Adobe recently walked away from its intended $20 billion acquisition of Figma, shedding light on the rationale behind this abrupt shift. Dana Rao, Adobe's general counsel, revealed that the company faced challenges in assuring European regulators that the merger wouldn't pose a threat to future competition, specifically, that Adobe and Figma wouldn't evolve into direct competitors.
Adobe recently walked away from its intended $20 billion acquisition of Figma, shedding light on the rationale behind this abrupt shift. Dana Rao, Adobe's general counsel, revealed that the company faced challenges in assuring European regulators that the merger wouldn't pose a threat to future competition, specifically, that Adobe and Figma wouldn't evolve into direct competitors.
Both EU and UK regulatory bodies raised substantial concerns about potential competition issues last month. The European Commission (EC) expressed apprehension that the deal might "significantly reduce competition in the global markets." Subsequently, the Competition and Markets Authority (CMA) in the UK provisionally blocked the acquisition, citing potential harm to innovation in software for the majority of UK digital designers.
Rao emphasized that, at present, Adobe and Figma weren't direct competitors. Despite Adobe's product Adobe XD, which closely aligns with Figma, being on the decline this year, Rao insisted there was no overlap in customer bases and no complaints from competitors or customers about the proposed deal, although sentiments among Figma users might differ.
The pivotal issue emerged concerning potential future competition. Rao highlighted that regulators emphasized newer antitrust doctrines, asserting that considering future competition is a vital aspect of antitrust analysis. Following the statements from the EC and CMA, Adobe and Figma jointly concluded, "Looking at the road ahead and the timing and the tenor of the conversations we're having, this is probably a good time to stop."
Rao delves into why Adobe didn't persist in fighting, akin to Microsoft's perseverance in its eventually successful Activision Blizzard deal. Adobe and Figma assessed the persuasive aspects with regulators and determined whether continuing the legal battle was worthwhile. Rao articulated, "The only way to solve a future competition issue, that someone might do something, is to not do the deal." This, according to Rao, encapsulates the essence of regulators' advice to both companies.
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