Adobe walked away from its planned purchase of Figma on December 18, 2023, after determining that neither the European Commission nor the UK's Competition and Markets Authority would clear the transaction. The collapse of the deal, first announced on September 15, 2022, triggered a $1 billion reverse termination fee paid by Adobe to Figma.
The European Commission had opened a Phase 2 in-depth review in August 2023. A provisional deadline of January 8, 2024, had been set for a final decision. Adobe and Figma chose to walk rather than fight a likely prohibition.
The US Department of Justice was also preparing an antitrust lawsuit to block the combination. Three major authorities had aligned against the deal. Adobe concluded the wall was insurmountable.
The European Commission's Competitive Concerns
The Commission opened its Phase 2 probe into the Adobe-Figma merger in August 2023. Its central worry: the deal would substantially weaken competition in the global market for interactive product design tools and digital asset creation software.
Direct competition between Adobe XD and Figma
Figma is a web-based collaborative design platform and a direct competitor to Adobe's XD. The Commission assessed that the two were close rivals in a market with few alternatives. If the merger proceeded, Adobe would control both products, removing the competitive dynamic that pushed each to improve features and hold down prices.
The Commission also examined whether Adobe would have the ability and incentive to degrade Figma's interoperability with competitors' products, or to bundle Figma with Adobe's broader Creative Cloud suite in ways that would harm rival tools.
Scope of the Phase 2 Investigation and Timeline
The Commission's Phase 2 review is the deeper, more demanding stage of EU merger control. It typically involves detailed information requests, market testing with customers and competitors, and economic analysis of the transaction's likely effects.
The Commission set a provisional deadline of January 8, 2024, for its final decision. That date was the statutory end point of the Phase 2 process, though the Commission could have extended it if Adobe had proposed remedies requiring additional market testing. Adobe and Figma terminated the agreement before that deadline.
In their joint statement on December 18, 2023, they cited the absence of a clear path to clearance from both the European Commission and the CMA as the reason for abandoning the deal.
Parallel Regulatory Reviews in the UK and US
The European Commission was not alone. The UK's Competition and Markets Authority also referred the deal for an in-depth Phase 2 examination. The CMA's review ran in parallel with the EU process and raised similar concerns about reduced competition in the product design software market. In the United States, the Department of Justice was preparing an antitrust lawsuit to block the purchase. While the DOJ had not formally filed a complaint before the deal was abandoned, the prospect of US litigation added another layer of risk.
The coordinated opposition from three major competition authorities created an environment where clearing the deal on acceptable terms was unlikely. Merger agreements typically require approval from multiple jurisdictions. Failing to obtain clearance from any one of them can kill the transaction.
Adobe's Rationale and Defense of the Deal
Adobe argued throughout the review process that buying Figma was pro-competitive. The combination, the company stated, would accelerate collaborative design tools and bring Figma's cloud-native capabilities to a wider customer base.
Adobe also contended that the relevant market for design tools was broader than the Commission defined. The company pointed to Canva, Sketch, and other design platforms as credible alternatives to both Figma and Adobe XD. A broader market definition would have reduced Figma's share and lowered the horizontal overlap that troubled authorities. Adobe offered remedies to address the Commission's concerns, but the specifics were not disclosed. After the Phase 2 review advanced, Adobe concluded that the concessions required to secure approval would be too extensive to make the deal worth pursuing.
Market Positions of Adobe XD and Figma
Figma entered the design software market as a web-first, collaborative platform. Its real-time co-editing attracted product design teams, particularly at technology companies, where multiple designers and developers work simultaneously on the same files. Figma grew rapidly through a freemium model that made it accessible to individual designers and small teams.
Adobe XD was Adobe's response. Launched in 2016, XD offered similar vector design and prototyping capabilities but was built on a desktop-first architecture. Adobe integrated XD into its Creative Cloud subscription, making it available to the millions of users who already paid for Photoshop, Illustrator, and other Adobe tools. Despite Adobe's scale, Figma's collaborative model had gained significant traction. The purchase would have combined the two closest competitors in a market where switching costs for design teams are material, given that design files and workflows are tightly coupled to the chosen platform.
Impact on Innovation and Pricing for Users
The Commission's probe was driven in part by concerns about what would happen to innovation and pricing if the deal proceeded. Merger authorities typically worry that removing a disruptive rival reduces the incentive for the combined entity to invest in new features or to keep prices low.
Figma had been a source of competitive pressure on Adobe. Its web-native approach pushed Adobe to modernize XD and improve its own collaboration features. Figma's freemium pricing also constrained what Adobe could charge for XD, particularly for individual designers and small teams. Had the merger gone through, designers and businesses would have faced a single vendor controlling two of the leading product design tools. The likely outcome, authorities feared: higher prices, slower feature development, and reduced choice for users who rely on these tools for their daily work.
Financial Terms of the Deal
Adobe announced on September 15, 2022, that it would acquire Figma for roughly $20 billion in a mix of cash and stock. It was Adobe's largest purchase by a wide margin, reflecting the strategic importance the company placed on controlling the collaborative design market.
The acquisition agreement included a reverse termination fee provision. If the deal failed to obtain clearance under specified conditions, Adobe would pay Figma $1 billion. That clause became reality on December 18, 2023, when both companies confirmed the merger was off. The valuation represented a substantial premium over Figma's last private funding round. Figma had been valued at $10 billion in its most recent raise in 2021. The purchase price reflected Adobe's view of Figma's growth trajectory and the strategic imperative of preventing the platform from falling into the hands of a competitor or continuing to erode Adobe's market position independently.
Timeline from Announcement to Abandonment
The Adobe-Figma saga spans 15 months, from the deal's announcement in September 2022 to its collapse in December 2023. Adobe unveiled the roughly $20 billion purchase on September 15, 2022. The transaction was structured as a cash-and-stock deal and was expected to close in 2023, subject to regulatory approvals.
In August 2023, the European Commission escalated its review, opening a Phase 2 in-depth probe. The UK's CMA also referred the deal for an in-depth examination around the same time. In parallel, the US Department of Justice was reported to be preparing an antitrust lawsuit. On December 18, 2023, Adobe and Figma announced they had mutually agreed to terminate the merger agreement, citing no clear path to clearance. The Commission's provisional deadline of January 8, 2024, for a final decision became moot. Adobe paid the $1 billion reverse termination fee, and Figma continued to operate as an independent company.
Key Facts: Adobe-Figma Acquisition
- Acquirer: Adobe Inc.
- Target: Figma Inc.
- Announced deal value: Approximately $20 billion in cash and stock
- Announcement date: September 15, 2022
- EU Phase 2 investigation opened: August 2023
- Provisional EU decision deadline: January 8, 2024
- Deal abandoned: December 18, 2023
- Reverse termination fee paid by Adobe: $1 billion
- Regulators involved: European Commission, UK CMA, US DOJ
Frequently Asked Questions
Why did the Adobe-Figma deal collapse?
Adobe and Figma abandoned the deal on December 18, 2023, after concluding there was no clear path to clearance from the European Commission and the UK's Competition and Markets Authority. Both regulators had opened in-depth Phase 2 probes, and the US Department of Justice was preparing a lawsuit. Adobe paid Figma a $1 billion reverse termination fee.
What were the European Commission's main concerns about the merger?
The European Commission opened a Phase 2 probe in August 2023 because it was concerned that the deal would significantly reduce competition in the global market for interactive product design tools. Figma and Adobe XD were direct competitors, and the Commission was worried about higher prices, reduced innovation, and fewer choices for designers and businesses.
Did the UK or US regulators also investigate the deal?
Yes. The UK's CMA also referred the deal for an in-depth Phase 2 examination. The US Department of Justice was reportedly preparing an antitrust lawsuit to block the purchase, though no formal complaint had been filed before the deal was abandoned.
What is a Phase 2 investigation in EU merger review?
A Phase 2 probe is the deeper stage of EU merger control. It involves detailed requests for information, market testing with competitors and customers, and economic analysis. The European Commission has a statutory deadline to issue a final decision, which in this case was January 8, 2024.
How much did Adobe pay Figma when the deal fell through?
Adobe paid Figma a $1 billion reverse termination fee, as stipulated in the original purchase agreement, after the deal was abandoned due to regulatory obstacles.
