Adobe have announced their intention to acquire a company called Figma – for $20 billion dollars (insert Dr Evil gif here!).
That’s a great question and I have to admit, I’d never heard of them until this announcement. Figma is a design platform that enables easy, rapid collaboration between people at all stages of the creative process – improving efficiency of delivery among other things. They also have “Figjam”, a collaborative whiteboard for creative teams.
It competes pretty directly with Adobe’s XD product, is used within several large international corporations, and is gaining traction with users – for example, the Figma iOS app consistently outranks Adobe XD in the App Store – so it makes sense that Adobe would look to acquire them. However, when you look at the numbers, it seems to make a little less sense.
That means Adobe are paying 50x the annual recurring revenue!
For comparison, the OpenText acquisition of Micro Focus is 2.2x the latter’s pro-forma trailing twelve months (TTM) revenue while Oracle paid $28.3 billion for Cerner, with an annual revenue of $5.8 billion, so approximately 5x.
Paying that much for a relatively small company seems strange – so what’s behind it? Well, it seems it may well be down to Microsoft…
In 2016, Microsoft acquired Xamarin, and their 350 people brought Figma into the Redmond ecosystem. It took hold and reached the point where CVP of Design & Research, John Friedman said:
“Figma’s become, I would say, sort of the No. 1 common tool we use to collaborate across all of the design community in the community and beyond…[It’s] “really great at helping us collaborate at scale, and at global scale. I can collaborate with teams we have in India, China, Europe, Israel, and Africa”
Why is this a problem? Well, Adobe and Microsoft have had a strong relationship for a couple of decades and, to some degree at least, it appears to be a factor in Adobe’s success – particularly since it was “reinforced” in 2015 by deeper integrations with Office 365. Seeing a competitive product take hold within a key partner – especially one with as much sway and influence as Satya Nadella’s re-energised Microsoft – has to have caused concern within Adobe. There may even have been a worry that Microsoft would acquire Figma, swiftly turning a partner into a competitor (again).
As with all software company acquisitions, one must consider how they’re going to recoup their investment. Luckily there’s no need to worry about audits here but I would expect to see some (more) price increases within the next 12-18 months. Not only will they incorporate Figma into the existing Adobe XD product, but I also imagine they will start to add parts of the Figma technology across the CC suite – the “increased functionality” you’re then receiving will be the justification for an uplift on your Creative Cloud subscriptions.