How domain name oversights can complicate M&A

These critical assets are more complex than most realise and disputes can stall a merger or acquisition, say Lauren Tracey and Colin Costello of GoDaddy Corporate Domains.

A merger or acquisition (M&A) process can be one of the most consequential events in a company’s existence, often involving millions or even billions of pounds. Companies entering into M&A agreements are subject to high anxiety and strict confidentiality, with in-the-know employees sworn to secrecy about the deal’s intrinsic details.

Under this veil of stressful confidentiality, both parties’ legal, marketing and IT departments must work together to make the merger happen as smoothly as possible. However, despite their best efforts to control all variables, there are always pitfalls that can make an M&A deal much rockier.

One of these overlooked areas is domain names, which are more important and complex than most companies realise.

Don’t let domains get lost in the shuffle

Domains often get relegated to secondary importance amid all the dealmaking that M&A transactions entail. They are typically included in an intellectual property disclosure in the deal material but rarely are deal team members aware of their importance.

Think of domains as prime digital real estate: they're critical assets in M&A, serving as the face of the brand, an entry point for online traffic, and a key factor in customer experience.

While all assets of both parties are being catalogued and evaluated, a plan must be devised to manage and secure domains according to the merged entity’s strategic objectives.

Another domain asset that may be overlooked in the M&A process is generic domains that the acquired company may own. There are many reasons a company might own domains that don't match any trademarks currently in use.

It’s important that these domains are reviewed for possible reuse or for resale value as they may contribute to the overall value of the acquisition.

Getting a handle on domains pre-merger

Mergers take shape in a variety of ways, sometimes with a larger company ingesting a smaller one, or other times with a marriage of relative equals that have different, complementary strengths.

In some cases, the merger creates a completely new entity with a different name, phasing out company and/or brand name equities from both parties. Each approach has its own unique requirements when it comes to domain management—there is no one size that fits all.

The acquirer’s legal department is a good place to start pre-merger domain inquiries since lawyers are often notified first about an upcoming merger or acquisition. Typically, legal teams do the “heavy lifting” to negotiate and document how the two companies will join forces.

As part of best practices in due diligence, the acquiring company’s lawyers can initiate a domain portfolio audit or checklist to summarise both parties’ domain name assets, which are among their most valuable IP (intellectual property) assets.

The domain portfolio assessment or audit report should include which domains are owned and with which registrars they are registered. Take note of which domains are being used, as this will be important during the consolidation and keep/lapse review.

Domains that have email or DNS (domain name server) records attached should be red-flagged so they do not mistakenly lapse after the merger happens. Registrars like GoDaddy Corporate Domains (GCD) also offer auditing and analysis to help take stock of those domain name factors.

Investigate domain purchase options before new names are chosen

If the acquisition will result in a new name, the domain name options should be investigated before the name choice is finalised, not after. Otherwise, companies may choose a name that gains internal consensus and enthusiasm, only to find that the domain name is not available to buy or can only be obtained for an exorbitant price.

At GCD, we do this type of work regularly. Recently, we worked with two companies where a new name was needed, and it took multiple cycles to align on one that resonated with the business and was also available.

This example is a great reminder to follow the recommended process of affirming that the name is securable (registerable or able to be purchased) prior to proceeding.

Following a standard domain name strategy best practice, it’s also advisable for companies to buy multiple domains for the names being considered. Then, once the final naming decision is made, that domain can be kept while other unneeded domains can be eventually lapsed or resold if they have no further usefulness.

This practice ensures that any potential leaks don’t result in potentially valuable names being scooped up by others.

For global companies, it’s also important to investigate ccTLD (country code top-level domain) availabilities for the new company name. Are those domains available in all countries where the company will be doing business, or has plans to do business?

If not, it may be better to choose another name that provides a clear shot at international ccTLDs for consistent global branding purposes.

When renaming companies and/or brands due to M&A transactions, defensive domain registrations are highly recommended to build a strong, secure foundation for the newly named entity.

Registering names that look and/or sound similar to the actual name being registered can protect against cybersquatters redirecting legitimate traffic away from the new company’s website.

Data privacy and defensive considerations when buying domains

Companies engaged in an M&A process should take care to register new domains with privacy controls in mind. The publicly available WHOIS domain lookup allows anyone to trace ownership of a domain name, so the acquiring company is effectively tipping its proverbial hand by registering several domains with related names.

Historically, many felt the best way to keep things hidden was to use anonymous WHOIS details but to keep the names at their chosen registrar. The problem that quickly emerged was that bad actors knew which companies used which corporate registrars and news started to leak fast.

A better way is to use a large registrar where the registration can get lost in the noise. Large registrars that handle a substantial volume of domain purchases each day provide a camouflage effect because it’s anonymous for whom they are purchasing the domains—identifiable data of the purchasing company is anonymised.

Using a smaller registrar for domains might lead to those domains being flagged by opportunists who make a business out of watching which domains are being registered each day, with the intention of squatting on domains to make money reselling them.

This is a tactic also used in the trademark registration process, where cybersquatters purchase domains based on trademark data—another reason to consider purchasing domains early in the M&A process.

From a brand protection perspective, domain purchases may also leak a new company or brand name before the merger is complete, so it’s important to use privacy tactics like this to stay under the radar.

Lauren Tracey is a domain advisory manager at GoDaddy Corporate Domains with deep experience in brand protection and strategic portfolio management who has been following ICANN for more than seven years.

She can be contacted at: lauren@gcd.com

Colin Costello is a senior account executive at GoDaddy Corporate Domains and its resident Brand TLD expert. He has worked in the domain industry and enterprise sales for over 25 years, including 11 years at Verisign managing their 200+ Brand TLDs.

He can be contacted at colin@gcd.com