Overpriced?: Adobe to buy ‘competitor’ Figma for $20b

Sources say valuation for cloud-based collaborative design software was much higher than assessed

Designing and media editing software manufacturer Adobe has announced plans to purchase the cloud-based collaborative design software Figma in a deal valued at around $20 billion.

The deal will help Adobe – a leader in the design and media editing software space – to expand its portfolio of collaborative platforms that have been all the rage in a hybrid work environment post-novel coronavirus (Covid-19) pandemic.

The deal was confirmed late on Thursday by the software giant Adobe as it released figures for quarter three earnings. Adobe posted around $4.43 billion in revenues and non-GAAP earnings of $3.4 per share.

It projected quarter four earnings of $4.52 billion, and pledging around 50 times that to buy Figma was seen by most investors as risky, resulting in Adobe’s stock plunging.

The deal is half cash and half stock, and Adobe has suggested it may have to borrow money to fund the deal.

It is thus surprising that Adobe agreed to such a valuation when they were the only bidder.

Adobe is the premier design software firm, banking on industry-leading platforms and editing applications which have made it a household name, such as Photoshop, Premier Pro, Illustrator and After Effects.

However, the software firm has been facing intense competition from upstarts such as Figma, which users say is easier to use, more flexible and, most importantly, includes a free-to-use tier that endears it to so many users.

Last year in June, Figma raised money with a $10 billion valuation. And this deal will bode well for its investors.

The acquisition is also by far the biggest by Adobe in its history.




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