Every year between Christmas and New Year’s, Figma gives all employees two weeks’ vacation to enjoy the holidays. This year’s companywide PTO was looking even more wonderful as many of the software company’s employees hoped regulators would approve its $20 billion acquisition by creative giant Adobe. But on Monday, its U.S. employees awoke to Slack and email notifications saying that the deal was off. It seemed the companies failed to convince European Union lawmakers that an Adobe-Figma merger would not equate to a creativity software monopoly.
With just three hours’ notice, Figma called its 1,300-person workforce (known internally as “Figmates”) back from vacation to attend a spur-of-the-moment optional town hall that reviewed the company’s future with the Adobe deal scuttled, Fortune has learned.
“‘Hugs all around,’ was one of the things that management did say,” a Figma employee who spoke on the condition of anonymity, told Fortune.
The town hall, which lasted 60 minutes early Monday morning Eastern Time, came after 15 months of talks between Figma, Adobe, and regulators to reach an agreement for the creativity enterprise companies to merge. Figma CEO Dylan Field said that the decision to call off the merger was “joint” by the two design-focused companies. Now, Adobe will have to pay Figma a $1 billion breakup fee. (A Figma spokesperson said that this money would be used to accelerate impact as a team, but that it’s too soon to say how exactly it will be allocated.)
“Despite thousands of hours spent with regulators around the world detailing differences between our businesses, our products, and the markets we serve, we no longer see a path toward regulatory approval of the deal,” wrote the Figma CEO in a letter published on the company blog, first shared with employees. “Figma’s best, most innovative days are still ahead.”
With Adobe valuing Figma at $20 billion, and the company’s last valuation at $10 billion, the upside for almost every employee hired before the deal would have been significant. The gains for tenured employees could have meant the difference between homeowning versus renting or private versus public school for kids—as some Figmates expected payouts of over 40% of their salaries when the deal closed, Fortune has learned.
“This isn’t the outcome we had hoped for, and it’s fair to say we’re disappointed regulators prevented the deal from going through,” the Figma spokesperson told Fortune. “But one thing the last two days have made even clearer is that our team is amazing and a big reason why we’re so confident that Figma’s best days are ahead.”
For employees, the writing was all over Slack that regulators would kill the deal. Staffers shared articles across internal channels citing regulators’ issues with the merger for months. “We had known this was coming,” says the source.
Fortune’s source also notes that the internal mood combines nonchalance with resilience. “I don’t think it really changes much … It just really looks to me like it’s a delay; Figma is a very stable, strong company; we didn’t really need this.”
On paper, the source is correct. Figma will finish 2023 with over $600 million in annual recurring revenue, a 40%-plus increase year over year, multiple publications report. This fortifies the San Francisco–based company as a top late-stage private tech firm, and could position it for an IPO by 2025 or later, says The Information.
While Figma employees may be scaling back plans for elaborate vacations and homeownership with the merger’s death, Adobe shareholders are, in a shocking twist, slightly richer. Adobe’s stock has climbed 4% since the deal was called off, demonstrating Wall Street’s dislike of acquisitions that inflate venture-backed price tags by enormous percentages and billions of dollars.
Wall Street’s attitude is shared by many Figma users, who have long cherished the creative collaboration software as a simpler and cheaper alternative to Adobe’s offerings like Photoshop, InDesign, InCopy, and so on. “It’s fantastic news for everybody else in the world,” writes one designer on X about the failed deal.
