ADVFN News | How much Adobe is really paying for Figma: $20 billion

Figma’s co-founder and some employees are expected to earn billions in a historic retention package after the software giant takes over.

THE Adobe (NASDAQ: ADBE) sent Wall Street and Silicon Valley into a frenzy when it announced Thursday that it was buying design software startup Figma for $20 billion. But the deal is much more expensive for Adobe, given the historic retention package for CEO Dylan Field and employees worth $2.3 billion at press time — more than $1 billion for Field alone.

The additional compensation comes in the form of six million restricted stock units, or RSUs, that vest over four years, Adobe disclosed in its settlement announcement. But half of that is directed at Field alone, according to The Forbes. And Adobe initially offered Field more, sources add, before the CEO decided on a more or less amicable split with the team.

Adobe is also traded on B3 via the ticker (BOV:ADBE34).

Adobe did not respond to a request for comment on Field’s retention package. A Figma spokesman declined to comment on behalf of Field and Figma.

At Adobe’s announced acquisition price of $20 billion in cash and stock, the total retention package would be worth about $2.3 billion. With Adobe shares down more than 20% since the news broke, the deal would be worth $18 billion today, with an additional $1.7 billion retained.

Not all employees benefit. As reproduced in a regulatory filing on the proposed acquisition, Figma told officials that Figma and Adobe would jointly decide which “subset of Figmate” would receive such concessions. “Our team continues to grow rapidly and we want to create opportunities for new hires in the pre-closure period to also consider retention grants,” the company wrote.

The proposed acquisition, which the companies said they expect to complete in 2023, has sparked backlash among some Adobe investors concerned about its price tag — 50 times Figma’s expected revenue for the year — and among some Figma fans in the design community, who reached out for the meme and reshared Field’s 2021 tweet that “our goal is to be Figma, not Adobe” (Wallace left the company in 2021).

Adobe shares have fallen more than 20% since the announcement, wiping out $29 billion in market capitalization and prompting several prominent analysts to cut their ratings.

Analysts say Adobe’s reasons for doing the deal, even at such a high price, are simple: The move pulls Adobe into the cloud, an area where it has historically struggled to gain traction, while reaching out to a new group of design software. Beyond just removing a potential existential threat, the acquisition of Figma also creates an opportunity to expand that business by integrating with Adobe’s broader user base. To do this, Adobe will likely look more to the model of LinkedIn, which Microsoft bought for $26 billion in 2016 and which Microsoft ceased to function independently in recent years under former CEO Jeff Weiner (Field’s mentor, by the way).

A big part of that is retaining Field and his top aides, and Adobe is paying a premium for that. Field, 30, has run Figma since 2012 and carries credibility with clients and the wider design community, they say. (Recent tweets, perhaps, aside.) “It’s clear they want him to stay,” said Alex Zukin, an analyst at Wolfe Research, who called the timing and cost of the deal more surprising than its substance. “If it wasn’t for him [como uma futura opção de CEO da Adobe]for the value of the property carried with it.”

Still, it’s a historically large package to keep up with in recent technological history, especially in business software. Salesforce’s acquisition of Slack in 2021 and Microsoft’s acquisition of LinkedIn in 2016, both major acquisitions valued at $27 billion and $26 billion, respectively, involved public companies buying public companies and therefore had very little additional compensation. : nothing for Slack co-founder and CEO Stewart Butterfield , and just $7 million for LinkedIn CEO Jeff Weiner (a.k.a. Field’s mentor).

Meanwhile, IBM’s $15 billion purchase of Mobileye in 2017 only revised CEO Amnon Shashua’s acquisition schedule to get more stock, while Okta’s $6.5 billion acquisition of Auth0 last year included $25 million in employee and a separate undisclosed amount for the CEO.

To find more technologically demanding retention packages, you need to turn to consumer products. Walmart’s fall 2016 acquisition of e-commerce site for $3 billion in cash and $300 million in stock included a 3.5 million restricted stock package for CEO Marc Lore, worth about $250 at the time million dollars, and twice as much when they were fully ready to invest five years later. Walmart shut down in 2020, but Lore lasted longer, exiting more than four years after the sale in early 2021.

More recently, Intuit’s $7 billion acquisition of personal finance website Credit Karma in 2020 also included $300 million in RSUs for “certain” employees: executives received about $125 million per signup, while founder and CEO Kenneth Lin received nearly $75 million in restricted stock, plus another $40 million in cash from Credit Karma’s board.

The gold standard for founder packages in tech remains what Facebook offered founders Jan Koum and Brian Acton, on top of the billions they were already due, when it bought their startup WhatsApp for $19 billion in 2014. The messaging app received 45.9 million RSUs, worth $3.6 billion at the time and more than $7 billion four years later. CEO Koum received nearly 25 million RSUs in a retention package worth $1.9 billion at the time; although he left six months before the end of his four-year vesting period, Facebook’s rising share price meant that his vested retained stock was still worth about $3 billion. (Acton, meanwhile, said in 2018 that his walkout was leaving $850 million on the table.)

Several leaders who did not receive a large portion of the retention package did not stay. Salesforce’s $6.5 billion acquisition of MuleSoft in 2018 and Cisco’s $3.7 billion purchase of AppDynamics in 2017 revealed neither of these packages on record. The CEO of both companies left within two years – with AppDynamics CEO David Wadhwani who helped acquire Figma now as an executive at Adobe.

Meanwhile, Salesforce’s $15.7 billion acquisition of Tableau in 2019, another public deal, included nearly $20 million in new RSUs for then-CEO Adam Selipski, as well as a plan to grant him more more.more on improved capital grants. It wasn’t enough: Less than two years later, Selipsky returned to his former employer Amazon Web Services to take over his role as CEO.

While analysts may question the price Adobe paid for Figma in the short term as a “defensive move” — especially combined with the weaker earnings forecast that has caused recent pressure on the stock — the retention package makes sense, both in terms of duration and size. Cowen analyst Derrick Wood sees similarities to the generous compensation package Snowflake offered CEO Frank Slootman ahead of the cloud data company’s IPO in 2020. To make the gamble pay off, Adobe needs Field and his “Figmates,” notes analyst Gregg Moskovitz. at Mizuho Americas – and Figma knows that too.

“This reflects the fact that Figma was a high-performing company with a lot of options, so it certainly didn’t have to sell,” says Moskovitz.

With information from Forbes

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