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Thursday, December 8, 2022

Investors Concerned about Adobe’s Proposed $20 Billion Acquisition of Figma

Adobe stated that it anticipated the acquisition to increase its earnings

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UNITED STATES: The deal between Adobe Inc. and Figma, whose products software professionals use to cooperate, was announced on Thursday. Investor fears over the high price tag caused the company’s market value to decline by more than $30 billion.

According to the company’s CEO Shantanu Narayen, the economic model of Figma is “the future of work,” and there are “tremendous opportunities” to combine it with his company’s products like document reader Acrobat and online whiteboard Figjam.

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Investors did not change their minds, and Adobe’s stock fell by 17%. Many of them claimed to understand the strategy’s underlying logic. Still, they felt Adobe overpaid for a business valued at roughly $10 billion in a private funding round just over a year prior.

David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, which owns a 1.5% stake in Adobe, asserts that it is unreasonable for Adobe to pay that sum.

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“It is unreasonable for Adobe to pay that sum for an additional 2.8% of Figma’s $400 million in annual recurring revenue (ARR), given that it represents a tiny portion of Adobe’s $14 billion in revenue,” Wagner added.

“We’re disappointed with the price paid for the company (Figma),” he added.

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Three years after the deal’s conclusion, Adobe stated that it anticipated the acquisition to increase its earnings. As for design, whiteboarding, and collaboration. It was also stated that Figma’s entire addressable market would amount to $16.5 billion by 2025.

The cash-and-stock transaction would give Adobe ownership of a company whose online collaboration platform for ideas and design is utilized by businesses like Zoom Video Communications, Airbnb Inc., and Coinbase. It is the largest-ever buyout of a privately-owned software startup.

One of the most opportunistic corporations in Silicon Valley, Adobe has acquired a number of companies over the years as it has sought to protect its market share from rivals like Microsoft.

Prior to acquiring Figma, its greatest purchase was Marketo, a software provider, for $4.75 billion in 2018.

In the past 24 months, it has acquired more businesses to narrow its focus on collaboration products, including video collaboration platform Frame.io, social media marketing startup ContentCal, and collaboration tool provider Workfront.

Figma, situated in San Francisco, will continue to be run by co-founder and CEO Dylan Field after the deal, which is anticipated to finalize in 2023. Each company must pay a $1 billion termination fee if the acquisition is cancelled.

Also Read: Starbucks Appoints Former Reckitt Head Laxman Narasimhan as the New CEO

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