Housed in the Silicon Valley amidst many competitors, Adobe buys into a lot of businesses to defend its market shares against giant companies like Microsoft.
Adobe Inc.’s latest acquisition for 20 billion dollars is Figma. Shantanu Narayen, the chief executive of Adobe Inc. says that combining Figma with his own company’s offerings such as document reader Acrobat and online whiteboard Figjam would put many opportunities in their path and Figma’s business is the future of work.
But the investors of Adobe Inc. are not happy spending this figure as it has brought down the stocks of Adobe by 17%. Although a number of them understand the reasoning behind this buying, they feel that Adobe has paid a bit too much for a company whose value was put at 10 billion dollars in a private fundraising around a year ago. This has led to a drop of more than 30 billion dollars in the market value of the makers of Photoshop.
Figma’s annual recurring revenue (ARR) of 400 million dollars was a very tiny fraction of Adobe’s 14 billion dollar. Holding 1.5 stake in Adobe, portfolio manager and equity analyst at Aphus Capital Advisor, David Wagner found it quite unreasonable to pay nearly 11% of its market value for 2.8% ARR.
But Adobe says that it is a lucrative deal as its earnings would increase in three years after the deal. By then, in 2025, Figma’s addressable market would reach 16.5 billion dollars across design, whiteboarding and collaboration. Adobe would get ownership of a company whose online collaborative platform for designs and brainstorming is used by many companies like Zoom Video Communications, Airbnb Inc. and Coinbase.
The deal is expected to be finalised in 2023 but Dylan Field, co-founder and chief executive will continue to head Figma based in San Francisco. If any of the parties tries to get out of the deal, they will have to pay a termination fee of 1 billion dollars.
Adobe has also bought other companies in the last two years to sharpen its focus on collaboration tools, including those of video collaboration software Frame.io social media start-up Content Cal and collaboration tool maker, Workfront.
