ironSource Acquisition: Key Details, Impact, and What Comes Next

Unity's acquisition of ironSource marks a significant milestone in the tech industry, creating a comprehensive platform for game developers. This merger combines Unity's game engine with ironSource's ad tech, enhancing tools for building, running, and monetizing games. The strategic move aims to streamline the development lifecycle, offering developers a robust suite of solutions to grow their creations.

What Is ironSource?

Founded in 2010, ironSource provides a comprehensive platform designed to help app developers turn their apps into scalable businesses. Its core products include monetization solutions, marketing tools, analytics, and publishing services. Unique selling points include advanced ad mediation, high-impact ad formats, and ROI-positive user growth campaigns. Additionally, ironSource offers on-device solutions for telecom operators and creative management tools to enhance user engagement, making it a one-stop solution for app developers.

Who Acquired ironSource?

Unity Technologies is a pivotal player in the real-time development industry, offering a versatile platform for creating 3D, 2D, VR, and AR applications. Key products include the Unity Engine, comprehensive tools for game development, industry solutions for transforming CAD and 3D data, and growth tools to help developers scale their applications. Unity's market influence is substantial, with support for over 20 end-user platforms and widespread adoption, including 82 of the top 100 games.

When Was ironSource Acquired?

Unity completed its acquisition of ironSource on November 7, 2022. This strategic move came during a period marked by economic downturns and significant industry changes, such as Apple's App Tracking Transparency (ATT) framework, which impacted advertising revenues. The merger aimed to consolidate game development and monetization tools, creating a comprehensive platform for developers. Despite facing competitive pressures, including an unsolicited bid from AppLovin, Unity's decision to proceed with the merger underscores its commitment to enhancing developer support and market position.

Why Was ironSource Acquired?

• Market Expansion: The merger positions Unity as the industry’s leading end-to-end platform for mobile app creators, supporting developers through the entire development lifecycle. This expansion allows Unity to serve a broader market by offering comprehensive tools and services for building, running, and growing immersive, real-time games and 3D experiences.
• Technology Integration: The integration of ironSource’s technology with Unity’s platform enhances the tools available to developers. This includes the use of Unity’s mediation platform LevelPlay for game monetization and the deeper integration of product portfolios to strengthen the feedback loop between creating and growing games.
• Competitive Advantage: The combined company offers unmatched depth and breadth of tools and services in the industry, providing a complete ecosystem for developers. This competitive advantage is further strengthened by the expected profitability and positive free cash flow of the merged entity, as well as the enhanced ability to support developers at every stage of the development cycle.

Acquisition Terms

• Acquisition Price: The all-stock transaction values ironSource at approximately $4.4 billion.
• Payment Method: The transaction was completed entirely in stock, with each ordinary share of ironSource exchanged for 0.1089 shares of Unity common stock.
• Key Conditions or Agreements:
  • The merger is subject to customary closing conditions, regulatory, and shareholder approval.
  • Unity’s Board of Directors authorized a 24-month share buyback program of up to $2.5 billion, effective upon closing of the merger.
  • Silver Lake and Sequoia committed to purchasing an aggregate of $1 billion in convertible notes from Unity at closing.
  • The convertible notes to be issued to Silver Lake and Sequoia are due in 2027 and bear an interest rate of 2% per annum, with a conversion price of $48.89 per share.
  • Unity rejected an unsolicited bid from AppLovin to merge for $20 billion, which was contingent on Unity abandoning its acquisition of ironSource.
  • The merger aims to integrate ironSource's technology into Unity's Create and Operate Solutions, including the rebranding of Unity Mediation to Unity LevelPlay.

Impact on ironSource

The acquisition of ironSource by Unity has led to significant changes in operations and management. Three new board members from ironSource, including CEO Tomer Bar-Zeev, have joined Unity's Board of Directors, expanding it from 10 to 13 members. Additionally, ironSource's headquarters in Israel will serve as an additional global hub for Unity. The integration of ironSource's technology into Unity's existing business lines has resulted in the retirement of Unity's mediation tool, which has been replaced by Unity LevelPlay. This unified mediation platform aims to streamline operations and enhance the overall developer experience.

The merger has also impacted product offerings and services. Developers now have access to a more comprehensive set of tools for building, running, and monetizing games. ironSource's Supersonic game studio and LevelPlay mediation offering have been integrated into Unity's Create and Operate Solutions, along with other tools from ironSource's acquisitions like Bidalgo, Tapjoy, and Luna Labs. While some developers have expressed skepticism about the integration of monetization tools with game creation engines, the combined platform is designed to provide more value across the entire development journey. Employee reactions have been mixed, with some reporting a toxic atmosphere and dissatisfaction with new management, while others remain optimistic about the merger's potential benefits.

For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smoother integration and better outcomes for all stakeholders.