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Tuesday 20 September 2022

Shares fall following Adobe's proposed $20bn Figma acquisition

Adobe logoAdobe’s move to acquire Figma late last week has not been well received, as illustrated by the c.22% fall in its share price since the announcement. The hefty $20bn (cash and shares) to be paid for the startup who raised $333m in funding last year and is expected to generate revenue of c.$400m in the current year, is the crux of the concern even though Adobe says Figma will define a new category and drive growth for decades to come. 

Figma provides a collaborative visual design platform for creatives. Design capability is core but the collaborative aspect raises the game – it enabled the company to substantially benefit from the pandemic-driven shift to remote working and on-going hybrid work models. While Adobe is able to flex design credentials its collaborative capabilities e.g. Adobe XD, are not well established so with this proposed acquisition it both removes a competitor from the market and gains valuable collaborative capability. It is also hoping to attract new types of users – developers as well as designers for instance. This is something we highlighted in the Adobe profile within the Enterprise Software Supplier Prospects 2022 and Beyond report, whereby Adobe’s strategy underpins the importance of it expanding outside its traditional CMO realm, to become integral to CIOs, LoBs and a new generation of digital content creators as it expands the definition of a creative professional.  Figma aligns with this strategy, hence Adobe’s comments about it being a long-term growth acquisition.

The market has been disappointed by Adobe’s decelerating rate of growth and forward guidance. The share price fell c.5% when Q2 results were released in June despite record revenue of $4.39bn representing 14% growth, as investors spooked at Q3 revenue guidance of 12%, and tweaked full year guidance of $17.65bn which is a far cry from the 23% growth of FY21. 

The creative platform market is competitive (e.g. Sketch, Miro, Framer, Invision Studio , Canva) and as the market leader Adobe is in their sights so its needs to push hard to maintain innovation and open up new markets, needs that Figma fits with. 

Posted by: Angela Eager at 09:21

Tags: acquisition   software  

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