Machine Zone CEO Kristen Dumont. Photo by Stephen McCarthy/Collision via Sportsfile, under Creative Commons license

AppLovin, a mobile games company notably backed by famed private equity firm KKR, has announced it has reached a deal to acquire Machine Zone, one of the biggest mobile game developers globally. Terms of the acquisition were not disclosed by either party. Notably, Machine Zone has raised nearly $300 million in known funding and is said to be have been valued at up to $5 billion by a financing round in 2017. AppLovin, on the other hand, has raised some $1.4 billion in equity and debt financing, last valued at about $2 billion by investors.

A $2 billion company acquiring a $5 billion counterpart doesn’t seem rational so it seems that AppLovin and Machine Zone may have reached an agreement that placed AppLovin’s valuation at much more than $2 billion, after all, companies grow. The deal more so seems like a merger of both companies as opposed to an outright acquisition by AppLovin. To paint a picture, AppLovin last year was reported to be eyeing a 2020 public listing after about seven years of staying private. Machine Zone, also, has remained private since being founded in 2008, seemingly due for its own public listing. It seems both companies have agreed to merge to form a stronger entity that would go public and possibly secure better returns for their investors. According to the Wall Street Journal, AppLovin is expected to eclipse $1.5 billion in annual revenues once its Machine Zone acquisition is completed, and a $1.5 billion annual sales mobile games company seems like one that investors may drool for in the case of a public listing.

Since raising funding from private equity firm KKR in 2018, AppLovin has made multiple acquisitions and also invested in mobile games studios. AppLovin isn’t actually a mobile game developer, rather an ad-tech platform that lets mobile game developers monetize their games. The company was founded in 2012 but formally launched its ad-tech platform two years after that. AppLovin has grown rapidly since its launch and further expanded into game publishing through its own subsidiary studio paired with investments in third-party studios. Altogether, the company has assembled a partner network of six mobile game development studios.

“Machine Zone connects millions of people across the globe, providing them with a compelling gaming experience and engaged community,” Machine Zone’s CEO, Kristen Dumont, said in a press statement that announced the acquisition. “Combining our expertise and unmatched success in midcore games with AppLovin’s impressively successful portfolio of casual games and leading mobile marketing platform is a win-win for both of our companies and will create an unmatched experience for players worldwide,” she touted.

Update: It’s been reported that AppLovin acquired Machine Zone for about $500 million in cash and stock, a steep discount to the company’s peak valuation of $5 billion.