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    Adobe/Figma: big premium makes deal not so picture perfect

    Design software company Figma encourages collaboration. Its browser-first tools allow designers to participate in the creative process online in real time. But the San Francisco company’s collaboration with Adobe could encourage the acquirer’s shareholders to part ways with it.

    Adobe, the company behind Photoshop, is splashing out $20bn in cash and shares to buy Figma. The deal values the business at double its last private valuation.

    It is a steep premium. PitchBook estimates that Figma revenue last year was $150mn. Adobe is paying 133 times that figure. Growth is rapid, however. Figma is forecast to generate more than $400mn in annual recurring revenue (ARR) this year.

    Adobe wants to add collaborative services for digital products — particularly for non-professional users. Its move to cloud-based subscriptions, where users pay a monthly fee, has been a great success. Subscriptions now account for about 92 per cent of group revenue.

    Figma fits an existing strategy. Adobe is positioning itself to offer more online, team-based tools. Last year, it bought video collaboration platform Frame.io for $1.3bn in cash. In December it launched Creative Cloud Express.

    The group’s largest acquisition comes at an awkward time. The stock price more than doubled between the start of 2020 to hit a record high last November. Since then, tech stock weakness, a strong dollar and pulling out of Russia have weighed on the price.

    Adobe’s stock fell 17 per cent on news of the deal. This is equal to a $30bn decline in market equity — more than Figma’s price. Adobe’s poor fourth-quarter forecast showed the effects of lower discretionary spending. With less than $6bn in cash and short-term investments Adobe will need to raise funds to cover the deal.

    The final problem is that Figma competes with Adobe XD, launched in 2019. Adobe will need to dig into its suite of image editing tools to make this deal look good to regulators — as well as to investors.

    Adobe/Figma: big premium makes deal not so picture perfect Republished from Source https://www.ft.com/content/4ed2cd31-5c54-46ea-afcc-57706c1fb180 via https://www.ft.com/companies/technology?format=rss

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