Adobe agrees to purchase Figma in $20 billion software program deal

Adobe Inc. agreed to purchase software program design startup Figma Inc. in a deal valued at about $20 billion to assist it develop instruments for inventive professionals.

The deal introduced by Adobe, which is a mixture of half money and half inventory, confirms an earlier Bloomberg report and would mark the largest ever takeover of a non-public software program firm, in line with knowledge compiled by Bloomberg. Adobe shares fell about 9% in premarket buying and selling.

Figma, which permits prospects to collaborate on software program as they construct it, noticed demand soar in the course of the pandemic whereas extra folks labored remotely. The firm expanded its buyer base in recent times from software program designers at massive corporations like Airbnb Inc., Google, Herman Miller and Kimberly-Clark Corp. — to additionally embody people constructing light-weight video games, maps and shows. It has additionally attracted a loyal scholar following.

The mixture advantages “literally anybody who is a knowledge worker,” mentioned Adobe Chief Executive Officer Shantanu Narayen, in an interview.

Adobe, which had been a Wall Street favourite for greater than a decade, has been pummeled within the tech downturn, seeing its shares lose greater than a 3rd of their worth because the begin of the yr. Investors have grow to be more and more skeptical concerning the dominance of Adobe’s line of software program for design professionals, which makes up about 60% of its income. The firm has focused extra accessible web-based choices corresponding to Photoshop Express to promote its inventive software program to shoppers, small companies, and social media influencers. The initiative bumped into friction from upstarts together with Figma, Lightricks Ltd. and Canva Inc.

San Francisco-based Figma was co-founded a couple of decade in the past by Dylan Field and Evan Wallace. The startup launched browser-based software program design instruments that permit software program designers to work collectively in real-time, bypassing the generally clumsy strategy of saving and sending their work to collaborators utilizing a group of disparate apps. The firm was valued at $10 billion in its final funding spherical a yr in the past. Figma’s backers embody enterprise capital corporations Kleiner Perkins, Index Ventures and Greylock Partners.

The deal’s “very high” valuation is probably going weighing on Adobe’s inventory, mentioned Bloomberg Intelligence’s Anurag Rana. But Adobe defended its enterprise technique.

“We’re confident that if you look at this in the long run, it’s going to be a big value for their shareholders and our shareholders as well,” Narayen mentioned. The transaction is predicted to shut in 2023, pending regulatory and different approvals, Adobe mentioned. After closing, Field will proceed to guide the Figma workforce, reporting to David Wadhwani, president of Adobe’s digital media enterprise. Figma will live on as a standalone product.

Adobe additionally introduced third-quarter outcomes, with income leaping 13% to $4.43 billion. That was consistent with analysts’ estimates however marked the third consecutive quarter of development of lower than 15%, as Adobe has been buffeted by financial uncertainty and by the robust greenback abroad. Adjusted earnings per share had been $3.40, higher than Wall Street anticipated.

Figma may have a complete addressable market of $16.5 billion by 2025, in line with the assertion. The firm is predicted so as to add about $200 million in internet new annual recurring income this yr, surpassing $400 million in whole annual recurring income by the top of 2022, with a internet greenback retention of better than 150%, Adobe mentioned in an investor presentation. Figma has gross margins of about 90%, and about 850 staff, Adobe mentioned. The transaction is predicted to be accretive to Adobe’s adjusted earnings per share on the finish of the third yr.

According to phrases of the deal, about 6 million extra restricted inventory items will likely be granted to Figma’s CEO and staff that may vest over 4 years after closing. Adobe expects the money consideration to be financed by money available and, if crucial, a time period mortgage.

Qatalyst Partners suggested Figma together with the regulation agency Fenwick & West whereas Allen & Co. was Adobe’s adviser together with Wachtell, Lipton, Rosen & Katz.