Adobe is buying startup Figma for $20 billion. It’s a defensive acquisition that just might capitalize on its rival’s popular online collaboration tools. But the valuation requires too much imagination. jgfarb
The deal could indeed be “transformational,” as Narayen says in the overused merger handbook vernacular. To make it so, Adobe would have to successfully adapt its own software to Figma’s engineering for a significant top-line uplift. As it stands, Figma’s revenue is expected to double this year to $400 million. Even if it doubled again in 2023, it would represent just 4% of the $20 billion that analysts expect Adobe to generate, according to Refinitiv.
Adobe investors couldn’t muster the same amount of imagination. They sent the shares tumbling 16%, wiping out another $27 billion of market capitalization, on the same day the company unveiled 13% top-line quarterly growth from a year earlier. Ignoring conventions is generally better suited to art than finance.Adobe said on Sept. 15 it had agreed to buy digital design rival Figma for about $20 billion, paying about half in cash and half in shares.
Figma, which was started in 2012, expects to make more than $400 million in annual recurring revenue in 2022, roughly doubling from the previous year. It has a gross margin of about 90%, Adobe said. Adobe also reported record revenue of $4.4 billion for its fiscal third quarter ending Sept. 2, a 13% increase from the same period a year earlier. Its $4.5 billion forecast for the next three-month period fell slightly short of analysts' forecasts, according to Refinitiv.Editing by John Foley and Amanda Gomez
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