In the wake of increasing pressure from European regulators, Adobe and Figma announced they are terminating their proposed merger agreement. California-based Adobe had planned to purchase Figma’s cloud-based product design platform for $20 billion, a proposal that was 15 months into the regulatory review process. However, the two companies eventually agreed there was no possibility of obtaining regulatory approval from the European Commission and the UK Competition and Markets Authority (CMA). According to a regulatory filing, the decision to cancel the deal will require Adobe to pay Figma a reverse termination fee of $1 billion in cash.

“It’s not the outcome we had hoped for, but despite thousands of hours spent with regulators around the world detailing differences between our businesses, our products, and the markets we serve, we no longer see a path toward regulatory approval of the deal,” explained Dylan Field, Figma co-founder and CEO in an announcement yesterday.

“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” said Shantanu Narayen, Adobe chair and CEO, in a press release.

“While Adobe and Figma shared a vision to jointly redefine the future of creativity and productivity, we continue to be well positioned to capitalize on our massive market opportunity and mission to change the world through personalized digital experiences,” he added.

Both companies have been integrating artificial intelligence into their products, including generative AI features being introduced by Adobe to its Creative Cloud suite and Figma rolling out its first native AI features to design and build software.

Regulators had expressed concerns regarding Adobe’s significant strength in the design software market, a dominance that could potentially curb innovation if Adobe integrated Figma’s product design platform, which is reportedly now more popular than Adobe’s XD vector design tool for web and mobile apps.

As a result, reports The Verge, “Adobe had very little wriggle room to push the deal forward and still get all of the Figma assets it had hoped to obtain — or, in the case of its own apps being sacrificed in antitrust appeasement, retain.”

Regulators have been looking carefully at recent technology deals. “In May, after the UK’s competition watchdog cited potentially anticompetitive effects, Meta sold Giphy to photo marketplace Shutterstock for $53 million, three years after it first acquired it,” explains CNBC. “The CMA has also been reviewing Microsoft’s investment in OpenAI.”

Related:
U.S. Lawmakers Warn Biden to Probe EU Targeting of Tech Firms, Reuters, 12/18/23
Adobe and Figma Terminate $20 Billion Deal After Regulator Clash, Bloomberg, 12/18/23
Adobe Has $6 Billion for AI and Buybacks After Figma Deal Collapses, Bloomberg, 12/18/23
Adobe Scraps Its $20 Billion Takeover of Figma, The New York Times, 12/18/23
Figma’s CEO Laments Demise of $20 Billion Deal with Adobe, The New York Times, 12/19/23