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Comment by cowpig | Hacker News Reader

According to Wikipedia, AppLovin has 6.16Bn in total assets and 2.5Bn revenue. How can a company this size bid 17.54Bn to acquire Unity?

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The title is too simplified. The merger/acquisition will create a new entity in which Unity will own 55% of the total shares and 49% of voting shares. Unity CEO John Riccitiello will become CEO of the combined business, while AppLovin CEO Adam Foroughi will take the COO role.

This is basically a desperate play by AppLovin to prevent Unity from acquiring ironSource (its main competitor) and cutting it out of the mobile ads business.

It's so interesting that the move to avoid being destroyed is to destroy oneself.

If you can't beat 'em, reverse-pseudo-corporate-join 'em?

Reminds me of how FireEye bought Mandiant, then 8 years later Mandiant sold FireEye.

How is it possible for the subsidiary to sell the parent?

In a lot of these acquisitions, it's not a becomes a subsidiary of b, it's often that all of the employees of A are transferred to B under something like a TUPE [0]. As part of these acquisitions, the leadership of the acquired team can be offered senior positions in the acquirer, e.g. in this case the CEO of AppLovin would become the COO of the new world.

Combine these two things and with a bit of luck and timing, AB corp now decided that A isn't in its best interests anymore and decides to sell that part of its business.

[0] https://www.acas.org.uk/employee-rights-during-a-tupe-transf...

Huh, so weirdly interesting. Thanks for the explanation!

Why on earth would Unity accept giving this company majority control... a company that is worth less than Unity.

Just a dumb and terrible proposal

According to the proposal the non-voting C-class shares are going to be given voting rights, so Unity stock holders will end up with the majority of voting rights too after that goes through.

Well, that's a bit less ridiculous then

It is still ridiculous since AppLovin is cornering Unity into an unsolicited edge

What does this mean?

Unity can turn down the proposal. And there is nothing wrong with unsolicited proposals. And I don't understand what an unsolicited edge is?

So who's acquiring whom? I am very confused.

Interesting (and probably accurate) take.

Worth noting that this transaction excludes the $4B proposed purchase of IronSource by Unity.

-- In the same manner that Twilio acquired Sendgrid --

https://techcrunch.com/2018/10/15/twilio-acquires-email-api-...

The valuation (based on the trading price of each stock) of the combined companies is more than the $18 billion (it can vary in exciting ways).

This article lays it out pretty clearly:

https://www.barrons.com/articles/applovin-unity-software-tak...

I just commented about this. I get the impression large investors are using other lesser known companies to make acquisitions probably to conceal financial records somehow. It's like a shell corp but one that is legitimate enough to not be called a shell corp outright.

> I get the impression large investors are using other lesser known companies to make acquisitions probably to conceal financial records somehow. It's like a shell corp but one that is legitimate enough to not be called a shell corp outright.

That's simply not correct.

It's an all stock transaction, so AppLovin can issue stock equal to $17.5B and transfer that to owners of Unity stock in return for their Unity stock. Then the two companies merge and the AppLovin stock owners now own both.

You can read details here:

> in a transaction where each outstanding share of Unity common stock would be exchanged for 1.152 shares of AppLovin Class A voting common stock and 0.314 shares of AppLovin Class C non-voting common stock. Under these terms, current Unity shareholders would receive approximately 55.0% of the outstanding shares of the combined company, with the Class A shares representing approximately 49.0% of the outstanding voting rights of the combined company.

https://www.businesswire.com/news/home/20220809005530/en/App...

Do AppLovin stock holders prior to the acquisition see a massive price decrease in their shares?

Seems like they’re basically printing double the existing stock to cover it

No, because the acquisition makes AppLovin more valuable. If merging with Unity makes AppLovin $17.5B more valuable than it was previously, then the existing stock's value doesn't change.

Of course, the market may disagree on the value in either direction.

Mergers are weird.

There's an added complication that some of the stock is class-C non-voting stock (which is less valuable) but they plan to make it voting stock at some stage after the transaction.

Also, Unity stock holders end up holding 55% of the merged company.

And Unity is a loss making company, with only $297.0 Q2 revenue. https://www.marketscreener.com/quote/stock/UNITY-SOFTWARE-IN...

$292.0 million, but yeah.

It would only go in half if they issued double the shares and didn’t get any assets.

In this case, the expectation is that the value of Unity equals roughly the value of the issued shares.

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