Shantanu Narayen, CEO of Adobe, called Figma’s business “the future of work” and claimed there were “tremendous opportunities” to combine it with his company’s products, such as document reader Acrobat and online whiteboard Figjam.
Adobe Inc agreed to purchase Figma, whose products are used by software engineers to cooperate, for $20 billion on Thursday, triggering investor concerns about the high price tag, causing the Photoshop maker’s market value to fall by more than $30 billion.
Adobe CEO Shantanu Narayen called Figma’s business “the future of work” and said there were “tremendous prospects” to combine it with his company’s other products, such as document reader Acrobat and online whiteboard Figjam.
Investors were unconvinced, causing Adobe’s stock to fall 17%. Many of them said they understood the concept, but thought Adobe spent too much for a business that was valued at approximately $10 billion in a private funding round a little more than a year ago.
Figma’s annual recurring revenue (ARR) of $400 million was a tiny fraction of Adobe’s $14 billion, making it unreasonable for Adobe to pay the equivalent of 11% of its market value for 2.8% more ARR, according to David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, which owns a 1.5% stake in Adobe.
“We’re dissatisfied with the amount paid for the firm (Figma),” Wagner stated.
Adobe stated that the transaction would be accretive to company earnings three years after it was completed. It went on to say that Figma’s total addressable market in design, whiteboarding, and collaboration will reach $16.5 billion by 2025.
The cash-and-stock transaction would give Adobe ownership of a company whose online collaborative platform for design and ideation is utilised by companies ranging from Zoom Video Communications to Airbnb Inc and Coinbase.
Adobe is one of Silicon Valley’s most acquisitive organisations, having purchased multiple startups over the years in order to defend market share against competitors like as Microsoft.
Prior to Figma, the company’s largest purchase was Marketo for $4.75 billion in 2018.
It has also acquired additional startups in the last 24 months to focus on collaboration solutions, such as video collaboration platform Frame.io, social media marketing startup ContentCal, and collaboration tool provider Workfront.
The transaction is slated to finalise in 2023, and Figma, located in San Francisco, will continue to be headed by co-founder and CEO Dylan Field. If either business cancels the agreement, they will be required to pay a $1 billion termination charge.
Meanwhile, according to Refinitiv statistics, Adobe’s fourth-quarter sales prediction of $4.52 billion fell short of the $4.58 billion predicted by analysts.
Profit in the third quarter declined roughly 6%, reflecting the impact of a stronger currency and greater costs.