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Is the AppLovin, Unity, and ironSource story really over?

Unity have reaffirmed their commitment to the ironSource merger, but AppLovin may not be out of the fight
Is the AppLovin, Unity, and ironSource story really over?
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Yesterday, Unity’s board of directors unanimously voted to reject an acquisition offer by AppLovin in favour of continuing with the planned merger with ironSource, but according to a new column by Reuters it appears that AppLovin are down, but not out.

Some analysts and industry experts have theorized that AppLovin’s plans were due to fears that they wouldn’t be able to compete with a new entity of Unity and ironSource. Gamebake CEO Michael Hudson stated "With Unity being the development platform of choice for roughly 70% of all mobile developers, then you can see why AppLovin, with its Ad network and its Mediation platform, may see Unity and ironSource merging to be a big blow to their business."

Of the three companies, Unity is arguably the most powerful, trading at 12 times its projected revenue for the year, compared to just over 4 times for AppLovin and ironSource, making their plans to merge with ironSource more realistic – whereas Unity can use its richly valued currency to buy the smaller ironSource, AppLovin’s proposal would see them own just 45 per cent of the combined entity should their acquisition have been accepted.

Another bonus that may have attracted shareholders, however, was the promise of savings of $700 million a year and $3 billion for Unity shareholders today, compared to just $300 million and $1.7 billion from the ironSource transaction.

Can AppLovin find a way forward?

However, it's clear that AppLovin could up their offer, if necessary, offering Unity shareholders a larger cut of the combined company. However, this would put the company at risk of greater losses.

Based on current stock prices, Breakingview project a 3 per cent return on investment for a potential acquisition of Unity by 2024 – pressing too hard could see this ROI shrink even further. To make matters worse, the original 18% premium on announcement has already been scuppered by falling stock prices. As such, the company would need to offer more stock than anticipated – or, indeed, hoped – should they decide that a Unity acquisition is vital for the company’s business goals.

A further push is possible and, while the ball is in Unity’s court, it doesn’t appear that the game is over quite yet.

Last year, both AppLovin and ironSource made our list of the top 50 game makers. Keep your eye on our site, as we'll be announcing our list for 2022 later this month.