(Kimberly White/Getty Image)
Adobe‘s $20 billion deal to buy Figma, a high-water mark for software M&A, has collapsed due to regulatory roadblocks, the two companies said Monday.
First announced in September 2022, it would have been the largest acquisition of a venture-backed company ever. The cash and stock deal was equivalent to a third of total US VC exit value so far this year, according to PitchBook data.
The deal promised a major windfall for Figma’s investors, among them Index Ventures, Greylock Partners, Kleiner Perkins and Sequoia. Index Ventures, which led Figma’s $3.8 million seed round in 2013, would’ve brought in $2.6 billion from the deal, Forbes reported.
“This will chill the M&A market, and not just for mega-acquisitions,” said Avichal Garg, an angel investor in Figma’s 2018 Series B and managing partner at Electric Capital. “No company wants to burn years on an acquisition that regulators won’t approve, especially on a smaller acquisition.”
The collapsed deal will cast a shadow over future deals that have the potential to attract scrutiny from anticompetition regulators in an already-depressed VC exit market.
The lost returns will sting VCs for whom the expected deal was one of the last upsized victories as the exit market turned sour in 2022. Adobe had promised to pay out more than double Figma’s last valuation—priced at the height of the 2021 tech bubble—for its suite of enterprise user interface design tools.
Adobe has agreed to pay out a $1 billion termination fee to Figma.
Adobe and Figma agreed to terminate the deal because the two companies could not envision a path to secure regulatory approval from the UK Competition and Markets Authority and the European Commission. Both regulatory bodies had raised concerns that the acquisition would stifle competition for product design services, driving up prices and reducing choices for consumers.
UK, European and US antitrust regulators have increasingly gone into battle over mega-takeover deals. Microsoft faced extensive scrutiny over its $68.7 billion acquisition of Activision Blizzard, which closed in October.
But other acquirers have been less successful: genetics biotech company Illumina said Sunday it was divesting from Grail, a cancer diagnostics testing company it bought in 2021 for $7.1 billion, due to yearslong pushback from the European Commission and the Federal Trade Commission. And in 2022, the UK’s CMA ordered Meta to sell Giphy after buying it for $315 million.
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