After 15 months Adobe has canceled its $20 billion acquisition of Figma, as it has had problems getting approval from regulators in EU, Britain and the US. Adobe will pay Figma $1 billion as a break-up fee.
The European Commission has released a statement on the canceled acquisition, saying: “It is important in digital markets, as well as in more traditional industries, to not only look at current overlaps but to also protect future competition. This applies in particular to transactions by which large, established companies acquire successful disruptive innovators.“
While protecting competition is important, there will likely be unintended consequences to the funding of innovation if large technology companies cannot acquire companies that today build related products, just because they could build directly competitive products in the future.
I think that to some extent regulators are getting the lesson of Meta’s/Facebook’s acquisition of Instagram backwards. I think a key reason Instagram managed to become enormous (vs just very large) is largely due to being operated by Meta. It is likely that without the acquisition Instagram would been much smaller (like Snapchat, Pinterest or Twitter) and been unable to build an ad platform that could compete with to Meta/Facebook.
