Regulators, these days, have been feeling their oats. Seems like nearly every major piece of M&A activity is stymied by one country’s regulator or another, convinced that all competition will grind to a halt the second a deal goes through. One of the latest comes out of the UK, where Adobe (NASDAQ:ADBE) is under fire for its planned buyout of Figma.
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The planned buyout—said to come with a hefty $20 billion price tag—is facing scrutiny in the UK over its potential to harm innovation, reports note, especially given how many of the UK’s digital designers are turning to Figma. Indeed, according to research from the Competition and Markets Authority, Adobe buying Figma would “eliminate competition” as well as “remove Figma as a threat to Adobe’s flagship Photoshop and Illustrator products.” Adobe outright refused to offer the CMA any concessions to allay concerns, so the probe went forward and found likely what the CMA expected it to find all along. The CMA, however, noted that it was “open to consult” with those interested before making any final decision.
Did This Market Need Protecting?
The CMA’s biggest sticking point, at last report, is Adobe’s refusal to get rid of its “overlapping operations.” While Figma doesn’t exactly seem to be that competitive with Adobe, let alone its primary opposition, the CMA appears to think otherwise. Reports note that Figma and its FigJam whiteboarding tool tends to focus more on user experience (UX), product design, and prototype production. Meanwhile, Adobe’s focus is on digital illustration outright. Figma was, at one point, a competitor with Adobe on the UX front. However, Adobe actually pulled out of product design by getting rid of the ability to even purchase Adobe product design software as a standalone tool. The CMA suggests that was “…a consequence of the merger.”
Is Adobe Stock a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ADBE stock based on 20 Buys, seven Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After an 89.65% rally in its share price over the past year, the average ADBE price target of $612.17 per share implies 1.29% downside risk.
