Unity to merge with ironSource in a deal valuing ironSource at $4.4bn

David Murphy

Real-time 3D (RT3D) content creation platform Unity, whose tech is used in more than half of the world’s videogame titles, is merging with app monetization and distribution firm ironSource in an all-stock deal that values ironSource at $4.4bn (£3.72bn).

“We believe the world is a better place with more successful creators in it,” said Unity CEO, John Riccitiello. The combination of Unity and ironSource better supports creators of all sizes by giving them all the tools they need to create and grow successful apps in gaming and other consumer-facing verticals like eCommerce.This is a step further toward realizing our vision of a fully integrated platform that helps creators in every step of their RT3D journey. We look forward to welcoming Tomer Bar-Zeev, the CEO of ironSource, and the rest of ironSource’s talented team into the Unity family.”

Unity said that the end-to-end platform synergy from the combination of the companies will enhance its offerings for creators of all sizes. Together with ironSource, it said it will transform and streamline how live games, RT3D apps and services are made by turning today’s linear creation and growth process into a deeply connected and interactive one. By integrating creation and growth more tightly, it said, creators will be able to leverage data on audience feedback to improve content from the earliest stage in the creation process, and throughout the content lifecycle. This will unlock a flywheel where data from growth feeds improvements in content, which in turn drives more business success for the content or app.

“To succeed today, creators need an extensive set of solutions and products working in concert to power amazing user experiences and sustainable business growth,” said Tomer Bar-Zeev, CEO of ironSource. “The combination of Unity and ironSource brings together every product needed to power that flywheel of growth, in a differentiated platform positioned to lead our category and beyond. We couldn’t be more excited about our shared mission to remove obstacles for creators to grow."

The deal will bring together the Unity game engine and editor, Unity Ads, and the rest of Unity Gaming Services (UGS) with ironSource’s mediation and publishing platforms. In the near term, ironSource's mediation platform will leverage the combined strength of the two companies' ad networks to deliver increased user reach and data scale, and provide an increased return on ad spend to advertisers. For telcos, the combination of Unity and ironSource will provide them with enhanced opportunities to leverage interactive gaming and RT3D experiences on-device.

Luis Visoso, Unity’s CFO, said that the companies expected to generate $300m in annual EBITDA synergies by year three.

Upon closing of the merger, Tomer Bar-Zeev will join Unity’s Board of Directors and serve as a key member of Unity’s executive leadership team. In addition, two additional ironSource Directors will join the Unity Board of Directors upon closing of the transaction.

LifeStreet CEO Levi Matkins believes the merger may be a sign of caution on Unit's part. He said: "At the start of the year, we saw the biggest tech deal ever with Microsoft’s acquisition of Activision and the games industry was truly having its moment, experiencing both unprecedented growth and unprecedented consolidation. A little more than 6 months later we are seeing a very different scenario: The ‘merger’ (though in this case Unity is more buying IronSource) between two companies whose valuations have plummeted.

"Unity and ironSource is a merger that may be motivated by a ‘safety in numbers’ mentality. When valuations and the metaverse buzz were strong, Unity appeared to be focusing primarily on the future potential of its game engine. But with a downturn in the more speculative businesses in the public markets, this is perhaps a recognition by Unity that its monetization suite was less competitive, and it made the move to bolster its more immediate business. In the end, this follows the trend of consolidation, and Unity and ironSource decided that they’d be better positioned to succeed together. The purchase already seems to have boosted ironSource’s valuation, which is expected given the 74 per cent premium Unity paid. It will be interesting to see in the coming quarters if it also pays off for Unity."