Adobe to Purchase Figma

Adobe Inc agreed to buy cloud-based designer platform Figma for $20 billion on Thursday, raising investor concerns about the high price, causing the Photoshop maker's market value to fall by more than $30 billion.

The cash-and-stock transaction, the largest buyout of a privately held software startup, will give Adobe ownership of a company whose web-based collaborative design and brainstorming platform is widely used by tech firms such as Zoom Video Communications (ZM.O), Airbnb Inc, and Coinbase (COIN.O).

The $20 billion exit represented a significant victory for Figma's venture capital backers, which included Index Ventures, Greylock Partners, and Kleiner Perkins.

Adobe investors were less impressed, with the company's stock dropping 17% on Thursday. Many of them said they understood the strategy, but that Adobe overpaid for a company that was valued at around $10 billion in a private fundraising round a little more than a year ago.

Adobe stated that the transaction would be accretive of its earnings three years after they completed it. It said that Figma's total addressable market in design, whiteboarding, and collaboration would reach $16.5 billion by 2025.

Adobe is one of the most acquisitive companies in Silicon Valley, having purchased numerous businesses over the years to defend market share against competitors. Prior to Figma, the company's largest acquisition was Marketo for $4.75 billion in 2018. It has also acquired other companies in the last 24 months to focus on collaboration tools, such as video collaboration software Frame.io, social media marketing startup ContentCal, and collaboration tool maker Workfront.

Subject to regulatory approvals, the transaction is expected to close in 2023.

Figma, based in San Francisco, will continue to be led by co-founder and CEO Dylan Field and will operate independently. If either company cancels the agreement, they will be required to pay a $1 billion termination fee.

Meanwhile, according to Refinitiv data, Adobe's fourth-quarter revenue forecast of $4.52 billion fell short of the $4.58 billion predicted by analysts.

The company's third-quarter profit dropped nearly 6%, owing to a stronger US dollar and higher costs.

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