If IPO-hungry investors thought they’d get some relief in the M&A market, the opportunity for a successful exit got a whole lot bleaker in the last few days.
Yesterday Adobe and Figma announced that they had called off the blockbuster $20 billion acquisition the companies had first announced 15 months ago. That deal was set to be Adobe’s largest acquisition ever and one of the largest acquisitions of a subscription software company in history. It was also going to be a much-needed respite for what’s been an exceedingly dry exit environment for investors. Figma’s enormous deal with Adobe has been repeatedly cited as an example of how there is still hope for strong exits for good companies—even in this market.
Well, no longer.
Since the deal was announced last September, it’s received repeated backlash from anticompetitive watchdogs in Europe and the U.K. Just last month, the Competition and Markets Authority of the U.K. published findings from its “detailed Phase 2 investigation,” stating that it had provisionally found that the deal would eliminate competition in the product design, image editing, and illustration software markets. The report stated that 80% of the professional product design market in the U.K. uses Figma’s software.
Then there was The European Commission, which told Adobe last month that it believed the Figma acquisition might reduce competition globally for interactive product design software and of other creative design software.
One month after these reports, Adobe and Figma decided to call it quits, they said yesterday. And that comes with a steep $1 billion breakup fee Adobe will have to pay Figma, per earlier agreements.
“It’s not the outcome we had hoped for, but 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,” a statement posted by Figma cofounder and CEO Dylan Field reads.
It’s not just the Figma deal in the spotlight this week. On Sunday, the biotech company Illumina agreed to divest cancer test maker Grail, which it acquired for $7.1 billion two years ago. That was after the FTC’s successful court appeal that argued that the deal would be anticompetitive (the European Commission had also challenged the deal).
All of this spells very bad news for private market investors, as it will dissuade some companies from attempting certain M&A deals at all (though M&A agreements are still getting signed. Just check out the lineup in today's deals section). It goes to show why some VCs are feeling an additional sense of urgency and have started publicly pushing back, such as some firms’ condemnation of the Federal Trade Commission from earlier this month regarding its ongoing effort to block the Microsoft-Activision Blizzard acquisition.
In other news…Nikola founder Trevor Milton yesterday was sentenced to four years in prison, a long-awaited determination after Milton was found guilty of defrauding investors regarding his electric vehicle company in Oct. 2022. “Over the course of many months, you used your considerable social media skills to tout your company in ways that were materially false,” the judge said. In court, Milton said “I obviously feel awful for all the resources and time this has caused everybody. I don’t think you can feel human without feeling terrible for everyone involved. My intent was not to harm others.”
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.
