By Glenn Hayward, CEO at Com Laude
Amidst the post-Covid bounce-back and resurgent economies, M&As are back. In fact, deal makers around the world announced $5.1 trillion worth of M&A transactions in 2021, up 34% on the previous year, and this activity is only poised to reach new heights in 2022 as businesses pick up on paused plans from the last two years.
Yet this surge in M&As is likely to open the doors to bad actors who are willing to take advantage of profile brands where changing roles, responsibilities, systems and services areoverlooked in the race to acquisition.
Asimple, yet critical,digital asset isacompany’s domain name portfolio.Despite being a vital component of digital infrastructure and therefore of themselves valuable intangible assets, best practices around maintaining domain name portfolios can often be overlooked – both in pre-deal due diligence and in the post-completion integration phase. As two businesses become one, these domains can end up falling through the cracks of management responsibility, potentially exposing the new enlarged entity to amyriad of issues relating to brand protection and cyber security. And even the loss of online customer traffic.
Solet’s explore some actionable insights in relation to these assets – where the principles of ownership, control and risk management feature heavily.
Ensure domain ownership is accounted for
When a business is going through an M&A event, the integration planoften includes the formation of new teams with fewer roles (due to planned cost synergies). As responsibilities are allocated, domains are often neglected in the transition. This canlead to domain registration rights leaving with the person who originally registered them, or with theregistration remainingwith an old (and redundant) email address from the acquired company.Control is already being eroded.
While domain name portfolios feature in share purchase agreements,it is usually in a schedule to the agreementsetting out a simple domain list. More often than not,legal undertakings address initial control but do not address the transfer process to another legal entity where control is required going forwards. It is vitally important therefore to retain the services of a trustworthy corporate domain manager to ensure that, post deal, the domains are securely consolidated to the acquiring party. The process of updating the legal registrant to the correct entity, ensuring the names are delegated to resolve to the correct name servers and updating contact details to, ideally, role-based email accounts, will ensure the security and good husbandry of the portfolio going forward;providing sound brand protection,as part of a robust domain strategy.
Secure domains before the acquisition is announced
M&As can be exciting times,yet secrecy is essential to secure the new acquisitionand reveal a new company name or brandas the transaction completes.However, bad actors are well versed in monitoring sites such as Companies House and the IPO and will systematically review these resources to determine the availability of domains that match the name of newly registered companies; if available, they will secure domain registrations. In this scenario, and with no established equity in the new brand, the various dispute resolution polices will not provide a remedy and it is not uncommon for the speculators to offer the names for sale on the after-market at inflated prices. Inevitably, this can cause serious headaches for the new business that needs the names, and the traffic they will generate, ahead of the official brand launch. Confusion reigns.
Prior to announcing details of an M&A,acquiring businesses should conduct an audit of their future domain portfolios and ensure thatall potential online real estate is secured. This is critical due diligence. By registering these domain namesin advance, (and preferably anonymously) organisations can safeguard against any costlyacquisitions from unrelated third parties.
Domain names can normallybe secured for reasonable sums in the tens of dollars, but they can be soldfor many thousands if they are fundamental to the future of a high profile brand. Take the example ofTikTok: two friends anticipated that the app would gain in popularity, such that, following TikTok’s launch they registered tiktoks.com for $2,000.TikTok’s parent company offered $145,000 to secure the transfer of the domain, however upon rejection of the offer, the brand was forced into lengthy and costly legal processes to secure the name.
The lesson is clear: stop and think about your domain portfolio and ensure all potential domains are registered and accounted forprior to your announcement at deal completion.
A lack of awarenessofhow vital domains are to business infrastructure and the potential implications of their neglectduring an M&A event may give rise to costly errors. And it’s not just in M&A activity that this is important. There are many examples of brands being consigned to history on account of the absence of appropriate domain name diligence – at not insubstantial cost to the rights owner.
And this is something that is not just the preserve of large global players. Regionalbrands are not exempt from being targeted and when they are, the damage can beproportionally higher given limited funds to rectify errors.
Be transparent, and don’t be afraid to ask for advice
When planning for future business acquisitions, organisations can help to mitigate these issues by ensuring they retain the services of a trusted corporate domain manager. Collaboration coupled with expert advice ensures that the deal principals can focus on the fundamentals of the acquisition process in the knowledge that the domain name component is being suitably managed in tandem.
There are many pieces to an M&A process – make sure securing the valuable domains doesn’t end up being the missing piece of the puzzle.