Why Adobe Really Pays Way Over $20 Billion for Figma and CEO Dylan Field

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Figma’s co-founder and some employees will make billions more in a historic retention package following its acquisition by the software giant.

Adobe caused a stir on Wall Street and in Silicon Valley when it announced Thursday that it would buy design software startup Figma for $20 billion. But the deal is much more expensive for Adobe, due to a historic retention package for CEO Dylan Field and employees worth $2.3 billion at the time of announcement — more than $1 billion of that for Field alone.

The additional compensation comes in the form of six million Limited Inventory Units, or RSUs, that will vest for four years, Adobe announced in announcing the deal. But half of it is specifically for Field alone, two knowledgeable sources say UKTN. And Adobe initially offered Field more, the sources add, before the CEO came to a more or less equal distribution of the workforce.

Adobe did not respond to a request for comment on Field’s retention package. A spokesperson for Figma 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 approximately $2.3 billion. With shares of Adobe down more than 20% since the news, the deal is said to be $18 billion today, with $1.7 billion in additional retention. Not all employees benefit from it. As reflected in a regulatory filing regarding the proposed acquisition, Figma told employees that Figma and Adobe would jointly decide which “subset of Figmates” would receive such grants. “Our team is still growing rapidly and we want to create opportunities for new hires during the pre-close period to also qualify for retention allowances,” the company wrote.

The proposed acquisition, which the companies said they expected to close in 2023, has sparked backlash from some Adobe investors who were concerned about its cost — $50 times Figma’s projected revenue for the year — and to some Figma fans in the design community, who turned to memes and re-shared a 2021 Field tweet that “our goal is to be Figma and not Adobe.” Shares of Adobe have fallen more than 20% since the announcement, evaporating $29 billion in market cap and helping several prominent analysts lower their ratings.

The deal makes Field and co-founder Evan Wallace billionaires. (Wallace left the company in 2021). Adobe’s reasons for closing the deal, even at such a high price, are simple, analysts say: The move is pulling Adobe into the cloud, an area where it has historically struggled to gain traction, while bringing a new cohort of customers. of design software. In addition to eliminating a potential existential threat, the purchase of Figma also provides an opportunity to grow that business by integrating it into Adobe’s wider user base. To do that, Adobe will likely look more closely at LinkedIn’s model, which Microsoft acquired in 2016 for $26 billion and which Microsoft ran largely independently in subsequent years under former CEO Jeff Weiner (a mentor of Field’s, by the way).

A big part of that is keeping Field and his top lieutenants, and Adobe pays a premium to do this. Field, 30, has been running Figma since 2012, adding credibility to clients and the wider designer community, they say. (Recent tweets, perhaps aside.) “Obviously they want him to stay,” said Wolfe Research analyst Alex Zukin, who called the deal’s timing and price more surprising than its content. “If It’s Not For Him” [as a future CEO option for Adobe]for the value of the good he brings.”

Still, it’s an all-time great retention package in recent tech history, especially in enterprise software. The acquisition of Slack by Salesforce in 2021 and the acquisition of LinkedIn by Microsoft in 2016, both larger acquisitions of $27 billion and $26 billion, included public companies that bought public companies, so had very little additional compensation: none for Slack. co-founder and CEO Stewart Butterfield, and just $7 million to LinkedIn CEO Jeff Weiner (a mentor of Field’s, by the way).

IBM’s $15 billion acquisition of Mobileye in 2017, meanwhile, just revised CEO Amnon Shashua’s vesting schedule to receive more shares, while Okta’s $6.5 billion acquisition of Auth0 last year $25 million for employees and a non-profit. disclosed separate amount for its CEO.

To find meatier retention packages in technology, one has to turn to consumer products. Walmart’s fall 2016 acquisition of e-commerce site Jet.com for $3 billion in cash and $300 million in inventory included a package of 3.5 million restricted shares for CEO Marc Lore, worth about $250 million at the time. and double that when she fully acquired it five years later. Walmart eventually closed Jet.com in 2020, but Lore lasted longer, leaving more than four years after the sale in early 2021.

More recently, Intuit’s $7 billion acquisition of personal finance site Credit Karma in 2020 also included $300 million in RSUs for “certain” employees: Executive officers received about $125 million per application, while founder and CEO Kenneth Li received nearly $75 million. in limited stock, plus an additional $40 million in cash from Credit Karma’s board.

The gold standard for tech founder packages remains what Facebook offered founders Jan Koum and Brian Acton, on top of the billions they would already receive when it acquired their startup WhatsApp in 2014 for $19 billion. Messaging app employees 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 in RSUs in a $1.9 billion retention package at the time; although he left six months before completing the four-year vesting period, Facebook’s rising stock price meant his acquired retention shares were still worth about $3 billion. (Acton, meanwhile, told) UKTN in 2018 that his protest departure put $850 million on the table.)

However, several leaders who didn’t receive much from a retention package stayed close. Salesforce’s $6.5 billion acquisition of MuleSoft in 2018 and Cisco’s $3.7 billion purchase of AppDynamics in 2017 did not disclose such packages. The CEOs of both companies left within two years – with David Wadhwani, CEO of AppDynamics, who eventually helped the acquisition of Figma, now as an Adobe executive.

Salesforce’s $15.7 billion acquisition of Tableau in 2019, meanwhile, another public-public deal, included nearly $20 million in new RSUs for then-CEO Adam Selipsky, as well as a plan to allocate him even more to revamped stock markets. . It wasn’t enough: Less than two years later, Selipsky returned to former employer Amazon Web Services to take his job as CEO.

For Adobe, while analysts may question the price it paid for Figma in the near term as a “defensive move” — which combined with a weaker earnings forecast is driving recent pressure on its stock — the retention package makes sense, both in terms of duration. and mate. Cowen analyst Derrick Wood sees similarities with the generous compensation package offered by Snowflake CEO Frank Slootman ahead of that cloud data company’s IPO in 2020. For the gamble to pay off, Adobe will need Field and its “Figmates,” notes Mizuho Americas analyst Gregg Moskovitz. on – and Figma knows it too.

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

Additional reporting by Iain Martin.

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