Domain names in mergers and acquisitions is a critical element to consider in due diligence. The mechanics behind M&A activity is complex and involves careful preparation and expert advice and consideration. Understanding how intellectual property rights are involved with mergers and acquisitions is essential and significant detail is required to ensure nothing is missed.
An area that is sometimes overlooked in M&A activity is the transfer of licence rights to the domain names held by the business being acquired.
So do domain name get missed in Mergers & Acquisitions as well? The answer is unfortunately yes. Domain names are probably the easiest (and most common) piece of a M&A detail to miss.
Without naming and shaming there have been some high profile Australian cases of prominent brands not properly managing the transfer of domain names in M&A deals. In one particular case, a very large (listed) utilities business mishandled the transfer of their namesake .com. Although it was transferred under their management, they did not transfer the licence for the domain name. The risk they now run is that the other party involved can, at any point, recover the domain name which would effectively bring down their entire online operation.
The key areas of risk involving domain names in mergers and acquisitions are:
- The acquisition agreement makes no provisions for transfer of domain names.
- The domain names are held by a holding company and therefore not a part of the deal.
- The domain names are not probably transferred to the acquiring party’s domain name portfolio, and
- subsequently the domain names are expired.
Preparing for the domain name transfer
The key documents companies should prepare for the transfer of domain names through M&A are:
- The Acquisition Agreement, which should outline all IP transfer including domain names;
- A transfer of ownership form signed and dated by both parties for each domain name; and
- An assignment agreement or a letter of undertaking (can be provided post agreement).
The Assignment agreement is important because it states the intentions of both parties in the domain name transfer. This letter will contain undertakings and warranties that the owner is the sole owner and that the domain name(s) do not have any claims, or history, of infringement or disputes. There should also be a clause indemnifying the buyer to protect themselves through the transaction. An important part of this assignment agreement is including a clause that prohibits the seller from registering or using a similar or related domain names.
If you require any additional information relating to domain names in merger and acquisition activity please contact Renewit and a specialist will assist you with your preparations.
Brandsec is a corporate domain name management and brand protection company that look after many of Australia, New Zealand and Asia’s top publicly listed brands. We provide monitoring and enforcement services, DNS, SSL Management, domain name brokerage and dispute management and brand security consultation services.
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