Adobe has agreed to buy design software company Figma for about $20 billion, striking one of the hardest-hit sectors in a tech selloff that began late last year.
Founded in 2012, San Francisco-based Figma enables software developers and designers to collaborate remotely and design everything from slides for presentations to user interfaces in mobile apps.
Along with Australian startup Canva, it’s part of a wave of new browser-based design tools opening up the creative process to millions of non-designers, expanding the market and potentially threatening traditional leader Adobe. software design.
The purchase price, which will be paid for in half cash and half stock, is more than double what Figman valued in its most recent private financing round last year and 10 times its 2019 valuation, despite the recent slump in software stocks. It values the company at 50 times annual recurring revenue, which Adobe says will reach $400 million in 2022.
In the software boom that peaked during the pandemic, acquisitions at 50 times earnings and higher were common, but multiples for most companies have fallen below 20 this year and acquisitions have been scarce.
The big award led to a sharp drop in Adobe’s stock price early Thursday, prompted by the company’s cautious earnings forecast. The lower forecast wiped 16.8 percent, or $29 billion, off its value.
At the time of signing, the acquisition was the most expensive among US private companies and surpassed Facebook’s $19 billion acquisition of WhatsApp in 2014. A sharp decline in Adobe’s stock price reduced the value of the Figma deal to $18.3 billion by the end of the year. Thursday.
“In this environment, people are asking, why do we need big deals?” There are questions,” said Adobe CEO Shantanu Narayen. But he argued that Figman would be a “transformational” deal for Adobe, and that its browser-based approach and collaboration tools would boost the company’s overall market share.
Danny Rimer, a partner at Index Ventures, which he says is Figma’s largest investor, said the company was on track for an initial public offering before talks with Adobe began.
Figma CEO Dylan Field came up with the idea for the company after dropping out of Brown University with co-founder Evan Wallace at age 19 after receiving a $100,000 grant from libertarian financier Peter Thiel. Thiel began offering 20 scholarships a year more than a decade ago after deciding that top scientists and entrepreneurs were wasting their time pursuing a traditional university education.
The idea that complex design tools could be delivered in a web browser was widely dismissed when Figma started, Field told the Financial Times, adding: “Nobody really thought we could do it.”
Liz Miller, an analyst at Constellation Research, said the company’s web-based tools will better enable Adobe to “move into a more modern, cloud-based, composable and open future” for design software.
The merger will allow Figma to bring Adobe’s capabilities in imaging, 3D and video to its platform, Adobe said. The company wants to reach millions of customers using Figma, which has enjoyed a boom during the pandemic as employees work remotely. Its clients include Twitter, News UK, Google and Netflix.
Adobe posted net income of $1.1 billion on revenue of $4.4 billion, up 13 percent year-over-year, or 15 percent on a constant currency basis, according to third-quarter results released Thursday.
