Unity Software Buyout Talks: Is $55 Per Share Too Low?

Unity Software (U) is reportedly in acquisition talks with a consortium including Silver Lake and Saudi Arabia's Public Investment Fund. Early reports suggest a valuation of $25 billion, or about $55 per share, which is roughly 9% above the stock's recent price of $50.34. Silver Lake is a long-time Unity investor, and its CEO has served on Unity's board since 2017.

The buyout interest comes after a remarkable turnaround at Unity. CEO Matt Bromberg, who joined in May 2024, scrapped the controversial runtime fee that had alienated game developers and rebuilt the advertising business around Vector, an AI-powered ad engine. Last quarter, Unity posted its first GAAP profit since going public in 2020, with revenue growth of 32% and Vector growing 126% year over year.

Vector's competitive edge stems from data: roughly three billion people play Unity-built games monthly, and over 90% of new Unity projects opt in to sharing in-game data, which trains Vector's AI. This inside-the-game advantage is difficult for rivals to replicate.

Separately, CoreWeave (CRWV) reported strong third-quarter results, with revenue up 168% to $3.7 billion and a backlog of $132.5 billion, but the company also posted a $709 million loss and carries $46.9 billion in debt. Meanwhile, Anthropic's IPO pricing came in below expectations, signaling that investors are becoming more discerning about AI valuations.

For Unity shareholders, the key question is whether the reported $25 billion offer is fair. The company's transformation is still in its early innings, and the ad business—especially Vector—is growing rapidly and gaining market share. Management believes Unity could generate over $2 billion in free cash flow within a few years, with double-digit revenue growth and rising margins. That would justify a valuation closer to $33 billion, or about $75 per share.

The buyout interest from Silver Lake and Saudi PIF validates Unity's turnaround and strategic value. Both investors have deep pockets and experience in gaming (Silver Lake owns stakes in Electronic Arts and Scopely). However, Silver Lake's board seat could complicate negotiations, as the firm may have an information advantage.

Beyond Unity, the news highlights a broader theme: AI infrastructure demand remains strong, as evidenced by CoreWeave's results, but investors are increasingly cautious about debt-fueled spending and sky-high valuations. Anthropic's IPO pricing below expectations reinforces that the market is shifting from hype to fundamentals.

For Unity, the path forward could be a higher buyout offer or continued independence. Given the company's momentum, shareholders may benefit from holding out for a better price or letting the turnaround play out.