In September 2022, Adobe announced plans to acquire Figma for approximately $20 billion.

For Adobe, the deal promised more than another software product. It offered an opportunity to combine Adobe's established creative software ecosystem with Figma's browser-based design and collaboration platform.

But the acquisition never happened.

In December 2023, Adobe and Figma mutually terminated their merger agreement after concluding that they could not obtain the necessary regulatory approvals. Adobe paid Figma the previously agreed $1 billion termination fee.

So, why did Adobe want to acquire Figma in the first place? What made the deal so controversial? And what can businesses learn from an acquisition that failed before completion?

The answer involves competitive strategy, changing customer behaviour, product innovation, and the growing influence of competition regulators in the technology industry.

To understand the deal, it helps to understand the market Adobe was competing in.

Adobe had built a powerful position in creative software through products such as Photoshop, Illustrator, and Adobe XD. Its tools were widely used for image editing, illustration, graphic design, and digital product design.

However, the way digital products were being developed was changing.

Design was no longer an activity performed exclusively by individual designers. Building a website or mobile application increasingly required designers, developers, product managers, and other stakeholders to work together.

This created an opportunity for software that could support the entire collaborative design process.

That was where Figma stood out.

Adobe announced its proposed acquisition on September 15, 2022, describing Figma as a platform that had pioneered browser-based collaborative design. Adobe saw an opportunity to combine its creative technology with Figma's collaborative platform.

The strategic logic was straightforward: Adobe could expand its product design capabilities, strengthen its position in web-based creative tools, and access a platform that had already gained traction among collaborative product teams.

**The important point:** Adobe wasn't simply buying another design application. It was attempting to acquire a platform positioned around an evolving way of working.

The competition between Figma and Adobe is easier to understand when we look at the actual user experience.

Adobe had powerful creative tools. Figma approached a different problem: how people collaborate while creating digital products.

Adobe built its reputation on sophisticated software for creative professionals.

Photoshop became a major tool for image editing. Illustrator served vector illustration and graphic design. Adobe XD was developed for user interface and experience design.

These products offered designers specialised capabilities and control over their work.

However, design teams also needed to share files, collect feedback, coordinate changes, and communicate with developers. Depending on the tools and workflow used, these activities could involve several applications and handoffs.

Figma was designed around a browser-based, multiplayer environment.

Imagine a team building a mobile banking application.

The designer creates a login screen. A product manager wants to change the wording. A developer needs to inspect the spacing, colours, and component properties. Another stakeholder wants to leave feedback.

With Figma, these participants can work around the same shared design file.

Here is what that changes in practice:

1. Real-time collaboration: Multiple team members can view and edit a design together. Instead of repeatedly sending updated files, teams can collaborate around a shared version.

2. Browser-based access: People can open shared designs through a browser, reducing the need to install and maintain a dedicated design application for every participant. Figma's browser-based approach also made cross-platform collaboration easier.

3. Shared components and design systems: Teams can create reusable buttons, colours, typography styles, and interface components. When a shared component changes, teams can propagate updates across designs instead of manually recreating every element.

4. Interactive prototyping: Designers can connect screens and create interactive prototypes to demonstrate how a website or application should behave before it is fully developed.

5. Developer handoff: Developers can inspect designs and obtain implementation details, including dimensions, spacing, colours, and other properties. Figma's Dev Mode, introduced during the acquisition review period, further developed this workflow.

These capabilities mattered because they addressed the process surrounding design, not just the act of creating a visual.

Adobe's own acquisition announcement recognised the importance of web-based, collaborative product design.

Adobe had built a strong portfolio of creative applications. Figma built a collaborative environment in which designers and other product team members could work together.

That distinction helps explain why Figma became strategically important to Adobe.

The competitive question was no longer simply which application had the most powerful features. It was also which platform made the wider design and development process easier.

The proposed acquisition valued Figma at approximately $20 billion, a substantial price for a company founded in 2012.

Why would Adobe commit that much capital?

Three strategic considerations help explain the decision.

Building a competing platform internally can take considerable time. A company must develop the product, attract users, establish distribution, and persuade customers to change their existing workflows. Acquiring an established competitor offers a different route: buying access to its product, customer base, team, and market position. Figma had already developed a collaborative design platform with a strong presence among product teams.

Adobe's proposed acquisition was also about the future of creative software. By combining Adobe's expertise in imaging, illustration, video, 3D, and other creative technologies with Figma's collaborative platform, Adobe envisioned broader opportunities for web-based creative tools. This was a strategic bet on how people would create and collaborate in the future.

When a smaller company changes customer expectations in an established market, the incumbent faces a difficult decision. It can invest in developing a competing product, partner with the challenger, acquire the challenger, or pursue a combination of these strategies. Figma's position in collaborative product design made it strategically relevant to Adobe's existing business.

However, it is important to distinguish strategic interpretation from proven intent: Adobe publicly emphasised the opportunity to combine the companies' products and technologies. The acquisition itself does not establish that eliminating competition was Adobe's sole motivation.

The deal did not collapse because the two companies simply changed their minds about working together.

The main obstacle was regulatory approval.

Competition authorities in the United Kingdom and European Union examined whether combining Adobe and Figma could substantially weaken competition in digital design software. The concern extended beyond the immediate products the companies sold. Regulators considered the potential effect on current and future competition, including professional product design tools and other creative software markets. The UK's Competition and Markets Authority published provisional findings in November 2023 indicating competition concerns. The European Commission also raised concerns during its investigation.

The underlying question was important: If a major incumbent acquires a growing competitor, could customers have fewer meaningful alternatives in the future?

Even when an acquisition promises product integration and operational benefits, regulators may examine whether those benefits outweigh potential harm to competition.

After approximately 15 months of regulatory review, Adobe and Figma jointly concluded that there was no clear path to obtaining the necessary approvals. On December 18, 2023, they announced that they would terminate the agreement. Adobe paid Figma the agreed $1 billion termination fee. The deal therefore ended before the acquisition could be completed.

This distinction matters: the transaction was abandoned following regulatory scrutiny, rather than a completed acquisition being reversed.

Figma remained an independent company. The end of the acquisition did not mean the company had to rebuild its business from scratch. It retained its product, team, customers, and ability to pursue its own strategy. During the regulatory review period, Figma continued developing its platform. It introduced or expanded capabilities including:

- Dev Mode, designed to improve the handoff between design and development.

- Variables and advanced prototyping, which gave teams additional ways to manage and test interface behaviour.

- AI-powered features, including new capabilities for FigJam.

- Broader product development, aimed at helping teams move from brainstorming and design towards building digital products.

Figma's December 2023 announcement also described its intention to make it easier for people to design and build digital products on a shared collaborative canvas. These developments demonstrate that Figma continued executing its product strategy during a period of uncertainty. However, it would be inaccurate to conclude that the failed acquisition alone caused Figma to become successful or that Adobe subsequently failed as a business. The more defensible conclusion is that Figma remained independent and continued investing in its product after the proposed transaction ended.

The acquisition offers several lessons for companies considering major strategic moves.

Lesson 1: A competitor can change the rules of the market

Established companies often build their advantage around a successful product, technology, or distribution model. But customer expectations evolve. Figma's significance was not limited to its design features. Its collaborative workflow addressed the way modern product teams worked.

Business takeaway: Monitor how customers complete their entire task, not just how they use your product.

Lesson 2: Acquisition is not the only way to respond to disruption

Buying a competitor can provide immediate access to technology, talent, customers, and capabilities. However, acquisitions can also be expensive, difficult to integrate, and subject to regulatory scrutiny. An alternative is to develop competing capabilities internally, form partnerships, or build complementary products.

Business takeaway: Evaluate the cost, speed, risks, and long-term consequences of building versus buying.

Lesson 3: Product features matter, but workflows matter too

A product can have impressive features and still create friction in the wider process. For example, a design application may be powerful, but teams also need to review work, resolve feedback, maintain consistent components, and hand designs over to developers. Improving these connections can create significant customer value.

Business takeaway: Look for delays, repeated work, unnecessary handoffs, and coordination problems in the customer's workflow.

Lesson 4: Regulatory risk belongs in acquisition planning

A deal's strategic benefits and financial returns cannot be evaluated in isolation from regulatory requirements. Competition authorities may investigate whether a transaction could restrict customer choice or weaken future innovation. The Adobe–Figma case demonstrates why regulatory approval must be treated as a major transaction risk, not an administrative formality.

Business takeaway: Assess regulatory exposure early, alongside valuation, financing, integration, and expected synergies.

Lesson 5: A large acquisition price does not guarantee a successful outcome

A proposed acquisition can look attractive on paper while still failing to reach completion. The buyer must consider not only the potential value of the target but also the probability of approval, the time involved, the termination costs, and the alternatives available if the transaction fails.

Business takeaway: A good strategic decision accounts for both the expected upside and the downside if the plan does not work.

Conclusion: The Real Lesson Behind Adobe's Failed Figma Acquisition

Adobe's proposed $20 billion acquisition of Figma was a major attempt to combine established creative software with a collaborative, browser-based design platform. But the deal encountered regulatory obstacles and was ultimately terminated in December 2023, with Adobe paying the agreed $1 billion termination fee. The story is not simply that a smaller company defeated a larger one. It is a case study in how changing customer workflows can reshape competition, why established companies consider acquisitions as a strategic response, and how regulation can determine whether a major transaction proceeds. For business leaders, the lasting lesson is to understand what customers value, recognise emerging competitive threats, and evaluate strategic decisions beyond their immediate financial appeal.