Why Adobe Paid $1 Billion To Figma For 0% Equity

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00:00:00imagine you are trying to buy something but the deal fails for whatever reason and instead of

00:00:04walking away with nothing you pay the other person 1 billion dollars just for trying to buy

00:00:09that is exactly what happened to adobe in 2023 and the company on the receiving end of that check

00:00:15was figma so let's talk about how adobe tried to buy figma for 20 billion dollars but instead

00:00:20ended up paying 1 billion dollar just for trying so to understand the overall story first you need

00:00:26to understand what was happening to adobe's design business for decades adobe was untouchable in the

00:00:32design world they had photoshop in design illustrator basically everything that designers used every

00:00:38single day and if you wanted to do anything serious in design you were paying adobe a monthly subscription

00:00:44whether you liked it or not but then figma showed up in 2012 and over the years they started quietly

00:00:50eating adobe's market share and they could see it happening in real time but couldn't really do

00:00:54anything about it because figma was doing something that adobe's entire product line was fundamentally

00:01:00not built for it was entirely browser-based which meant designers didn't have to download anything in

00:01:05their computer and not just that they could work collaboratively with others hand off design without

00:01:11sending the zip file an email and most importantly you could get most of your things done with a free

00:01:16version by the time adobe decided to act companies like google microsoft netflix all had already moved their

00:01:24entire design workflows to figma so when adobe came to the table with a 20 billion dollar offer it wasn't

00:01:30just really an acquisition it was more like admitting that they had already lost so in september 2022 adobe

00:01:37made it official they announced that they were acquiring figma for 20 billion dollars in cash and stock

00:01:43now you'd think that would be the end of the story big company buys smaller company everyone moves on but

00:01:48this is where things get really interesting regulators in europe and the uk had a very different opinion

00:01:54about the whole thing the uk's competition and markets authority and the european commission both launched

00:01:59investigations and what they found was pretty straightforward if adobe which already dominated

00:02:05creative software also owned figma which was dominating design tools there would be essentially no

00:02:10meaningful competition left in that entire space and that is exactly the kind of situation that antitrust

00:02:17regulators exist to prevent so adobe did something that i still cannot believe actually happened their

00:02:23official legal defense was that they don't really compete with figma in any meaningful way and therefore

00:02:28the deal shouldn't raise any competition concerns at all just let that sink in for a second if you genuinely

00:02:34didn't compete with someone you would not pay 20 billion dollars to acquire them you just wouldn't and by

00:02:40late 2023 it was clear that the regulators weren't budging the cma said adobe could only complete the deal

00:02:46if it sold figma's main design product but that product was the whole reason adobe wanted to buy figma

00:02:52so the deal no longer made sense and on december 18th 2023 adobe and figma mutually agreed to terminate

00:03:00the deal citing no clear path to regulatory approval and just like that 15 months of negotiations ended

00:03:06with adobe writing figma a check for 1 billion dollars but wait a second why did adobe pay 1

00:03:13billion dollars if the deal just didn't work out and the answer is that when two companies agree to a

00:03:18merger of this size they don't just shake hands and hope for the best they sign a legally binding agreement

00:03:24that includes something called a termination fee which is basically a penalty clause that protects the

00:03:29smaller company from the risk of having their entire business put on hold for months or even years while

00:03:34regulators decide whether the deal is allowed to happen or not and in figma's case adobe had agreed

00:03:40up front to pay 1 billion dollars if the deal fell apart for regulatory reasons but the drama isn't still

00:03:45finished yet and it feels like a movie plot instead of slowing down after the deal collapsed figma did the

00:03:52opposite it put its head down kept building and grew at a pace that made the whole situation look

00:03:58even more embarrassing for adobe revenue hit 749 million dollars in 2024 which was up 48 percent

00:04:06compared to the year before and the company filed for an ipo in july 2025. figma priced its ipo

00:04:13at 33 dollars a share which valued the company at 19.3 billion dollars and if that number sounds familiar

00:04:20it should because that is almost exactly the 20 billion dollars that adobe was going to pay for it two years earlier

00:04:27except this time figma wasn't selling itself to adobe it was selling shares to the public and then on the

00:04:33very first day of trading the stock jumped 250 which pushed figma's valuation well past what adobe had

00:04:40originally offered and that is the overall figma and adobe story a 20 billion dollar deal 15 months of

00:04:47regulatory chaos a 1 billion dollar check written by the losing side so let me know in the comments if you

00:04:53actually knew that termination clauses like this existed in big acquisitions because genuinely most

00:04:59people have no idea that the smaller company gets paid just for having their time wasted and i'm curious

00:05:04how many of you already knew that going in if you enjoyed this kind of business breakdown make sure to

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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

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.

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.

Regulatory Intervention and Deal Collapse

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.

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.

Post-Termination Financial Outcomes

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.

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.

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