Adobe Inc. (NASDAQ:ADBE) dropped over 3.12% in previous trading session as the firm is taking a big digital leap with a hefty price tag. For nearly $20 billion, the IT behemoth has entered into a final merger deal to buy Figma, a web-first collaborative design platform and Adobe rival.
Figma, which was launched in 2012, is a design application tool that allows you to develop websites, applications, and even logos. It also enables for real-time collaboration on the same file, which users can access via their browsers. Designers in Adobe Photoshop, for example, would have to transmit the picture file via email in order to share their work. Furthermore, colleagues cannot work on the file at the same time. Adobe will be able to use Figma to access collaboration capabilities, which have become commonplace in today’s remote and hybrid work contexts.
CEO of Adobe Inc., Shantanu Narayen stated during earnings call on Thursday that when they consider the future of what’s happening with creativity, and, in a sense, what’s going to happen as it relates to multiple people engaging in that with respect to collaboration, they simply believe that this will be an incredible value and a way to attract a large number of new customers to the combined platform.
CFO of the firm, Dan Durn articulated that the transaction, which is the company’s largest acquisition, is expected to close in 2023, pending regulatory approvals. “The $20 billion would be paid in cash and stock, “and if necessary, a term loan, to be paid down from our operating cash flows following the closing.”
The business announced that about 6 million extra restricted stock units will be given to Figma’s CEO and employees over a four-year period following the transaction. According to Cruchbase, Figma has raised $333 million in venture capital to far, with its most recent fundraising round in June 2021 resulting in a $10 billion valuation. As a result, the acquisition would result in a significant cash benefit for the startup.
Three years to break even sounds like some cautious assumptions baked in, especially because Figma is earning cash, according to a Goldman Sachs analyst, Kash Rangan.
“This transaction is about setting the firm to establish new categories and drive development for decades to come,” Durn explained. “Starting in year two after the closing, our EPS growth rate will be stronger than our overall sales growth, and we will be accretive entering year three.”
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