Adobe has agreed to buy design software company Figma for about $20bn, sending a blow through a sector that has been hardest hit by tech sales that began late last year.
San Francisco-based Figma, which was founded in 2012, allows software developers and designers to collaborate remotely and design everything from slides for presentations to user interfaces on mobile apps.
Together with Australian start-up Canva, it is part of a wave of new browser-based design tools that have opened up the creative process to millions of non-designers, expanding the market and posing a potential threat to traditional leader Adobe. has done. design software.
The purchase price, which will be paid half in cash and half in stock, was twice that of Figma in its most recent private funding round last year and 10 times its valuation in 2019, despite a recent drop in software stocks. This values the company at 50 times its annual recurring revenue, which Adobe said will top $400mn in 2022.
Acquisitions at multiples of 50 times revenue and more were common in the software boom, which peaked during the pandemic, but for most companies the multiplier has dropped below 20 this year and acquisitions have become rare.
The big premium contributed to a sharp drop in Adobe’s share price early Thursday, triggered by cautious earnings forecasts from the company. The downbeat projection wiped out 16.8 percent, or $29bn, from its value.
At the time of signing, the acquisition was the most expensive acquisition by a US private company to date, topping Facebook’s $19bn purchase of WhatsApp in 2014. The sharp drop in Adobe’s share price pushed the value of the Figma deal down to $18.3bn by the end. of Thursday.
“In this environment people are asking, ‘Why the big deal?’ There are questions,” said Adobe chief executive Shantanu Narayan. But he claimed Figma would be a “transformative” deal for Adobe and that its browser-based approach and collaborative tools would boost the company’s overall market.
Danny Rimmer, a partner at Index Ventures, which says it is Figma’s biggest investor, said the company was on track for an initial public offering before talks with Adobe began.
After dropping out of Brown University with co-founder Evan Wallace at age 19, Figma’s chief executive Dylan Field came up with the idea for the company after accepting a $100,000 grant from libertarian financier, Peter Thiel. Thiel began awarding 20 “fellowships” a year more than a decade ago, after deciding that the best scientists and entrepreneurs were wasting their time seeking traditional university education.
When Figma was launched, the idea that sophisticated design tools could be delivered in a web browser was widely rejected, with Field telling the Financial Times, “Nobody really thought we could do it. “
The company’s Web-based tools will give Adobe a better shot at a “more modern, cloud-based, compatible and open future,” said Liz Miller, an analyst at Constellation Research, which was opening up to the design software.
Adobe said the merger will help Figma bring Adobe’s capabilities in imaging, 3D and video to its platform. The company is looking to tap into the millions of customers using Figma, which enjoyed a boom during the pandemic as employees worked remotely. Its clients include Twitter, News UK, Google and Netflix.
In its third-quarter results announced Thursday, Adobe posted net income of $1.1bn on revenue of $4.4bn, an increase of 13 percent year-over-year, or 15 percent on a constant currency basis.