Adobe’s $20B Deal To Buy Figma: Four Key Things To Know

The acquisition, valued at about $20 billion, will give Adobe, already a leader in innovative creativity and digital experience, the leading provider of web-first collaborative design technology.

Adobe chairman and CEO Shantanu Narayen

Creating A Winner?

Adobe surprised the IT world early Thursday morning with the unveiling of a plan to acquire Figma, a developer of web-first collaborative design technology whose tools are in use by some of the world’s largest software companies. The $20-billion deal, expected to close next year, actually helps Adobe reel in one of its major competitors in the user experience market.

Adobe and Figma together become a creativity and productivity powerhouse with global communities of creators, designers and developers, Adobe said.

It will have a major impact on collaborative creativity, said Adobe chairman and CEO Shantanu Narayen in a statement.

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“Adobe’s greatness has been rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions. The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity,” Narayen said.

However, not everyone agreed with Adobe and Narayen’s rosy picture of the future. Investors expressed their concerns about the deal and about the guidance Adobe provided Thursday after unveiling its fiscal third quarter 2022 financials by pushing the company’s stock down about 17 percent close to the end of the trading day to just under $309 per share.

To learn more about the deal and its implications, click through the slideshow.

The Deal

Adobe’s planned acquisition of Figma for about $20 billion is expected to comprise about half cash and half stock. Adobe expects to be able to pay the cash portion from its existing cash on hand, but if needed will take a term loan. An additional 6 million in restricted stock units will also be granted to Figma’s CEO and employees, and is slated to vest over four years starting from the close date.

The deal is slated to close in 2023, and is subject to regulatory approvals and other closing conditions, including Figma stockholder approval.

What Adobe Gets With Figma

Privately-held Figma does not report its financials. However, according to PitchBook Data, Figma in June 2021 raised $200 million from investors, giving it a valuation of $10 billion, meaning that Adobe plans to acquire the company for double its valuation of just a year ago. Figma generated about $75 million in revenue in 2020, and was slated to double that in 2021, according to Forbes.

Adobe Thursday said Figma employees about 850. One of those, company co-founder Dylan Field, is expected to continue leading the Figma team after the transaction closes. Figma is also expected to add about $200 million of annual recuring revenue in 2022, and to surpass $400 million ARR exiting fiscal year 2022, Adobe said. Adobe also said Figma has gross margins of about 90 percent and a positive operating cash flow.

Adobe And Figma

Adobe is a multi-billion-dollar leader in innovative creativity and digital experience. The company offers products and services in three categories. Its Creativity Cloud provides apps, web services and other resources for designing and publishing projects, including such applications as Photoshop, Illustrator, and Acrobat Pro. The Adobe Experience Cloud provides a suite of products and services to manage customer experience with real-time data, scalable personalization, and more. The Adobe Document Cloud lets customers scan, edit, share, and sign documents from anywhere at any time.

San Francisco-based Figma was founded in 2012, and was a pioneer in the development of design tools for the web aimed at helping teams collaborate visually and making web design easily accessible. Customers include Google, Spotify, Mailchimp, Microsoft, Dropbox, Airbnb, HermanMiller, Netflix, Kimberly-Clark, Square, GitHub, and Zoom.

Figma has a large developer ecosystem with dozens of widgets and over 2,000 publicly available plugins.

Figma’s biggest competitor on the user experience design side has traditionally been Adobe.

Adobe Approaches Deal From A Position Of Strength

In addition to unveiling the acquisition of Figma, Adobe Thursday also unveiled its third fiscal quarter 2022 financials in a report that shows the company looking better than perhaps any time in its long history.

Adobe said revenue for its third fiscal quarter 2022, which ended Sept. 2, reached a record $4.43 billion, which was up 13 percent over the same period a year ago. That included subscription revenue of $4.13 billion, up 12 percent; product revenue of $126 million, up 6 percent; and services and other revenue of $179 million, up 13 percent.

Adobe also reported GAAP net income of $1.14 billion or$2.42 per share, down slightly from last year’s $1.21 billion, or $2.54 per share. Non-GAAP net income was $1.60 billion or $3.40 per share, up from last year’s $1.50 billion or $3.11 per share.

Looking forward, Adobe expects its fourth fiscal quarter 2022 digital media revenue to grow 10 percent over last year, its digital experience segment revenue to grow 13 percent, and its digital experience subscription revenue to grow 13 percent.