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Adobe-Figma: Anti-trust Actions that Forsake the Future for the Present

Adobe has announced the abandonment of its acquisition of Figma owing to a lack of confidence in getting regulatory approval for anti-trust reasons.

Along with IPOs, strategic acquisitions are the major source of financial return for investors in startups. Fewer acquisitions (especially big acquisitions) means lower returns for investors. Lower returns mean negative pressure on startup investment and negative pressure on the formation of new businesses in general.

Blocking acquisitions is a blunt instrument for addressing anti-trust issues because it throttles the incentives that are there for startups to exist in the first place. It’s not just about startups; blocking acquisitions throttles incentives for business investment in general.

The only long term solution to anti-trust problems is to have a system that incentivises new players.

Any anti-trust action to block acquisitions today should account for its effect on the formation and investment in future businesses. This is because anti-trust is about benefiting consumers, and consumers are best served by a long term environment that incentivises new business creation and competition.

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I’m excited about the future of Figma, who have excellent products and a young and incredibly capable founder, Dylan Field. My guess is that Figma will do very well.

Yet, to focus on this, or on the breakup fee that will be received by Figma, misses the point.

There has been a real change of expectations around what is possible with acquisitions and that is long term headwind for business formation and for a competitive and diverse marketplace for consumers.

Notes:

  1. In addition to IPOs, one can include financial acquisitions, e.g. by private equity

2. “new players” can include new product lines or divisions of existing companies. The incentives provided by the possibility of acquisition are also real for them and their investors/owners.

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