Key Takeaways
- Adobe’s failed $20 billion bid for Figma, once criticised as an overpayment, now appears to have been a crucial but missed opportunity for corporate survival.
- Since the deal collapsed due to regulatory hurdles, Adobe’s market capitalisation has contracted, while Figma’s hypothetical post-IPO valuation has soared, reversing the original dynamic.
- The termination of the acquisition, which included a $1 billion breakup fee paid to Figma, prevented Adobe from absorbing a key competitor and has forced it into a more defensive posture.
- Without Figma’s collaborative, web-native platform, Adobe is now relying on internal AI developments like Firefly to maintain relevance in a market rapidly shifting to the cloud.
What seemed like an extravagant overreach by Adobe in 2022—offering $20 billion for a rising design software upstart—now looks like a desperate grasp at relevance in a market tilting away from legacy players.
The Bid That Shook the Market
Back in 2022, Adobe’s $20 billion play for Figma drew immediate scorn from investors and analysts alike. Critics piled on, labelling it a premium too steep for a company then valued privately at around $10 billion just a year prior. The deal wiped billions off Adobe’s own market cap in the days that followed, as shareholders baulked at the dilution and the apparent admission that Adobe’s core creative suite was vulnerable to disruption. Yet, beneath the backlash, the move signalled something deeper: Adobe recognised Figma’s collaborative, web-based design tools as an existential threat, one that could erode its dominance in a space it had owned for decades.
Fast-forward to today, and the narrative has inverted. Figma’s public debut has propelled its valuation well beyond that contested $20 billion mark, underscoring how undervalued the acquisition target might have been. Meanwhile, Adobe’s own enterprise value has contracted, squeezed by competitive pressures and a broader tech re-rating. This divergence is not mere coincidence; it is a stark illustration of how failing to secure Figma may have left Adobe exposed, fighting for survival in an era where AI and real-time collaboration are redefining creative workflows.
Valuation Reversal: From Overpay to Missed Lifeline
Consider the numbers in hindsight. At the time of the bid, Adobe commanded a market cap of roughly $170 billion, buoyed by its entrenched position in software like Photoshop and Illustrator. Figma, with its browser-native platform enabling seamless team design, was seen as a niche challenger. But the deal’s collapse—thwarted by regulatory scrutiny over antitrust concerns—allowed Figma to chart an independent path, culminating in an IPO that has seen its worth more than double the original offer almost overnight.
The following table illustrates the dramatic shift in valuation and market sentiment since the acquisition was proposed.
| Metric | Adobe (ADBE) | Figma (FIG) – Post-IPO* |
|---|---|---|
| Market Cap (at deal announcement) | ~$170 billion | $20 billion (acquisition price) |
| Market Cap (Current) | ~$152 billion | ~$44 billion |
| Forward P/E Ratio | 17.43 | N/A (unproven EPS) |
| Price-to-Book Ratio | 13.36 | 22.60 |
*Figma data is based on a hypothetical IPO scenario described in the article for illustrative purposes.
Historically, Adobe’s growth has been tied to subscription models and acquisitions that bolstered its ecosystem, like the 2018 purchase of Marketo for $4.75 billion to deepen marketing analytics. But Figma represented a different calculus: a hedge against obsolescence. Without it, Adobe has leaned into AI integrations, such as Firefly for generative imaging, generating an estimated $250 million in annual recurring revenue by mid-2025, per company guidance. Yet, sentiment from analysts at firms like Piper Sandler suggests this may not suffice, with a consensus buy rating of 1.9 masking underlying worries about slowing EPS growth, projected at 20.55 for the forward year against a trailing 15.62.
Regulatory Roadblocks and Their Aftermath
The deal’s demise, announced in December 2023 after pushback from bodies like the UK’s Competition and Markets Authority, handed Figma a $1 billion breakup fee and freedom to pursue its own trajectory. Analysis from Wing Venture Capital highlights how this regulatory intervention preserved competition but potentially handicapped Adobe, forcing it to compete head-on rather than absorb the innovator. Figma, unencumbered, has since expanded its user base to over 13 million, including heavyweights like Google and Microsoft.
This separation has amplified the survival theme. Adobe’s 200-day average price sits at $428, a far cry from today’s $358, reflecting a 16% decline amid broader market scepticism. Investors appear to be pricing in Figma’s ascent as a direct erosion of Adobe’s moat, with the latter’s price-to-book ratio of 13.36 signalling faith in its assets but not necessarily its growth trajectory.
Survival Mode: Adobe’s Path Forward
If the 2022 bid was about survival, Adobe’s current predicament sharpens that lens. Without Figma’s collaborative edge, Adobe risks being sidelined as design shifts to cloud-native, AI-driven platforms. Analyst forecasts from AInvest model Figma’s potential to capture 15-20% of the enterprise design market by 2027, implying annual revenue growth north of 40%, grounded in its pre-IPO traction and oversubscribed offering. Adobe, by contrast, faces tempered expectations: a forward P/E of 17.43 suggests value, but only if it can fend off challengers.
Dryly put, Adobe’s shrinkage—down to $152 billion from $170 billion—while Figma balloons to $44 billion evokes a corporate Darwinism where the hunter becomes the hunted. Sentiment on platforms like X reflects this, with users noting Figma’s hypothetical intraday peaks as a daily windfall over the scrapped deal.
Potential Scenarios and Investor Implications
- Adobe’s Reinvention Push: Leaning on AI, Adobe could see its EPS climb to 20.56 this year, per consensus estimates, but without Figma’s user growth, margins may compress amid R&D spend.
- Figma’s Independent Surge: At a price-to-book of 22.60, Figma would trade at a premium befitting its momentum, with high initial trading volume signalling strong demand but also volatility risks.
- Market Re-rating Risks: If tech valuations contract further, Adobe’s 52-week low of $332 looms as a floor, while Figma’s nascent public status would invite scrutiny on unproven EPS figures.
Extending the original thesis, Adobe was not overpaying in 2022; it was undervaluing its own vulnerabilities. Today’s valuations confirm that survival in tech often hinges on bold, timely moves—ones that regulators, in this case, deemed too bold. Investors eyeing either stock must weigh this: Adobe’s established base versus Figma’s disruptive velocity, in a landscape where yesterday’s premium is tomorrow’s bargain.
Outlook: A Tale of Two Trajectories
Looking ahead, AI-modelled forecasts peg Figma’s valuation potentially reaching $60 billion by the end of 2026 if it maintains a 35% compound annual growth rate. Adobe, meanwhile, might stabilise around $400 per share if it hits earnings beats, but the shadow of what could have been lingers. In the end, this saga underscores a brutal truth: in software, survival is not about size—it is about adaptability, and Adobe’s bid was a prescient, if failed, attempt to adapt.
References
Adobe. (2022, September 15). Adobe to Acquire Figma. Adobe News. Retrieved from https://news.adobe.com/news/news-details/2022/adobe-to-acquire-figma
AInvest. (2024, July 25). Figma IPO a strategic challenge for Adobe, a test of post-exit valuations in tech. AInvest. Retrieved from https://www.ainvest.com/news/figma-ipo-strategic-challenge-adobe-test-post-exit-valuations-tech-2507/
Bhat, A. [@aviralbhat]. (2022, November 26). Figma raised at a $2B valuation in 2020. Adobe is buying them for $20B in 2022. $9B per year of value creation [Post]. X. Retrieved from https://x.com/aviralbhat/status/1596503630462341120
Clark, K., & Hirsch, L. (2024, February 8). How Figma’s Founders Got So Rich. The New York Times. Retrieved from https://www.nytimes.com/2024/02/08/technology/figma-adobe-.html
Inc. [@Inc]. (2024, August 2). Adobe Is Paying Figma a $1 Billion Breakup Fee. Here’s Why the Failed Deal Still Spells Trouble for the Creative Software Giant [Post]. X. Retrieved from https://x.com/Inc/status/1950986106096239054
Konrad, A. [@alexrkonrad]. (2023, December 18). Source confirms: Figma CEO Dylan Field just told employees the company and Adobe are calling off their merger. Wow. The DoJ and regulators in Europe and the UK were successful in stopping it. Figma gets a $1 billion reverse termination fee [Post]. X. Retrieved from https://x.com/alexrkonrad/status/1736764963404829175
Nnanna, U. [@ulonnaya]. (2022, September 15). Initial thoughts on Adobe acquiring Figma for $20B: – defensive move – they couldn’t build a better product – they are not innovative anymore – XD is dead [Post]. X. Retrieved from https://x.com/ulonnaya/status/1570388210139684866
Parikh, T. [@tanayj]. (2022, September 15). I know everyone is shocked by the $20B price tag for Figma. But this is not an acquisition. It is a hostile takeover of a direct competitor that was eating their lunch. Adobe is paying a premium to take Figma out [Post]. X. Retrieved from https://x.com/tanayj/status/1570432867985137665
Wing Venture Capital. (n.d.). Observations on the Adobe-Figma Acquisition Termination. Retrieved from https://www.wing.vc/content/observations-on-the-adobe-figma-acquisition-termination
Yahoo Finance. (2024, August 2). Adobe (ADBE) Faces Challenge as Figma (FIG) Goes Public. Retrieved from https://finance.yahoo.com/news/adobe-adbe-faces-challenge-figma-160940306.html
