American software giant Adobe has to pay $1 billion as part of a contractual clause after their deal to buy rival company Figma fell through the cracks due to regulatory push-back in Europe.
Adobe announced the cancellation of the $20 billion (around R366 billion) deal this week in a joint statement published on its website.
“Although both companies continue to believe in the merits and pro-competitive benefits of the combination, Adobe and Figma mutually agreed to terminate the transaction based on a joint assessment that there is no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority,” both parties said in the press release.
The deal was first announced in September 2022.
Adobe is a computer software company that focuses on creative tools that work both online and offline. It also focuses on cloud management, document processing capabilities.
Figma is a graphics editing software company which was founded in 2012 by college students Dylan Field and Evan Wallace while they were at Brown University.
But the billion dollar deal was not likely to go through, because if Adobe bought Figma, it would effectively be taking its biggest competitor out of the market, TechCrunch reported.
The United States Department of Justice (DOJ) also looked at the deal and also met with Adobe and Figma to discuss it.
But Europe is where they faced serious push-back, after the UK announced that the deal would harm levels of innovation.
“This proposed deal, therefore, has the potential to impact the UK’s digital design industry by reducing choice, innovation and the development of new competitive products,” the UK government said.
But Shantanu Narayen, chairperson and CEO of Adobe, disagreed with the regulatory findings.
“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” Narayen said.
Field also shared the same sentiments.
“Going through this process with Shantanu, David and the Adobe team has only reinforced my belief in the merits of this deal, but it’s become increasingly clear over the past few months that regulators don’t see things the same way,” Field said.
According to Techcrunch, Adobe must now pay Figma $1 billion because the deal did not attain regulatory clearance and was not completed in 18 months from the time of announcement in September 2022.
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