American software giant Adobe (NASDAQ: ADBE) has acquired rival online collaborative design software company Figma, in a deal estimated to be worth US$20 billion.
The software giant’s acquisition will expand its collaboration-focused offerings, embracing Figma’s expanding client base, while also eliminating a significant threat to the company.
Along with its Dreamweaver, Adobe XD, Adobe Reader and other products, design has always been a fundamental and crucial part of Adobe’s business.
Adobe chairman and chief executive officer Shantanu Narayen said the company is always looking to capture greater market share in new areas.
“Adobe’s greatness has been rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions,” he said
In the company’s announcement, it said the partnership will open the door for new opportunities.
“Together, Adobe and Figma will reimagine the future of creativity and productivity, accelerate creativity on the web, advance product design and inspire global communities of creators, designers, and developers,” it said.
Founded in 2012, Figma offers cloud-based design software, helping teams collaborate in real-time.
Figma said it expects, by 2025, the company’s whole addressable market will reach US$16.5 billion. Figma also anticipates add ing US$200 million in net new annual recurring revenue this year to exceed US$400 million by the end of 2022.
More of a need, not an opportunity
Despite the acquisition costing Adobe US$20 billion, Figma’s valuation sat at just US$10 billion.
Bernstein research analyst Mark Moerdler said the deal was driven by need and not opportunity, but said in defence of the purchase, Figma has about a 90% profit margin.
The acquisition will open the door to greater creativity opportunities for Adobe, while also complementing its own suite of development tools.
Adobe said it will integrate its own imaging, photography, illustration, video, 3D and font capabilities into the Figma platform.
It is understood Adobe will incorporate Figma into its creative suite at some point down the track, though that has not been confirmed yet.
Tech stocks continue to fall
Adobe’s share price sank around 17% after its acquisition announcement, as investors feared the giant is losing its competitive edge and is trying to buy out its up-and-coming rivals.
The trend has been the same for other tech stocks, with the general sector slumping – shedding about 45% of its value this year.
Figma continues operating independently for time being
Following the acquisition, Figma will continue to operate independently as it always has, continuing to be free for educational use also.
Figma chief executive officer Dylan Field said the opportunity to partner with Adobe will help its platform grow exponentially.
“There is a huge opportunity for us to accelerate the growth and innovation of the Figma platform with access to Adobe’s technology, expertise and resources in the creative space,” he said.
“Additionally, we will have the opportunity to reimagine what the best creative tools could look like within the Figma technology stack.”
Mr Field said the company will continue to operate in what it believes “best for our community, our culture and our business”.