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Why Adobe Bought Figma for $20B, Despite Some Objections

The Deal’s Details

Adobe (ADBE) announced its largest-ever acquisition last week, after it agreed to buy startup Figma for $20 billion. The deal speaks to the widespread growth of content creation and the way video and photo editing has exploded since the start of the pandemic. Figma, a software developer, helps digital creators collaborate.

As collaborators work on projects remotely, digital tools are key. That’s where firms like Figma and Australia’s Canva have thrived since COVID-19 began spreading. Adobe, who offers digital tools for creating PDRs and editing photos, is a more established entity.

It’s not the first time Adobe has sought to make changes in a bid to reinvent itself. Over 10 years ago CEO Shantanu Narayen oversaw the company’s shift from selling software largely on disks to its current subscription cloud-based model.

Adobe’s Perspective

While the pandemic has given rise to a new generation of creators, Adobe has yet to experience a similar upswing. The company released quarterly results last week showing revenue was growing at a slower pace. It also delivered weaker-than-expected guidance. By buying Figma, Adobe hopes to get in on some of the creator economy’s momentum.

Specifically, many creators describe Figma as a lean operation that’s attractive to people who aren’t necessarily design experts. Adobe’s products are considered more geared toward professional designers in marketing or magazine publishing. Figma’s ease of use is also beneficial for groups working across distances, given many of its features focus on collaboration.

Outside Concerns

The Figma price tag raised eyebrows among industry observers, given Adobe paid 50 times the smaller company’s expected annual recurring revenue for this year. A fundraising round also valued Figma at just $10 billion last year.

Adobe CEO Shantanu Narayen defends the deal as one that will help Adobe tap into a new user base. He notes there were many people opposed to the company’s shift to subscription sales as well. Adobe says it will focus on demonstrating strength in its core business in the meantime. Looking forward, the Figma deal could mark a new era for Adobe, all while the creator economy grows.

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James Flippin ABOUT James Flippin James Flippin is the son of a financial advisor who grew up hearing and learning about bond yields, interest rates, the stock market, and the ins and outs of Wall Street. After stints as a licensing and business broker for Marcus and Millichap in New York City, James moved into broadcasting and became a reporter and anchor. He covered crime, politics, finance, and tech at NBC News Radio while working part-time as a producer for SiriusXM. James graduated from the University of Delaware with a bachelor’s degree in political science and economics. He's also an accomplished podcaster with over 10-years of experience.

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