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Adobe announced on Thursday, September 15, 2022, that it will acquire design software business Figma for around $20 billion in cash and equity. Adobe’s stock fell 17%, marking the worst decline since 2010.
Figma was established in 2012 and makes cloud-based design software that enables real-time collaborative collaboration. It squares off against Adobe’s XD software.
The company’s previous investment round in 2021 valued it at $10 billion. This year, Figma is anticipated to produce more than $400 million in annual recurring revenue, according to people familiar with the company’s finances, which include Index Ventures, Greylock Partners, and Kleiner Perkins. Adobe stated that Figma’s ARR will exceed $400 million by the end of 2022.
That means Adobe is paying close to 50 times revenue at a time when cloud software sales multiples are sharply declining from their record highs established last year. The forward multiples for the top cloud companies in the BVP Nasdaq Emerging Cloud Index have decreased from over 25 times revenue in February 2021 to just over 9 times revenue now.
The drawing, photography, and video technology components from Adobe’s other products will be incorporated into the Figma platform, according to the company. Photoshop, Illustrator, Premiere Pro, and other software services are available from Adobe for purchase by professionals in the picture and video industries.
According to Adobe CEO Shantanu Narayen, “Adobe’s excellence has been rooted on our ability to build new categories and provide cutting-edge technology through organic innovation and inorganic acquisitions.” “The partnership between Adobe and Figma is revolutionary and will further our goal of shared innovation.
According to David Wadhwani, president of Adobe’s digital media division, in an interview with Bloomberg Television on Thursday, Figma would help speed up changes to Adobe’s key flagship programs, increase its appeal to creative arts professionals, and assist identify new consumers. This was a fantastic time to make that play because of the enormous market opportunity, he said.
Results for Adobe’s fiscal third quarter were also released. Adjusted earnings per share were $3.40, exceeding the $3.33 per share forecast from Refinitiv. It reported revenue of $4.43 billion, which was in line with analyst estimates.
For the fiscal fourth quarter, the corporation provided erratic guidance. According to StreetAccount, Adobe predicted that their quarterly revenue will be $4.52 billion as opposed to the $4.6 billion consensus expectation. It anticipates beating the StreetAccount prediction of $3.47 per share with adjusted earnings of $3.50 per share.
Investors have grown increasingly doubtful about the potential increase of sales for Adobe’s design-related goods, which are increasingly viewed as being complicated, pricey, and out-of-date. Adobe’s once-undisputed supremacy has been challenged by newcomers like Figma, Lightricks Ltd., and Canva Inc. that provide services that are more geared toward consumers. Since 2015, the creator of Photoshop has relied on acquisitions to boost sales by an estimated 20% annually, to an estimated $17 billion. However, the majority of these acquisitions have been in new or related industries, such as marketing, e-commerce, and analytics.
A New Era of Collaborative Creativity Will Be Launched by the Combination of Adobe and Figma
To transform the world via digital experiences is Adobe’s mission. Today, Adobe’s platforms and technologies power the digital economy, and throughout its history, the company’s innovations have had a profound impact on billions of people worldwide. Adobe continues to invent and modify categories, having already revolutionized photography and creative expression with Photoshop, pioneered electronic documents with PDF, and created the digital marketing category with Adobe Experience Cloud.
The goal of Figma is to facilitate visual team collaboration and open up design to everyone. The business, which was established in 2012 by Dylan Field and Evan Wallace, was a pioneer in web-based product design. Today, it is enabling multi-player processes, complex design tools, and a rich, extendable developer environment for everyone who builds interactive mobile and online applications to collaborate. Figma has drawn a devoted student following in addition to millions of new designers and developers.
Together, Adobe and Figma will rethink the possibilities for creativity and productivity, speed up web-based creative, promote product design, and enthuse communities of creators, designers, and developers around the world. The merged business will have the ability to create considerable value for consumers, shareholders, and the industry, as well as a sizable, quickly expanding market potential.
Reimagining the potential of invention and productivity
Adobe and Figma are both passionate about fostering greater creativity and productivity among individuals and teams. The combined company will have a unique opportunity to power the future of work by bringing together capabilities for brainstorming, sharing, creativity, and collaboration and delivering these innovations to hundreds of millions of customers thanks to the expansive product portfolios of Adobe and Figma.
Increasing creativity online
The problem facing creators today is producing an ever-increasing volume of material in close cooperation with an ever-increasing number of stakeholders. Teams can now more easily develop together because to the web’s ubiquity as a platform.
The web-based, multi-player capabilities of Figma will hasten the release of Adobe’s Creative Cloud technologies on the web, increasing the efficiency and accessibility of the creative process.
Empowering and motivating the community of designers and developers
The thriving creative community at Adobe has been important in spurring the company’s ongoing innovation. With their wide and expanding ecosystem, the dedicated Figma community creates and shares everything from lessons to templates to plug-ins. Designers and developers will become more accustomed to working together thanks to the merger of the Adobe and Figma communities.
According to David Wadhwani, head of Adobe’s Digital Media business, “Figma has established a remarkable product design platform on the web.” We eagerly anticipate working together with their outstanding team and thriving community to advance our shared aim of reimagining the future of creativity and productivity.
Dylan Field, co-founder and CEO of Figma, said that with Adobe’s amazing innovation and expertise, particularly in 3D, video, vector, imaging, and fonts, we can further reimagine end-to-end product design in the browser while creating new tools and spaces to enable customers to design products more quickly and easily.
According to the legally binding agreement, Adobe will pay $20 billion to acquire Figma, with roughly half going to cash and half to shares, with the usual caveats. The CEO and staff of Figma will get an additional 6 million restricted stock units, which will vest over the course of the next four years. Adobe anticipates funding the cash consideration from cash on hand and, if required, a term loan. Subject to the receipt of all necessary governmental clearances and approvals, as well as the fulfilment of other closing conditions, including the approval of Figma’s stockholders, the transaction is anticipated to close in 2023.
Dylan Field, co-founder and CEO of Figma, will remain in that position upon the transaction’s completion and report to David Wadhwani, head of Adobe’s Digital Media business. Each business will carry on independently until the deal is finalized.
Adobe & Figma Facts
|Overview||The world’s leading provider of creative, digital document, and digital experience solutions, Adobe is one of the biggest and most well-rounded software corporations in the world. Millions of customers—from independent creators to major brands—have access to everything they need to build and execute amazing digital experiences thanks to Adobe’s broad product range across Adobe Creative Cloud, Adobe Document Cloud, and Adobe Experience Cloud.||Figma is a design tool for groups of people who collaborate to create goods. Figma, a web-based tool, assists teams in brainstorming, product design, and development from beginning to end. Figma makes the design process faster, more efficient, and fun while keeping everyone on the same page. This is true regardless of whether it’s condensing tools, streamlining workflows, or collaborating across teams and time zones.|
|Ticker Symbol||NASDAQ: ADBE||Privately held company|
|Headquarters||San Jose, CA||San Francisco, CA|
|CEO||Shantanu Narayen||Dylan Field|
|Employees||26,000+ worldwide||850+ worldwide|
|History||Founded in 1982; Initial Public Offering in 1986||Founded in 2012|
|Founders||Chuck Geschke, John Warnock||Dylan Field, Evan Wallace|
Abode and Figma FAQs
Q.1: What will Adobe do with Figma?
Ans: $20 Billion Acquisition of Figma.
Q.2: How much did Adobe pay for Figma?
Ans: Approximately $20 billion
Q.3: Is Figma open source software?
Ans: Figma is available as a free and open source application
Q.4: Who is the CEO of Abode?
Ans: Shantanu Narayen
Q.5: Who is the CEO of Figma?
Ans: Dylan Field
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