Video game software company Unity can get bought by AppLovin or merge with ironSource, but it can’t do both.
Mobile app technology platform AppLovin on Tuesday offered to buy Unity in an all-stock deal valued at $20 billion. The proposal values Unity at $58.85 per share, a premium of 18% over its Monday closing price. Unity said it has received the offer and is evaluating it. It might be a tough deal to pass up, but it comes with strings attached:
- Unity would have to give up its proposed $4.4 billion acquisition of ad tech and monetization company ironSource if it accepts AppLovin's offer. And while Unity would control 55% of the new company’s shares and CEO John Riccitiello would remain in charge, Unity would only have 49% of the voting rights in the combined company.
- AppLovin would clearly be at a disadvantage if Unity follows through with its planned $4.4 billion ironSource purchase: IronSource is an AppLovin competitor, and whoever merges with Unity would gain a competitive advantage in the digital advertising and gaming markets.
- AppLovin has apparently been thinking about a deal ever since Unity and ironSource started working together: The company hired advisers to work on a bid after Unity announced its plans to acquire ironSource last month.
- Eric Seufert, editor of trade blog Mobile Dev Memo, called the proposed transaction “musical chairs on mobile,” saying, “This merger would marry two scaled ad networks with a formidable source of in-app games advertising supply.”
Regardless of where Unity goes, consolidation was basically inevitable.
- Apple made key changes to iOS’s data-tracking rules last year meant to improve privacy for users. Those changes drove some ad tech firms out of the market. Large companies, including all the major social platforms as well as Unity, have struggled with the changes, in part because Apple’s new opt-in privacy measures have made it more difficult to track the effectiveness of ads that drive user acquisition in mobile gaming.
- Seufert said these mobile app mergers have been predictable for some time now; Apple’s new rules just accelerated the process. AppLovin, for example, has been busy — it’s already purchased mobile ad and gaming companies including MoPub, Adjust and Machine Zone.