Adobe’s $20B deal to acquire Figma under threat from EU investigation | Hacker News Reader

Adobe’s $20B deal to acquire Figma under threat from EU investigation

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https://archive.is/U2Xol

Fingers crossed this deal goes through - and I am pretty confident it will.

I am building a design tool and I think my chances at success increase with Figma decaying at Adobe.

I was wondering where you were going after that first sentence :)

Good luck! I'll be happy to see some competition. I don't see a link in your profile.

Personally, I think Adobe will do a pretty good job of supporting Figma.

But the disruption to Figma/Adobe likely won't come from another traditional design tool. It'd have to come from a tool that does generative AI first, and maybe some tools to edit.

Just a wild guess but in 1-2 years, maybe someone can generate a whole app design from style guide to actual screen/interaction designs. That'd be a true competitor to Figma/Adobe.

I just can't see a competitor rising from nothing to compete with Figma/Adobe without being AI-first in 2023. Even Adobe is adding generative AI features into their products now.

Adobe’s acquisition and Apple’s headset are bulkheads. As compelling as generative AI technologies are, WebGPU makes it chooch.

The DOJ in the US doesn't think so. [0]

[0] https://www.bloomberg.com/news/articles/2023-02-23/doj-prepa...

The funny thing is, Adobe greatly overpaid for Figma and they know it so this is like a godsend.

They would much rather just pay the $1 billion breakup fee and forget about that 2 years when all of tech got a little "loose" than be forced to go ahead with such an expensive mistake.

Best case scenario it will take Adobe nearly a decade to grow into that valuation with their figma product.

And even thats really pushing it.

I'm not sure if this is true. They announced the deal in Sept 2022, when the Nasdaq had already dropped significantly. The Nasdaq is higher today than in Sept 2022. This means Adobe might actually have to pay a little bit more for Figma if they acquired them now.

It was true for Elon trying to back out of Twitter's acquisition because tech valuations dropped significantly during the closing period. But this is Adobe and they didn't buy Figma for the memes nor did they roll out of bed thinking they should buy Figma that day like Elon probably did.

I think Adobe bought Figma thinking that they might have acquired Instagram. Today, Meta would be in a lot of trouble if they didn't own Instagram. Figma could have developed a suite of tools via their cloud-native stack and competed with Adobe across all of their products eventually. Basically, I think Adobe bought out their long-term competitive threat.

Quite frankly, at 9% of Adobe's total market cap, it's not that bad of a deal.

But 20 billion is a huge amount, that's supposedly a 50 price to sales ratio if not more which is huge. Something like Snowflake which has an insane valuation is only half that...

Only way Adobe could justify this is that it kills a dangerous competitor, which is what EU legislation is supposed to stop..

>Only way Adobe could justify this is that it kills a dangerous competitor, which is what EU legislation is supposed to stop..

I mean, that's exactly what my post above is saying. Figma has inherent tech advantages via their cloud-native stack. You can use the tools anywhere there is a browser. It's significantly more intuitive and easier to collaborate with multiple people. Their applications can eventually be accelerated server side such as GPU-farm acceleration for AI features. Figma is also building a community for sharing work, like the Github of design.

There's nothing really stopping Figma from creating a competitor to Adobe Cloud Suite including Photoshop, Illustrator, Acrobat, and InDesign.

Yes, but there is no way it would cost Adobe even close to $20 billion to develop an analogues product.

Well you said:

> This means Adobe might actually have to pay a little bit more for Figma if they acquired them now.

Which is very unlikely in the current market if they were a public company.

>Yes, but there is no way it would cost Adobe even close to $20 billion to develop an analogues product.

This, I'm not familiar with. However, I will say that time to market is important too. By the time Adobe can come up with a cloud-native competitor to Figma, Figma might have come up with a cloud-native competitors to Photoshop and Illustrator.

>Which is very unlikely in the current market if they were a public company.

Why not? Nasdaq is 13% higher today than in September 2022 when they announced the deal. Adobe itself is 25% higher now. Arguably, tech valuations have stabilized and increasing again.

Because a 50 P/S ratio would be unusually high (I'm of course trying to say that IMHO Adobe is significantly overpaying)

Figma is a private company, of course it depends on figures as well which are not publicly available but no comparable public companies are valued that high after the 2021 peak.

However unlike most comparable tech companies it is supposedly profitable (not clear if GAAP, though) which would increase it's valuation.

Adobe has a much larger reach in the target market. Under Adobe, Figma can potentially double or triple their sales, bringing that ratio to more reasonable levels.

(Of course Adobe’s ability to execute that is far from certain)

Elon has entered the room.

> They announced the deal in Sept 2022, when the Nasdaq had already dropped significantly.

The price was likely locked, at least in significant part, well before this date. There would have been diligence happening for months prior to this, to finalize the numbers. But the large pieces would have been in place well before September.

It would have been possible for Adobe to walk away from whatever promises (likely not legally binding) they had made, but this would have hurt their reputation as an acquirer. Potential acquisition targets are already wary enough of a nonbinding LOI; if Adobe had turned its back after signing an LOI with Figma, that would not soon be forgotten by VCs, startups, and their lawyers.

Because the deal involved stocks and cash, the total value of the deal was likely agreed upon before but the actual amount of stock Adobe had to pay was likely dependent on the day of announcing it.

So the higher the Adobe stock when the deal announced, the less Adobe had to pay.

From April 2022 to September 2022, Adobe's stock was fairly stable (relatively). So I'm not sure if I buy this argument.

Your argument for adobe’s motivation seems to support anti-competitive practice that the EU might be concerned about.

I'm curious, what makes you conclude Adobe overpaid for Figma?

The lion's share of that $20bn is just Adobe stock, not actual cash. That's probably why the price had to be $20bn. Who knows what the stock is going be at by the time Figma insiders can sell it?

Figma was a bargain for Adobe.

Figma, if they put their minds to it could kill photoshop and illustrator within 2 years, and After Effects/Premier within 5.

Even given 5 years Adobe's current talent wont be able to build Figma, we know this already from Adobe XD and every other failed new app attempt.

It's been evident for a while that almost no one at Adobe understands how their apps work anymore, every feature update just ads welcome screens (written in HTML) or slower new document screens (written in HTML). The only recent update to the AE UI outside of welcome screens, the timeline reskinning is completely broken.

Figma will at least make their Creative Cloud offering more attractive. Maybe Figma can even justify price increases there.

Also it protects their position. If somebody else would bundle some decent graphics tools with Figma, that might have created a competitor for Creative Cloud.

I'm starting to think the EU is loud but rather toothless when it comes to merges relating primarily to digital services and products.

They've certainly blocked their share of telecommunication, retail, and airline industry merges — but after allowing the acquisition of Activision Blizzard by Microsoft, I wonder if its all bark and no bite.

I don't think they're toothless. I think they're drunk on power after successfully forcing cookie-prompts and iPhone USB-C.

One day, a large company will be bold enough to exit the EU and reset the power balance.

To me, it seems like the EU has created so many regulations that their startups/tech companies can't compete with the US tech companies. So rather than remove regulations blocking innovation and investment, they want to regulate US companies to even the playing field.

> One day, a large company will be bold enough to exit the EU and reset the power balance.

I hope it's Google. Or Meta. Or Apple.

Fuck it, I'll take those 3 leaving together. Move it!

That'll set Europe back to 2000.

Lol, thats what you want to believe

Yeah, because the only thing that happened in Europe for the past 20 years was social media and ads...?

lol the only thing that happened in the last 20 years is american consumer tech? haha

Yes, what would EU do without massive advertisement platforms or a manufacturer of luxury toys?

It would be the stone age.

EU doesnt require cookie prompts if you dont do shady stuff

If it was that easy. A cookie prompt is not an indication of shadiness. Any use of cookies requires a prompt.

It doesnt.

Technical cookies e.g auth

Do not require consent.

>What are strictly necessary cookies?

>A strictly necessary cookie is a type of cookie that is used by the website to function properly, without which the site would not work. This type of cookie does not collect any personally identifiable information about you and does not track your browsing habits.

>Strictly necessary cookies are essential for websites to work because they help improve your experience on the site and make it easier for you to use. For example, cookies can be used to remember your language preferences and other settings that you’ve set in order to make your visit as efficient as possible.

No they don't. You are proving you are eating up the bullshit of data miners.

The larger the company the more it loses by exiting the EU?!

Compare that to China for a moment, what large company does NOT do business in China, despite them doing a whole lot more than USB-C mandates?

I can't see anyway this is going to be blocked. There is ample evidence of competition and innovation outside of Adobe and Figma in the market. Figma has nowhere close to a monopoly in its narrow slice of the market or even has a significantly dominant position.

If anything seeing Figmas success and acquisition will encourage more startups to launch products in theses categories.

That not to say I don't have legitimate concerns of what Adobe could do to Figma and its customers. And the EU is absolutely right to look into it, it's literally their job to check up on these large deals.

> There is ample evidence of competition

There is?

Yeah lol I was surprised when I read that. Came across as a joke.

Does Microsoft Expression Blend count? Though that was discontinued over a decade ago, and was only capable of designing for WPF+Silverlight - it was also the first product I worked on at Microsoft - and I never heard of anyone ever actually using it for its intended purpose.

> narrow slice of the market

Do you have some numbers to back that up as every UX designer I know uses Figma. I did a quick google and the first few results point to surveys with market shares of 63%, 35% & 60%, depending upon metrics used. Figma's growth rate has been huge in recent years, it's already a big beast. If Adobe buys it their market dominance will certainly affect whether startups decide to launch alternatives, unless Adobe shittifies Figma and kills it slowly, which given Adobe's recent history is a strong possibility.

With "narrow slice of the market" I think they mean that their usecase is a small market, not that they capture a tiny part of it.

As much as I loathe Adobe's dominance in the overall market, I see your point: Figma is a specific type of product of which there are plenty others in the market to choose from (Sketch, UX Pin, Axure RP, ...). Justified to investigate but I don't know of any legal precedence that would support a blocking, so they'd have to create a new one. Unlikely to happen IMHO but I could see how after all of this Adobe will end up increasing it's European Budget for non-profits and "initiatives" with a Brussles address.

Exactly, it's not a good thing, but when compared to other acquisitions there is little evidence this should be blocked.

Back in 2005 (still relevant?) Adobe acquired Macromedia, mainly for Flash. But Macromedia were the "alternative" in the market for many Adobe's products, Photoshop & Fireworks, Illustrator & Freehand for example. They brought the company to dominate in an emerging market, and kill off competing products. Does that count for or against the Figma move?

(I still have very hard feeling for Adobe after they killed Fireworks)

It's a perfect demonstration of why such acquisitions shouldn't be allowed in the future.

Do you work for either of them? This feels incredibly naive.

Only those working for Figma would really want this to go through since they want a windfall of millions of dollars from this acquisition.

Unfortunately, the DOJ is not happy with this deal. [0]

[0] https://www.bloomberg.com/news/articles/2023-02-23/doj-prepa...

No, I don't, and I recently cancelled my Adobe subscription.

> There is ample evidence of competition and innovation outside of Adobe and Figma in the market

This can be true at the same time as Adobe buying Figma, integrating it into Creative Cloud and jacking up prices being bad for competition and consumers. The threshold for the EU commission is a dominant position in a market that can be abused, not "monopoly". Especially in a market that has significant barriers to entry.

https://competition-policy.ec.europa.eu/antitrust/antitrust-...

> If anything seeing Figmas success and acquisition will encourage more startups to launch products in theses categories.

This is a false argument. Those big companies will have too dominant position to care about startups at some point. And also you can use the same thing against all acquisitions.

Ms acquiring Activision? Don't stop it, it will encourage startups to enter game market Nvidia acquiring AMR? Don't stop it, it will encourage startups to enter chip market, etc.

I feel like Adobe abuses the market position it already has, their software is full of dark patterns, and I hope they get replaced.

This is a textbook example of horizontal integration, plain and simple and it is clear that this will be blocked by anti-competition regulators.

Unsurprisingly predicted in [0] and the investigations are already happening in the US: [1]

[0] https://news.ycombinator.com/item?id=33919862

[1] https://www.bloomberg.com/news/articles/2023-02-23/doj-prepa...

Looks like Adobe makes about 26% of their revenue from EMEA, so it's clearly worth it for them to continue operating there and deal with the regulatory overhead. But is it possible for them to have a different corporate structure that mitigates some of these challenges? For example, could they license their technology to an EU-based distributor instead of having direct operations in the EU?

Hacks work on computers where no leeway is given either way. In the legal world, this would be an indication that you knew that what you're doing will be challenged and might get an extra penalty for it.

Adobe’s annual revenue in EMEA is close to $5 billion. Figma’s global revenue is around $500 million.

If they lost just 10% of EMEA revenue to antitrust avoidance shenanigans, it would be equivalent to losing the Figma revenue stream entirely. A publicly held company can’t really afford to play that kind of games.

I don't disagree with your analysis. However, I do wonder if Adobe purchased Figma because of the current revenue streams, or that they'd much rather either want to prevent having to face a new competitor, or alternatively, get all the proceeds of said competitor.

And all EU based employees plus the cost of winding down existing contracts would be extremely expensive.

Aren't Adobe and Figma US-based companies? Why does the EU have any say in this?

The fact their headquarters are in the US isn't the relevant bit - it's the fact that they operate in Europe that's important. Figma and Adobe could withdraw their offerings from Europe and they'd be free to do what they want, but that's not very likely.

If you want to operate globally you have to accept the laws of the places where you do business. You can't just say "but HQ is in 'merica so screw you" and expect to continue trading in those countries.

Have there been any examples of this? I'd be really interested to know what happens in practice if the EU say "No acquisition" and Adobe just goes ahead with the acquisition. Do Adobe's products get pulled off the shelf? Do they face a monetary fine? What happens 10 years down the road when Figma is completely integrated into Adobe and Adobe still aren't operating in the EU at what point does the EU say "Hey, you're allowed back"?

Because they both operate in the EU, have customers in the EU, make money in the EU, and have legal presences in the EU. Generally, any merger of large multinational corporations will require multinational approval - the US and EU at a bare minimum, often also the UK, Japan, China, and any other countries with strong regulatory regimes where one of the companies has a major/critical presence.

Any one of these countries can block a merger if they see an antitrust issue; Qualcomm and NXP found this out the hard way with China a few years ago, and Microsoft and Activision Blizzard are finding that out with the UK right now. Of course, these companies could flip off China or the UK and just merge anyway, but then they'd risk being subject to crippling fines, having their local assets seized, and even being barred from doing business in that market altogether.

To be a multinational company, they have to follow laws in all those countries they operate in.

The US pioneered enforcing it's laws internationally. Now others are following...

How the hell is Figma worth $20B?

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