What happened
Shares of app-monetization platform ironSource (IS) popped on Monday after Unity Software (U 0.92%) officially rejected a proposal to merge with AppLovin, in favor of merging with ironSource. As of 10 a.m. ET today, ironSource stock was up 13%.
So what
This morning, Unity's management released a statement saying it officially intends to merge with ironSource. Unity CEO John Riccitiello said, "The Board continues to believe that the ironSource transaction is compelling and will deliver an opportunity to generate long-term value."
For context, Unity and ironSource first announced their merger on July 13. And in my opinion, Riccitiello chose to say this merger was "compelling" today for a reason. This was the same word AppLovin's management used on Aug. 9 when it submitted an unsolicited merger proposal to Unity.
In other words, it appears Unity's management is saying it doesn't need AppLovin's compelling proposal because it already has a plan that's more compelling for shareholders. AppLovin's bid had put the ironSource merger in question. But with today's news, those doubts are now laid to rest, and ironSource stock popped as a result.
Now what
I tend to agree with Unity. By merging with ironSource, the top game-creation platform is merging with the top monetization platform, and that could be a combination that delivers significant shareholder value in coming years.
That said, investors still need to remain cautiously optimistic about the Unity-ironSource merger. There's no shortage of stock market examples of acquisitions that didn't pay off with revenue growth or cost-saving synergies. Therefore, while I believe Unity is making the right move by merging with ironSource, it still has plenty of execution risk.
