Adobe’s Big Swing

Illustration of a hand dropping M&A.

Should the $20 billion Adobe acquisition of Figma—half in stock and half in cash—pass through regulatory hoops, it would be the largest acquisition of a private technology company to date, according to a Crunchbase News analysis. 

It would also prompt a big uptick in valuation from the last recorded valuation for the 10-year-old San Francisco-based company. Figma was valued around $10 billion in its Series E funding led by Durable Capital Partners in June 2021. Its earlier investors, which include Index Ventures and Greylock, are poised to do very well from this acquisition. 

The largest technology acquisition prior to this announcement was Facebook’s purchase of WhatsApp in 2014 for $19 billion. And the third largest is Walmart’s purchase of Flipkart in 2018 for $16 billion. 

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This is not the only billion-dollar acquisition for Adobe in recent years. 

The San Jose-based digital marketing and design company founded in 1982 has acquired cloud service companies with a wide range of capabilities from marketing to sales to design in recent years.  

Adobe acquired marketing automation platform Marketo from Vista Equity Partners which took the company private in 2016 for around $1.8 billion. Adobe paid $4.8 billion in 2018. In the same year, Adobe acquired cloud commerce platform Magento Commerce for $1.7 billion.

More recently, in 2020 it acquired enterprise workplace management company Workfront for $1.5 billion and in 2021 video collaboration platform Frame.io for $1.3 billion.

Strong market response

The public markets have not reacted well to the announcement, with Adobe’s stock trending down 17% in a day. Adobe reported $4.43 billion in revenue in the third quarter of 2022 showing 13% year-over-year growth. Adobe forecasts that Figma’s recurring annual revenue will be $400 million in 2022

In 2005, when Adobe acquired Macromedia, a web design software developer and a big competitor at the time, for $3.4 billion in a stock transaction which amounted to 18% of its stock, the market did not take well to that acquisition either. 

Still, the Figma acquisition offers clear advantages. With the advent of the cloud and scaled pricing from SaaS businesses, gaining a significant user base through product—and price—differentiation has led to innovation and competition. Incumbents are not always well-positioned to launch lower-priced options at scale. Acquiring your way into that makes ultimate business sense. 

Illustration: Dom Guzman

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