The EU and UK regulators blocked Adobe's proposed $20 billion acquisition of Figma in December 2023. The deal had been announced in 2022 and spent over a year in regulatory review. The way the deal died is more interesting than the fact that it died.
Why Adobe wanted Figma
Adobe Creative Cloud had not produced a competitive design tool for the screen design era. Sketch, then Figma, became the design tools that product teams actually used. Figma's collaborative, browser-based model was fundamentally different from Adobe's desktop-native approach and Adobe could not replicate it internally fast enough. The $20 billion offer was an acknowledgment that building the capability organically was going to take too long.
Why regulators blocked it
Both the EU and the UK CMA concluded that the merger would eliminate a significant competitive threat to Adobe in the creative software market. Adobe's Photoshop and Illustrator products compete with Figma in some use cases. Regulators were concerned that Adobe would reduce investment in Figma as a competitor to its own products. The AI design tools angle also featured in the analysis: both companies are developing generative AI tools for design, and the merger would reduce the number of competing approaches.
What killed it was AI
The timing matters. The merger was announced before the generative AI wave reshaped creative software economics. By the time regulators reviewed it, Adobe had launched Firefly, its generative image model, and Figma had announced AI features. Regulators evaluated the deal in a landscape where AI was transforming what creative software could do, and concluded that preserving two independent competitors developing AI design tools was better for innovation than a merger.
The lesson for tech M&A
The AI wave is making tech regulators more sceptical of large horizontal mergers in software. The argument that a large company needs to acquire a smaller one to compete effectively is harder to make when AI tools are rapidly changing the capability baseline. Regulators are watching whether AI makes markets more or less concentrated. The Figma/Adobe outcome suggests they are willing to block deals that look like capability acquisition in a rapidly changing AI landscape.