Adobe Is Focused on AI Rather Than Figma With Acquisition in Limbo

Adobe Inc.’s proposed $20 billion acquisition of Figma was a cornerstone of the creative giant’s plan to become cool again.

(Bloomberg) — Adobe Inc.’s proposed $20 billion acquisition of Figma was a cornerstone of the creative giant’s plan to become cool again.

But more than a year after the deal for the digital-design startup was announced, it has stalled due to regulatory challenges, and the software company’s attention has moved on to the next big thing — artificial intelligence.

Adobe’s focus at its annual conference in Los Angeles this week was on new generative artificial intelligence features in signature products like Photoshop. There were no mentions of Figma during keynote speeches, and only one reference during an hourslong investor briefing. The design startup had no presence on the exhibition floor.

That’s a stark contrast from last year’s event, when Figma Chief Executive Officer Dylan Field joined Adobe’s main keynote presentation to talk about future product integrations and fist-bump Adobe Chief Strategy Officer Scott Belsky, an architect of the deal. Field also joined last year’s investor briefing, where the startup’s name was uttered 40 times.

“A lot has changed since Figma was announced — at that time there was a view that Adobe was running out of growth and needed something new,” said Michael Turrin, an analyst at Wells Fargo. With the excitement over Firefly, Adobe’s new suite of AI models, buying Figma “doesn’t feel as dire a need as it did two years ago.”

Adobe executives say they’re committed to closing the deal, and the silence is due to regulatory limbo. The US Department of Justice has made a second request for information from the companies and Bloomberg News reported in February that the department was preparing a lawsuit to block the deal. The European Union is in a “phase 2” review of the purchase and has been asking competitors whether the acquisition could concentrate pricing power. The UK’s competition watchdog also is reviewing the deal.

“We still love Figma,” Adobe General Counsel Dana Rao said in an interview, adding that the two companies can’t work together until the acquisition closes, so it wouldn’t make sense to feature them at a product conference. 

At an investor event Tuesday, Adobe Chief Executive Officer Shantanu Narayen said the company isn’t talking about Figma because there is so much internal innovation to highlight. The lack of discussion about Adobe’s plans for the startup shouldn’t be taken as an indication of any issues, he said. A Figma spokesperson said several employees attended the conference, including its chief marketing officer and head of business development.

“It’s pretty frustrating when you want to buy a company and 13 months later you’re still waiting to just see if you can or can’t,” Rao said.

The deal is scheduled to close by the end of March. Adobe may owe the design startup a $1 billion breakup fee if it takes longer than that and the deal collapses, according to the merger documents. It may be hard to conclude the purchase within the tight time line with at least one of the regulators likely to challenge the deal, wrote Bloomberg Intelligence antitrust analyst Jennifer Rie. 

Investors have always been skeptical of the high price for Figma — almost a quarter of Adobe’s market value was wiped out in the week after the deal was announced. Turrin, of Wells Fargo, said he hears that more investors are hoping the acquisition will fall apart, figuring Adobe will invest more in AI or increase share buybacks to juice the stock price if it loses Figma. After focusing on AI, Adobe’s stock has climbed more than 65% this year.

Turrin said he’s optimistic the Figma deal will conclude and be positive for Adobe. But just like company management, the analyst’s attention is elsewhere. At the conference this past week, Turrin and his colleagues were focused on how Adobe’s generative AI tool Firefly compares with rivals like OpenAI’s Dall-E.

–With assistance from Leah Nylen.

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