Adobe backtracks on a report that the DOJ intends to sue to block a $20 billion Figma deal

Adobe backtracks shares fell up to 5% in extended trading after a report that also the US Justice Department is planning a lawsuit to block the company’s $20 billion acquisition of startup Figma.

The agreement, announced in September, would assist Adobe in rapidly expanding its portfolio also acquiring technology. That could enhance existing programmes in the Creative Cloud bundle used by businesses and independent designers. Adobe backtracks estimates that Figma will generate over $400 million in annualised recurring revenue by 2022.

However, by acquiring Figma, a tool businesses use to design apps also websites and collaborate on ideas. Adobe would remove a rising competitor from the market. Adobe, which provided the XD software-design tool that failed to generate significant revenue, also is a major player in the design software market.

In the United States, competition authorities have become more willing to take a hard line against large corporations’ expansion efforts.

In December, the United States Federal Trade Commission filed a lawsuit attempting to prevent Microsoft from acquiring video game publisher Activision Blizzard for nearly $69 billion.

“We’ve been delight to hear from customers across the design space. Who tell us they are excited about the benefits the transaction will unlock,” an Adobe spokesperson told news in an email.

“Today, Adobe and Figma focus on very different product areas. Figma is a pioneer in interactive product design, focusing on developing a collaborative web platform. Adobe is a market leader in creative tools, assisting millions of users in creating amazing visual content.

On a December conference call, David Wadhwani, also president of Adobe’s digital media business. Also a figure in the Figma deal, told analysts that “the regulatory process is proceeding as expect. He said Adobe was preoccupied with the Justice Department’s second request process as the federal agency investigated the deal.