US-based computer software company Adobe Inc. agreed on Thursday to acquire design startup Figma for $20 billion in cash and stock, sparking investor concerns about the rich price tag that led to a drop of more than $30 billion in the market value of the Photoshop maker.
In a statement issued by the company, Adobe Chief Executive Shantanu Narayen hailed Figma's business as "the future of work" and said there were "tremendous opportunities" in combining it with his company's offerings, such as document reader Acrobat and online whiteboard Figjam.
“The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity,” Adobe’s chairman and chief executive officer Shantanu Narayen said.
The combined company will have a massive, fast-growing market opportunity and capabilities to drive significant value for customers, shareholders and the industry, Adobe said.
“With Adobe’s and Figma’s expansive product portfolio, the combined company will have a rare opportunity to power the future of work by bringing together capabilities for brainstorming, sharing, creativity and collaboration and delivering these innovations to hundreds of millions of customers,” the statement said.
Figma, which was founded in 2012 by Brown University alumnus Dylan Field and Evan Wallace, is a collaborative web application for interface design and allows users to build software.
David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, which owns a 1.5 per cent stake in Adobe, said Figma's annual recurring revenue (ARR) was $400 million was a tiny fraction of Adobe's $14 billion, making it an unreasonable for Adobe to pay the equivalent of 11 per cent of its market value for 2.8 per cent more ARR.
"We're disappointed with the price paid for the company (Figma)," said Wagner.
Adobe said it expected the deal to be accretive to its earnings three years after its completion. It added that Figma's total addressable market would reach $16.5 billion by 2025 across design, whiteboarding and collaboration. The cash-and-stock deal, the biggest ever buyout of a privately-owned software startup, will give Adobe ownership of a company whose online collaborative platform for designs and brainstorming is used by firms ranging from Zoom Video Communications to Airbnb Inc and Coinbase.
Adobe is one of the most acquisitive companies in Silicon Valley and has bought numerous businesses over the years, as it has looked to defend market share against competitors such as Microsoft.
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