Adobe drops $20bn takeover of Figma after EU and UK regulator concerns

Adobe has abandoned its $20bn (£15.8bn) takeover of its smaller rival Figma, after European and UK regulators raised concerns that it would eliminate competition in the product design software market.

The Photoshop owner, which dominates the market with products including Illustrator and Acrobat Reader, said the two companies had come to a joint assessment that there was “no clear path” to regulatory approval.

The UK’s Competition and Markets Authority said last month that the deal would threaten competition in the product design, image editing and illustration markets.

“There is no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority,” the companies said in the joint statement.

“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” the chair and chief executive of Adobe, Shantanu Narayen, said.

Adobe will pay Figma a $1bn termination fee after the collapse of the cash-and-stock deal for the cloud-based designer platform.

In a response to the CMA published on Monday, Adobe said that any divestment would be “wholly disproportionate” and would “reduce investment and innovation and ultimately harm the parties customers” and did not offer any alternatives.

“Requiring a multi-billion dollar global divestment of Photoshop or Illustrator in order to address an uncertain and speculative theory of harm is wholly disproportionate,” the two companies said in their response. “This is also the case in requiring a divestment of the entirety of Figma Design.”

Margrethe Vestager, the European commissioner for competition, said, however, that the proposed acquisition would have “terminated all current and prevented all future competition between [Adobe and Figma]”.

“Our in-depth investigation showed that this would lead to higher prices, reduced quality or less choice for customers,” she said. “It is important in digital markets, as well as in more traditional industries, to not only look at current overlaps but to also protect future competition. This applies in particular to transactions by which large, established companies acquire successful disruptive innovators.”

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The deal, which was announced in September last year, is the latest big tech takeover to draw intense scrutiny from regulators on both sides of the Atlantic.

In May, the Facebook owner Meta sold the gif search engine Giphy after the CMA blocked the $315m deal. It was acquired by stock image service Shutterstock for $53m.

The CMA is also reviewing Microsoft’s multibillion investment and partnerhip with OpenAI, the company behind the artificial intelligence technology ChatGPT.