Adobe, Figma shelve $20 bln deal after hitting regulatory roadblocks

Dec 18 (Reuters) - Adobe (ADBE.O) on Monday shelved its $20 billion deal for cloud-based designer platform Figma, pointing to "no clear path" for antitrust approvals in Europe and the UK for what would have been among the biggest buyouts of a software startup.

The cash-and-stock deal, announced in September last year, was the latest to draw tough scrutiny from regulators worried about Big Tech acquisitions that boost the market power of dominant companies or involve startups seen as nascent rivals.

Adobe will pay a termination fee of $1 billion to San Francisco-based Figma, whose web-based collaborative platform for designs and brainstorming is used by Uber (UBER.N), Coinbase (COIN.O), Zoom Video Communications (ZM.O) and many other firms.

Last month, Britain's Competition and Markets Authority (CMA) said the deal would harm innovation for software used by the vast majority of UK digital designers, echoing similar concerns from the EU on the potential reduction of competition.

Adobe, whose shares rose about 1%, had refused to offer fixes on the deal to the CMA on grounds that no remedy that preserved the benefits of the deal would be sufficient to ease its concerns.

The Photoshop maker had argued it does not compete with Figma in any meaningful way. It said in November its only product relevant to the antitrust question was the Adobe XD design tool, which lost $25 million as a standalone app over the last three years.

Adobe CEO Shantanu Narayen said on Monday the firms "strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently."

The European Commission did not immediately respond to a request for comment, while the CMA said it will cancel its probe.

The CMA has been in the spotlight in recent months due to its moves against high-profile deals including Microsoft's (MSFT.O) $69 billion purchase of Activision-Blizzard.

Several analysts said the termination underscores how tougher scrutiny of M&As could also scuttle opportunities for startups.

"The effects will be felt not only amongst big tech, but also by smaller technology companies who may not be able to command as favorable exit premiums," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

"In the case of Figma, it had accepted an offer from Adobe at twice its valuation."

The Figma deal was seen as a bet on "the future of work" but investor concerns over the rich price tag and potential erosion of margins had wiped out more than $30 billion in Adobe's market value when it was announced.

It was also a major win for Figma's venture capital backers, including Index Ventures, Greylock Partners and Kleiner Perkins.

Figma "will thrive as an independent company with an incredible team, clear mission and focus," Index Ventures partner Danny Rimer said in an emailed statement.

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Akash Sriram

Thomson Reuters

Akash reports on technology companies in the United States, electric vehicle companies, and the space industry. His reporting usually appears in the Autos & Transportation and Technology sections. He has a postgraduate degree in Conflict, Development, and Security from the University of Leeds. Akash's interests include music, football (soccer), and Formula 1.

Chavi Mehta

Thomson Reuters

Chavi reports on U.S. technology companies, including semiconductor firms. Her work usually appears on the Technology and Business sections.