Reports have emerged that game engine provider Unity has held acquisition talks with an investor consortium involving private equity firm Silver Lake Partners and Saudi Arabia's sovereign wealth fund, the Public Investment Fund (PIF).
Reuters reported on November 5, local time, that Silver Lake—which holds an approximately 8% stake in Unity—and PIF approached Unity in recent weeks, and that Unity is working with an investment bank to evaluate its options. Reuters added that no deal is finalized and terms could still change.
The bidding consortium reportedly discussed a valuation of around $25 billion (approx. 33.7 trillion won) prior to Unity's earnings release. Following the earnings report, Unity's market capitalization rose to roughly $21.5 billion (approx. 29 trillion won), and its stock jumped about 4% in extended trading immediately following the Reuters report. Unity has declined to comment. Silver Lake and PIF did not immediately respond.
This move comes against the backdrop of a broader wave of gaming industry mergers and acquisitions. Silver Lake and PIF were also part of the consortium that took Electronic Arts (EA) private in August for approximately $55 billion (approx. 74.1 trillion won). That consortium also included Affinity Partners, and Reuters described the transaction as one of the largest leveraged buyouts (LBOs) in history.
A deal would give them control of a major company that produces not only game development tools, but also the underlying game engine and real-time 3D software suite. Following the EA deal, this could also become one of the largest software industry LBOs in recent years. Video game developers Scopely and Niantic—co-owned by the two firms alongside Affinity—also use the Unity engine. Scopely is the developer of 'Monopoly GO!', while Niantic developed 'Pokémon GO'.
Silver Lake is one of the largest tech-focused private equity firms. It invested up to $400 million (approx. 539.1 billion won) in Unity in 2017 and remains one of its largest shareholders. Egon Durban of Silver Lake also sits on Unity's board of directors, and Reuters noted that he typically recuses himself from sale discussions.
Meanwhile, Unity beat market expectations in its Q3 financial results released on November 5, local time. Driven by growth in its advertising and game development businesses, revenue reached $622.1 million, a 32% increase year-over-year. Thanks to the growth of its AI-driven advertising platform Vector, the company also posted its first quarterly GAAP profit since its September 2020 IPO.
Whether the deal will be finalized and its ultimate terms remain unconfirmed, and with neither party publicly responding to the situation, the possibility remains that no transaction will take place.
