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Adobe (ADBE, $309.13) has announced that it would acquire Figma for $20 billion, taking out one of its biggest rivals in the realm of digital design. After rumours surfaced early on Thursday about a potential acquisition, Adobe made it official in a press release shortly afterwards. It’s big news in the design and development world, particularly as Figma has been competing heavily with Adobe’s XD products in recent years.
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Investors were not persuaded, driving down Adobe's stock by 17%. Many of them said they understood the rationale around the strategy but argued Adobe overpaid for a company that was valued at about $10 billion in a private fundraising round a little over a year ago.
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Adobe also released its Q3 earnings which saw the company post revenues of $4.43 billion and non-GAAP earnings per share of $3.40, which respectively met and exceeded analysts’ expectations. Nevertheless, the company said that it might need to finance this deal with a loan, and it provided a lukewarm outlook for the next quarter.
Why it matters
Figma’s cloud-based designed software has been a growing headache for Adobe over the last few years. It’s cheaper, easier to use, collaborative and modern, and has been spreading like wildfire among designers at companies big and small. “This was very much both a defensive move but also an eye towards this trend where design rules and design matters,” Lo Toney, founding managing partner of Plexo Capital, which invests in start-ups and venture funds explained.
