Does buying Figma make sense for Adobe?


Figma, a cloud-based design software provider, was recently acquired by Adobe (NASDAQ: ADBE) for $20 billion. Adobe sees Figma as a strategic acquisition that will change the course of the company for years to come.

For Adobe, Figma seems to be the last missing piece to complete the puzzle of market dominance. Following the acquisition of Figma, Adobe has a higher market share with one less rival.

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Figma is a cloud-based design software founded in 2012 by Dylan Field and Evan Wallace. It was created as a collaborative platform for designers around the world to create eye-catching designs. The company was last valued at $10 billion in a funding round held in 2021.

In recent years, Figma’s user base has grown to include large companies like Airbnb Inc. (NASDAQ:ABNB), Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Twitter, Oracle, Salesforce ( NASDAQ: CRM), Herman Miller (NASDAQ: MLKN) and Kimberly-Clark Corp. The company is also well-known and widely used by freelancers and designers for their creative work. As more people have started working remotely due to the pandemic, demand for Figma has skyrocketed.

  • What did Adobe buy Figma?

Adobe has been facing stiff competition lately from startups like Figma, Lightricks Ltd. and Canva Inc. These startups have a strong user interface focus and easy operability, making them well recognized among creative designers and professionals. silver in creative tools due to high exit valuations and return potential.

“Investors are looking for disruptive technology coupled with high levels of product-driven growth. Finding a needle in a haystack is nearly impossible, but this combined filter helps narrow down the search and increase the chances of finding the next Figma,” said Ori Manor Zuckerman, co-founder and CEO of Substrata, a leading selling AI software.

With the purchase of Figma, Adobe can combine the powers of its creative tools with Figma’s user interface, giving them a huge competitive advantage. Figma was growing rapidly and gaining popularity among creative professionals. The acquisition of Figma will help Adobe grow its user base while eliminating one of its direct competitors.

On September 15, 2022, Adobe announced the acquisition of Figma for $20 billion. According to data from Bloomberg, the deal represents the largest takeover of a private software company in history.

Prior to the Adobe purchase, Figma was backed by Index Ventures, Greylock Partners and Kleiner Perkins. As confirmed by Adobe, Figma will generate over $400 million in annual recurring revenue for 2022. The $400 million ARR means Adobe is paying approximately 50 times Figma’s revenue.

After the acquisition, Figma will continue to operate as a stand-alone organization according to Figma Founder and CEO Dylan Field. There are also no plans to integrate Figma with Adobe’s Creative Services or change Figma’s existing pricing strategy.

  • How will Figma create value for Adobe?

“We believe that if you look at this for the long term, it will represent great value for their shareholders and our shareholders as well,” Adobe CEO Shantanu Narayen said of the acquisition.

Adobe’s customer segment has evolved a lot, with designers now focusing more on ease of use and user interface. Adobe said in its investor presentation that by buying Figma, it has the opportunity to make content creation more efficient, collaborative and fun.

In a report published by Spike, Gen Z want a clutter-free user experience as well as companies that make it easy to collaborate and share their opinions. The main feature of Figma is exactly what modern and Gen-Z designers are looking for: a friendly user interface offering a collaborative experience.

By 2025, Figma’s total addressable market (TAM) is expected to reach $16.5 billion. According to Adobe, Figma currently has a headcount of 850 people and gross margins of around 90%. The deal is expected to boost Adobe’s adjusted earnings per share after the third year.

Adobe can undoubtedly gain a lot from adding Figma to its product portfolio, including greater market share, higher revenue, additional customers, and integration with Adobe Creative Services.

The acquisition of Figma makes perfect sense from a strategic perspective as the combined synergy of the two businesses has the potential to significantly increase shareholder value in the years to come. Adobe has long been the market leader and the acquisition of Figma has strengthened this position.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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