Yang Yang, a trainee reporter for The Paper
Adobe spent $20 billion to acquire an online collaboration tool platform. Maybe future collaborative editing is not a dream?
On September 15, local time, Adobe (Nasdaq: ADBE), a well-known graphics, image and other software manufacturer, announced that it will acquire Figma, an online design collaboration tool platform, for about $20 billion. The transaction is expected to be completed in 2023, which is Adobe's history. Biggest acquisition ever.
According to an announcement on Adobe's official website, the transaction is a hybrid transaction of half cash and half stock.
The Figma CEO and employees will receive about 6 million additional Restricted Stock Units, which will be issued over a four-year period following the closing of the deal.
Figma becomes Adobe standalone product
Adobe is headquartered in California, USA. The company is known for its graphic design, video editing and other software series. Its software includes Photoshop, Premiere, After Effects, etc.
This family of software is Adobe's mainstay of revenue, contributing about 60% of the company's revenue.
On the same day that the acquisition was announced, Adobe reported third-quarter results that were underwhelming.
During the period, revenue rose 13% to US$4.43 billion, which was lower than market expectations. This was the company's third consecutive quarter of revenue growth of less than 15%; net profit was US$1.14 billion, down 5.8% year-on-year.
Additionally, Adobe issued fourth-quarter revenue guidance that fell short of Wall Street expectations.
Investors are increasingly skeptical about the dominance of Adobe's creative software, according to Bloomberg.
Adobe shares have fallen more than 40 percent this year amid economic uncertainty and a stronger dollar.
After the deal closes, Figma will continue to exist as a standalone product, with Dylan Field, one of the company's founders, continuing to lead the Figma team, reporting to David Wadhwani, Adobe's president of digital media.
The two companies will continue to operate independently until the transaction closes.
Deploy the field of online collaborative office
Adobe has been trying to enter the field of online collaboration.
The company once launched the Photoshop Express application, which allows users to edit images directly on the website without downloading software.
But the plan has been hit by startups like Figma, photo and video editing software Lightricks and online graphic design tool Canva.
In recent years, Adobe has accelerated the pace of online collaboration.
In 2020, the company acquired work management platform Workfront for about $1.5 billion, and last year it acquired cloud-based video collaboration platform Frame.io for about $1.275 billion, according to the Wall Street Journal.
Another protagonist of this transaction, Figma, is one of the best online design collaboration tool platforms.
The company was founded in 2012 and is headquartered in San Francisco, USA. Its software design tools are based on the web and browsers, allowing designers to work together online, avoiding cumbersome steps such as saving programs and sending them to colleagues.
Figma already provides services to well-known companies including meeting software company Zoom, short-term rental platform Airbnb and the largest U.S. cryptocurrency exchange Coinbase, and its clients include Google, streaming giant Netflix, and social media Twitter.
According to Adobe's acquisition announcement, Figma has a gross margin of about 90%, has about 850 employees, and is cash flow positive from operations.
The company was valued at $10 billion in its last funding round in June 2021, according to The Wall Street Journal.
US venture capital firm Kleiner Perkin, Index Ventures and Greylock Partners are all investors.
The deal's valuation is so high that it could put pressure on Adobe, Bloomberg said.
But Adobe also explained the high price of buying Figma, CEO Shantanu Narayen said, "We are confident that this transaction will bring great value to Figma's shareholders and our shareholders in the long run."
Narayen said the combination of Adobe and Figma is transformative, helping to accelerate the realization of the company's vision for collaborative work.
According to Adobe's announcement, Figma's total addressable market will reach $16.5 billion by 2025.
The company expects to add about $200 million in annual recurring revenue (ARR) this year, with ARR exceeding $400 million by the end of 2022, with net dollar retention exceeding 150%.
Adobe said it expects the deal to help Adobe boost adjusted earnings per share by the end of the third year.
According to the Wall Street Journal, the software industry typically sees steady deals every year, as established players need to keep updating their products.
For example, a high-profile M&A deal in recent years was Salesforce's $28 billion acquisition of communications software Slack.
But such deals have slowed since 2022, shrinking by about 30%, according to researcher Dealogic.
Still, there have been some big deals this year, including Microsoft's $75 billion acquisition of Activision Blizzard and US wireless chip giant Broadcom's roughly $61 billion acquisition of cloud computing company VMware.
At the close of U.S. stocks on September 15, Adobe shares fell 16.79% to close at $309.13.