How Figma Killed Adobe's Design Monopoly

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TThe Coding Koala
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Transcript

00:00:00Imagine you are trying to buy something, but the deal fails for whatever reason.
00:00:04And instead of walking away with nothing, you pay the other person $1 billion just for trying to buy.
00:00:09That is exactly what happened to Adobe in 2023.
00:00:13And the company on the receiving end of that check was Figma.
00:00:16So let's talk about how Adobe tried to buy Figma for $20 billion,
00:00:20but instead ended up paying $1 billion just for trying.
00:00:23So to understand the overall story,
00:00:25first you need to understand what was happening to Adobe's design business.
00:00:29For decades, Adobe was untouchable in the design world.
00:00:33They had Photoshop, InDesign, Illustrator,
00:00:36basically everything that designers used every single day.
00:00:39And if you wanted to do anything serious in design,
00:00:42you were paying Adobe a monthly subscription whether you liked it or not.
00:00:45But then Figma showed up in 2012 and over the years,
00:00:49they started quietly eating Adobe's market share
00:00:51and they could see it happening in real time but couldn't really do anything about it.
00:00:55Because Figma was doing something that Adobe's entire product line was fundamentally not built for.
00:01:01It was entirely browser-based,
00:01:03which meant designers didn't have to download anything in their computer.
00:01:06And not just that,
00:01:08they could work collaboratively with others,
00:01:10hand off design without sending the zip file and email.
00:01:13And most importantly,
00:01:14you could get most of your things done with a free version.
00:01:17By the time Adobe decided to act,
00:01:19companies like Google,
00:01:21Microsoft,
00:01:22Netflix,
00:01:23all had already moved their entire design workflows to Figma.
00:01:26So when Adobe came to the table with a $20 billion offer,
00:01:30it wasn't just really an acquisition.
00:01:32It was more like admitting that they had already lost.
00:01:35So in September 2022,
00:01:37Adobe made it official.
00:01:38They announced that they were acquiring Figma for $20 billion in cash and stock.
00:01:43Now you'd think that would be the end of the story.
00:01:45Big company buys smaller company.
00:01:47Everyone moves on.
00:01:48But this is where things get really interesting.
00:01:51Regulators in Europe and the UK had a very different opinion about the whole thing.
00:01:55The UK's Competition and Markets Authority and the European Commission both launched investigations.
00:02:01And what they found was pretty straightforward.
00:02:02If Adobe,
00:02:04which already dominated creative software,
00:02:06also owned Figma,
00:02:07which was dominating design tools,
00:02:09there would be essentially no meaningful competition left in that entire space.
00:02:14And that is exactly the kind of situation that antitrust regulators exist to prevent.
00:02:19So Adobe did something that I still cannot believe actually happened.
00:02:23Their official legal defense was that they don't really compete with Figma in any meaningful way.
00:02:28And therefore the deal shouldn't raise any competition concerns at all.
00:02:31Just let that sink in for a second.
00:02:33If you genuinely didn't compete with someone,
00:02:36you would not pay $20 billion to acquire them.
00:02:39You just wouldn't.
00:02:40And by late 2023, it was clear that the regulators weren't budging.
00:02:44The CMA said Adobe could only complete the deal if it sold Figma's main design product.
00:02:49But that product was the whole reason Adobe wanted to buy Figma.
00:02:53So the deal no longer made sense.
00:02:55And on December 18th, 2023, Adobe and Figma mutually agreed to terminate the deal,
00:03:01citing no clear path to regulatory approval.
00:03:03And just like that, 15 months of negotiations ended with Adobe writing Figma a check for $1 billion.
00:03:10But wait a second.
00:03:11Why did Adobe pay $1 billion if the deal just didn't work out?
00:03:15And the answer is that when two companies agree to a merger of this size,
00:03:19they don't just shake hands and hope for the best.
00:03:22They sign a legally binding agreement that includes something called a termination fee,
00:03:26which is basically a penalty clause that protects the smaller company from the risk of having their entire business put on hold for months
00:03:33or even years while regulators decide whether the deal is allowed to happen or not.
00:03:37And in Figma's case, Adobe had agreed up front to pay $1 billion if the deal fell apart for regulatory reasons.
00:03:44But the drama isn't still finished yet, and it feels like a movie plot.
00:03:48Instead of slowing down after the deal collapsed, Figma did the opposite.
00:03:53It put its head down, kept building, and grew at a pace that made the whole situation look even more embarrassing for Adobe.
00:04:00Revenue hit $749 million in 2024, which was up 48% compared to the year before,
00:04:08and the company filed for an IPO in July 2025.
00:04:11Figma priced its IPO at $33 a share, which valued the company at $19.3 billion.
00:04:18And if that number sounds familiar, it should, because that is almost exactly the $20 billion that Adobe was going to pay for it two years earlier.
00:04:27Except this time, Figma wasn't selling itself to Adobe.
00:04:30It was selling shares to the public.
00:04:32And then on the very first day of trading, the stock jumped 250%, which pushed Figma's valuation well past what Adobe had originally offered.
00:04:42And that is the overall Figma and Adobe story.
00:04:45A $20 billion deal, 15 months of regulatory chaos, a $1 billion check written by the losing side.
00:04:52So let me know in the comments if you actually knew that termination clauses like this existed in big acquisitions.
00:04:58Because genuinely, most people have no idea that the smaller company gets paid just for having their time wasted.
00:05:04And I'm curious how many of you already knew that going in.
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00:05:11I usually cover tech stories like this one that I don't always have time to turn into a full video.
00:05:16And if you are a developer, you will also find some genuinely useful content.
00:05:21Links in the description.
00:05:22And if this type of content is something you want to see more of, make sure to subscribe and show some support.
00:05:28And I'll see you guys in the next one.

Key Takeaway

Adobe paid Figma a $1 billion termination fee after regulators blocked their $20 billion acquisition attempt, leading Figma to achieve a $19.3 billion valuation independently through its 2025 public offering.

Highlights

  • Adobe agreed to acquire Figma for $20 billion in September 2022 after losing market share to Figma's browser-based collaborative design tools.

  • UK and European antitrust regulators investigated the acquisition, concluding that the merger would eliminate meaningful competition in the creative software market.

  • Adobe paid Figma a $1 billion termination fee on December 18, 2023, after regulatory pressure caused both companies to terminate the merger.

  • Figma reached $749 million in revenue for 2024, representing a 48% increase compared to the previous year.

  • Figma filed for an IPO in July 2025 at $33 a share, achieving a valuation of $19.3 billion on its first day of public trading.

Timeline

Adobe Loses Market Share to Figma

  • Adobe held a long-standing monopoly over design software with monthly subscription products like Photoshop, InDesign, and Illustrator.
  • Figma entered the market in 2012 with a browser-based, collaborative platform that required no software installation and offered a functional free version.
  • Major enterprises including Google, Microsoft, and Netflix transitioned their design workflows to Figma.
  • Adobe announced a $20 billion cash and stock acquisition of Figma in September 2022 to counter its fading market dominance.

Adobe dominated the creative software industry for decades, forcing professional designers to pay recurring subscription fees. Figma disrupted this model by introducing browser-based collaboration and file sharing without email attachments or zip files. By the time Adobe attempted to acquire Figma for $20 billion, major technology corporations had already migrated their workflows to the platform.

Regulatory Intervention and Deal Collapse

  • The UK Competition and Markets Authority and the European Commission launched antitrust investigations into the merger.
  • Regulators determined that combining Adobe and Figma would eliminate meaningful competition in creative software.
  • Adobe argued during the legal defense that the two companies did not meaningfully compete with one another.
  • Both companies mutually terminated the acquisition on December 18, 2023, resulting in Adobe paying a $1 billion regulatory termination fee.

Antitrust regulators scrutinized the transaction because it threatened to consolidate creative and design software under a single corporate entity. Although Adobe defended the merger by claiming a lack of direct competition, regulatory agencies demanded the divestment of Figma's core design product. This ultimatum invalidated the purpose of the acquisition, triggering a $1 billion contractually mandated termination penalty.

Figma Independence and Public Offering

  • Figma recorded $749 million in revenue during 2024, marking a 48% year-over-year increase.
  • The company filed for an initial public offering in July 2025.
  • Figma priced its IPO shares at $33, resulting in an initial valuation of $19.3 billion.
  • Stock prices surged 250% on the first day of trading, pushing Figma's market valuation past Adobe's original acquisition bid.

Following the canceled merger, Figma accelerated its business growth and expanded revenue to $749 million in 2024. Rather than accepting acquisition, the company pursued a public offering in July 2025 valued at $19.3 billion. Public market demand drove a 250% surge on the first day of trading, successfully cementing Figma's independent market position.

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