Following mounting pressure from regulators in the UK and EU, Adobe and Figma announced on Monday that both companies are mutually terminating their merger agreement, which would have seen Adobe acquire the Figma product design platform for $20 billion.
As a result of the termination, Adobe will be required to pay Figma a reverse termination fee of $1 billion in cash.
“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” said Adobe chair and CEO Shantanu Narayen in a statement. “While Adobe and Figma shared a vision to jointly redefine the future of creativity and productivity, we continue to be well positioned to capitalize on our massive market opportunity and mission to change the world through personalized digital experiences.”
Regulators cited Adobe’s near-monopoly in the design software market as they pushed back on the deal. By purchasing Figma, a fast-growing product design platform that’s now more popular than Adobe’s rival XD application, regulators worried that Adobe would harm innovation that could have occurred should Figma be allowed to flourish independently. Designers have expressed similar worries since the merger was announced in September 2022, but Adobe pushed back on those claims throughout the various ongoing probes.
In a letter dated December 14th, Adobe rejected remedies suggested by the UK’s Competition and Markets Authority (CMA) to approve the merger following an in-depth antitrust probe. The authority wanted Adobe to make a significant divestment of assets, source code, and engineers to “restore the conditions of competition.” All parties were expected to discuss the CMA’s provisional decision to block the deal on December 21st, with a final deadline to approve or block the acquisition set for February 25th.
The deal was being similarly scrutinized by the European Commission, and Bloomberg reported in February 2023 that the DOJ was preparing similar investigations. Following Adobe’s announcement, the European Commission has now also dropped its antitrust investigation into the merger.
With all that pressure mounting, Adobe had very little wriggle room to push the deal forward and still get all of the Figma assets it had hoped to obtain — or, in the case of its own apps being sacrificed in antitrust appeasement, retain.
“It’s not the outcome we had hoped for,” said Figma CEO Dylan Field in a statement. “But despite thousands of hours spent with regulators around the world detailing differences between our businesses, our products, and the markets we serve, we no longer see a path toward regulatory approval of the deal.”
Update, December 18th, 9.40AM ET: Article updated to note that the EU has now dropped its official antitrust investigation into Adobe’s Figma acquisition.