months, including video collaboration software Frame.io, social media marketing start-up ContentCal, and collaboration tool maker Workfront. Figma, based in San Francisco, will continue to be run by co-founder and CEO Dylan Field after the deal, which is anticipated to close in 2023. If the deal is cancelled, either company will be required to pay a $1 billion termination fee.
According to Refinitiv data, Adobe’s anticipated fourth-quarter revenue of $4.52 billion was less than the $4.58 billion analysts had predicted. The impact of a stronger dollar and higher costs was also reflected in a nearly 6% decline in third-quarter profit.
Detail of Transaction
According to the legally binding agreement, Adobe will pay $20 billion to acquire Figma, with roughly half going to cash and half to stock, with the usual caveats. The CEO and staff of Figma will receive an additional 6 million restricted stock units, which will vest over the course of the next four years. Adobe anticipates funding the cash consideration from cash on hand and, if required, a term loan.
The deal is expected to close in 2023, provided that all necessary regulatory clearances and approvals are obtained, as well as other closing requirements, such as stockholder approval. Dylan Field, the co-founder and CEO of Figma, will remain in that position following the transaction’s completion and continue to oversee the Figma staff while answering to David Wadhwani, the head of Adobe’s Digital Media division. Each business will continue to run independently until the transaction is completed.
New Era of Collaborative Creativity to Be Launched by Adobe and Figma Partnership: Adobe
As per Adobe’s official website, Adobe’s mission is to change the world through digital experiences. Today, the digital economy is powered by Adobe’s tools and platforms, and the company’s innovations have touched billions of lives around the world. Adobe continues to invent and transform categories, from revolutionising imaging and creative expression with Photoshop to pioneering electronic documents through PDF and creating the digital marketing category with Adobe Experience Cloud.
Figma’s mission is to make design accessible to all and to help teams collaborate visually. The company, founded in 2012 by Dylan Field and Evan Wallace, pioneered product design on the web. Through multi-player workflows, sophisticated design systems, and a rich, extensible developer ecosystem, it is now enabling everyone who creates interactive mobile and web applications to collaborate. Figma has attracted a new generation of millions of designers and developers, as well as a devoted student base.
By working together, Adobe and Figma will reimagine the future of creativity and productivity, speed up creativity on the web, advance product design, and motivate creators, designers, and developers around the world. With the ability to create significant value for customers, shareholders, and the industry, the combined company will have access to a sizable, quickly expanding market opportunity.
What is Figma?
Figma is a design tool for groups of people who collaborate to create products. Figma, a web-based tool, assists teams in brainstorming, product design, and development from beginning to end. Figma makes the design process quicker, more efficient, and fun while keeping everyone on the same page, whether it’s by consolidating tools, streamlining workflows, or collaborating across teams and time zones.
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