Why Adobe Paid $1 Billion To Figma For 0% Equity
Key Takeaway
Adobe's failed $20 billion acquisition attempt resulted in a $1 billion termination fee paid to Figma, which subsequently achieved a higher valuation through a successful 2025 public offering.
Highlights
Adobe agreed to pay a $1 billion termination fee if its $20 billion acquisition of Figma failed to gain regulatory approval.
Figma's browser-based model allowed collaborative workflows that bypassed the need for traditional software downloads, capturing market share from Adobe.
Major companies including Google, Microsoft, and Netflix migrated their design workflows to Figma prior to the acquisition attempt.
In 2024, Figma recorded $749 million in revenue, marking a 48% increase over the previous year.
Figma's 2025 IPO valued the company at $19.3 billion, with share prices jumping 250% on the first day of trading.
Timeline
Figma's Market Disruption
Adobe dominated the design software market for decades with products like Photoshop and Illustrator. Figma entered in 2012 and grew by offering a free version and a more accessible, web-native collaboration experience. By the time Adobe pursued an acquisition, high-profile clients like Microsoft and Google were already entrenched in Figma's ecosystem.
- Figma utilized a browser-based architecture that eliminated the need for software downloads.
- Collaborative features allowed teams to share designs without sending files via email.
- Major corporations transitioned their design workflows to Figma while Adobe relied on traditional subscription models.
Regulatory Intervention and Deal Collapse
Adobe announced its $20 billion acquisition in September 2022. During the review process, Adobe argued unsuccessfully that it did not directly compete with Figma. Regulators ultimately required the divestiture of Figma's core product, rendering the acquisition non-viable for Adobe.
- The UK Competition and Markets Authority and the European Commission launched antitrust investigations.
- Regulators determined that the merger would eliminate meaningful competition in the design software space.
- Adobe formally terminated the acquisition on December 18, 2023, due to a lack of regulatory approval.
Post-Termination Financial Outcomes
The $1 billion payment served as a legally binding protection for Figma during the protracted regulatory review. Following the deal's collapse, Figma increased its revenue to $749 million in 2024. The subsequent IPO proved that Figma's standalone market value effectively matched the original acquisition offer.
- Figma received a $1 billion termination fee stipulated in the initial merger agreement.
- Figma's 2025 IPO valued the company at $19.3 billion.
- Figma's stock price increased by 250% on its first day of public trading.
Description
📩 Join My Newsletter: thecodingkoala.beehiiv.com ----- Learn Coding Most Effectively. Try Scrimba's free courses (20% off paid plans): 👉 https://scrimba.com?via=codingkoala Build your portfolio projects: 👉 https://app.codecrafters.io/join?via=nishant-pradhan-8 Prepare For Coding Interviews: 👉 https://algo.monster?fpr=nishant18 💬 I may earn a small commission at no extra cost to you. ----- Adobe tried to buy Figma for $20 billion, and when the deal fell apart, they had to pay Figma $1 billion for walking away. No ownership. No product. Just a billion-dollar cheque written to a company they never got to own. So how does that actually happen, and what does it mean for the tools developers use every day? In this video, I break down the full story behind the biggest failed acquisition in design software history, why Adobe panicked, how regulators killed the deal, what a termination fee actually is, and why Adobe had no choice but to pay it, and how Figma ended up more valuable and more independent after the whole thing than it ever would have been if Adobe had just succeeded. What you'll learn: - Why Adobe was so desperate to acquire Figma in the first place - How regulators in the EU and UK killed a $20 billion deal - What a termination fee is and why Adobe had to pay $1 billion for 0% equity - How Figma grew 48% after the deal collapsed and filed for a $19.3B IPO - What this means for developers and the tools they rely on every day 🕒 Timestamps 0:00 Adobe Paid $1B For Nothing? 0:23 Why Adobe Was Scared of Figma 1:35 The $20 Billion Deal 1:48 How Regulators Killed It 3:11 Why Adobe Still Owed $1 Billion 4:08 The Revenge IPO 4:43 Final Words Also, if you're a developer, I write about tech business stories and things valuable for developers in my newsletter — stories like this one that don't always make it into a full video. Link below 👇 #Figma #Adobe #story