Adobe has called off its planned $20 billion purchase of design software startup Figma following pushback from antitrust regulators in the U.K. and European Union.

Adobe, which will pay a $1 billion deal termination fee to Figma, said it saw “no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority” to complete the deal. The purchase, announced in 2022, would have ranked among the largest acquisitions of a venture-backed startup in recent years.

San Francisco-based Figma was founded in 2012 and has raised more than $333 million from investors including a who’s who of Silicon Valley names: Sequoia Capital, Andreessen Horowitz, Greylock and Kleiner Perkins.

The Adobe deal would have been for double Figma’s $10 billion valuation from a 2021 funding round. Among investors, Index Ventures likely would have gained the most. The New York-based firm co-led Figma’s $3.9 million seed round in 2013 and went on to participate in follow-on rounds.

Regulators scrutinize startup deals

Acquisitions of startups by larger technology companies has drawn increasing scrutiny from regulators in Europe and the U.S. in recent years. The latest major deal to come under intense pressure from antitrust regulators — though it ultimately went through in October — was Microsoft’s $69 billion acquisition of Activision-Blizzard.

In the case of Figma, regulators expressed concern that Adobe would be taking out one of its major rivals, harming competition. Figma offers cloud-based collaboration software for graphic, web, UX and other digital designers.

Some investors and analysts have said the more challenging regulatory environment could have a chilling effect on the startup ecosystem by limiting the exit opportunities for venture-backed companies. The vast majority — around 90% by many estimates — of successful exit events for startups are M&A deals.

​​”The effects will be felt not only amongst big tech, but also by smaller technology companies who may not be able to command as favorable exit premiums,” Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, told Reuters. “In the case of Figma, it had accepted an offer from Adobe at twice its valuation.”

Related reading:

• Even Before Figma Deal, Design Startup Funding Looked Good
• Figma’s Venture Backers Win Big With Adobe’s $20B M&A Deal

Illustration: Dom Guzman