Business Platform ironSource Merging With Thoma Bravo Advantage (TBA) In $11.1 Billion Deal

By Amit Chowdhry ● March 22, 2021
  • ironSource, a leading business platform for the app economy, has entered into a definitive agreement to merge with Thoma Bravo Advantage (NYSE: TBA). These are the details.

ironSource, a leading business platform for the app economy, has entered into a definitive agreement to merge with Thoma Bravo Advantage (NYSE: TBA), a publicly-traded special purpose acquisition company, to bring to the public markets a highly-profitable and scalable business that provides a comprehensive business platform for app developers. 

Thoma Bravo Advantage has agreed to combine with ironSource based on a $11.1 billion pro forma equity valuation and the transaction is supported by a $1.3 billion oversubscribed Class A ordinary share PIPE led by a $300 million investment by an affiliate of Thoma Bravo as well as investments from Tiger Global Management, LLC, Counterpoint Global (Morgan Stanley), Nuveen, LLC, Hedosophia, Wellington Management, The Baupost Group, and certain funds managed by Fidelity Investments Canada ULC and other institutional investors.

ironSource provides the most comprehensive business platform for the app economy. And the platform is designed to enable any app or game developer to turn their app into a scalable, successful business by helping them to monetize and analyze their app and grow and engage their users through multiple channels, including unique on-device distribution through partnerships with leading telecom operators and OEMs like Orange and Samsung. In 2020, ironSource grew revenue 83% year-over-year to $332 million with 94% from 291 customers with more than $100,000 of annual revenue, a dollar-based net expansion rate of 149%, and adjusted EBITDA margins of 31%. And the company serves over 2.3 billion monthly active users across its global customer base.

As a public company, ironSource is expected to benefit from the financial and operational support of Thoma Bravo – one of the most experienced and successful software investors in the world. Thoma Bravo has a track record of over 300 software investments and can provide ironSource with unparalleled industry expertise and a global network.

The app economy is one of the fastest-growing markets today, with millions of apps available to billions of users who spend 83% of their time on mobile devices inside apps. And within the app economy, games are the leading category of apps, accounting for the majority of apps in the Apple App Store in 2020 according to Statista, and ironSource has established a strong leadership position within this category, focusing its product development and innovation on building core infrastructure serving mobile game developers.

ironSource powers the business growth of 87% of the top 100 games, and has been ranked multiple times as one of the top 3 platforms for driving both quality and scaled user growth by leading industry indexes. Plus 14 of the 19 games published through the ironSource platform were ranked in the top 10 most downloaded games on either the Apple App Store or Google Play Store over the course of 2020, and one of them – Join Clash – was the most downloaded game in the world in February 2021.

The ironSource platform is made up of two solution suites ironSource Sonic and ironSource Aura. And the Sonic solution suite supports developers as they launch, monetize, and scale their apps and games. The Aura solution suite allows telecom operators to enrich the device experience by creating new engagement touchpoints that deliver relevant content for their users across the entire lifecycle of the device. This creates a unique on-device distribution channel for developers to promote their apps as an integral part of the device experience.

The combination of these 2 solution suites serves to differentiate the ironSource platform, making it the most comprehensive app business platform in the market and underpinning its market leadership. And that market leadership makes ironSource the de facto choice for customers looking to grow their app, and the breadth of its solutions means developers of all sizes and at all stages of growth have a way to leverage the platform. After a developer starts working with ironSource, they typically expand their use to multiple solutions within the platform, driving a high dollar-based net expansion rate and gross customer retention rate.

Thoma Bravo Advantage has agreed to combine with ironSource based on a $11.1 billion pro forma equity valuation and the transaction is supported by a $1.3 billion oversubscribed Class A ordinary share PIPE led by a $300 million investment by an affiliate of Thoma Bravo, as well as investments from Tiger Global Management, LLC, Counterpoint Global (Morgan Stanley), Nuveen, LLC, Hedosophia, Wellington Management, The Baupost Group, and certain funds managed by Fidelity Investments Canada ULC and other institutional investors.

The deal, which has been unanimously approved by the Boards of Directors of ironSource and Thoma Bravo Advantage, is expected to close in the second quarter of 2021, subject to customary closing conditions, including approval by Thoma Bravo Advantage’s shareholders.

Shares issued to the sponsor of Thoma Bravo Advantage will be subject to a 12-month lock-up with limited releases based on the trading price of the shares following the 150th day after the closing of the transaction. Nearly all of ironSource’s shareholders will be subject to a 6-month lock-up after the closing of the transaction, subject to the same early release applicable to Thoma Bravo Advantage.

Following the closing of the deal, ironSource will have a dual class equity structure whereby current shareholders of ironSource will own Class B ordinary shares with five votes per share and holders of Class A ordinary shares, including Thoma Bravo Advantage’s shareholders, will have one vote per share.

After giving effect to the transaction and assuming no redemptions by the Thoma Bravo Advantage shareholders, the company is expected to have approximately $740 million of unrestricted cash.

And total consideration to ironSource shareholders will be $10 billion, which is expected to be comprised of $1.5 billion in cash consideration and a majority of the shares of the combined company. Upon completion of the deal, the combined company will retain the ironSource Ltd. name.

KEY QUOTES:

“Joining forces with Thoma Bravo Advantage to bring ironSource to the public markets presents an opportunity to partner with the world’s leading software investor to achieve the next level of growth. Despite our previous progress pursuing a traditional IPO, when we met with Thoma Bravo Advantage we found an alignment of vision and shared conviction about the long-term growth we can drive at ironSource that made them the perfect partner as we take this next step in growing our company, and the market as a whole.”

— Tomer Bar Zeev, CEO and co-founder of ironSource

“As one of the fastest-growing and most innovative platforms for building and scaling businesses in the app economy, ironSource is well-positioned for continued success as a public company. With a full suite of solutions across the app growth life cycle – and a unique combination of scale, business growth, and profitability – we expect ironSource to further its market leadership position as a public company. We look forward to partnering closely with Tomer and the talented ironSource team in this exciting next chapter for the company.”

— Orlando Bravo, Chairman of the Board of Directors of Thoma Bravo Advantage, as well as a founder and managing partner of Thoma Bravo

“ironSource is a one-of-a-kind software company that combines an innovative, high-growth franchise with a deeply experienced management team that has a track record of success in a rapidly expanding market. We are thrilled to be partnering with ironSource as it enters the public markets and to be able to provide Thoma Bravo’s deep software expertise and financial support to the company as it continues its growth journey.”

— Robert (Tre) Sayle, CEO of Thoma Bravo Advantage, as well as a partner at Thoma Bravo

“Our solutions cover the entire game growth cycle, from growing your user base, to generating revenue to reinvest in growth, and then analyzing and optimizing the entire cycle to drive profitability. Using our platform, game developers are able to unlock a flywheel of continuous growth, and since our business model is aligned with our customer’s success, as they grow, we do too. While this cycle is most often leveraged by mobile games, it’s easily transferable to apps outside of gaming, and today 16% of our customers with more than $100,000 of annual revenue are already from industries beyond games.”

— Omer Kaplan, CRO and co-founder of ironSource

“The Aura solution suite represents a unique value-add for developers, allowing them to get their apps discovered on millions of devices worldwide. Equally important, however, is our ability to help telecom operators with digital transformation, enabling them to engage their users throughout the lifecycle of the device. By leveraging ironSource’s core capabilities around content monetization and user engagement, we were able to quickly build and deploy a solution suite for telecom operators that allows them to more fully participate in the app economy.”

— Arnon Harish, President and co-founder of ironSource

“This is a very proud moment for us at Viola and for me personally. A company where we were the first investors thrives and goes public as one of the largest public tech companies in Israeli history. We look forward to continuing to work with the amazing founding team of ironSource on their incredible journey.”

— Shlomo Dovrat, co-founder of Viola Ventures and board member at ironSource

“We invested in ironSource in 2019 because we saw a unique opportunity to partner with a founder-led company that not only operated in an exciting market, but had already achieved impressive, profitable growth and industry leadership,” said Daniel Pindur, Partner at CVC Capital Partners. “It’s been amazing to be part of ironSource’s journey so far, and incredibly rewarding to see the company enter its next chapter of growth,” added 

— Sebastian Kuenne, Managing Director and Head of CVC Growth Partners in Europe

The stock price of TBA is up more than 6% pre-market this morning due to the announcement.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.