SnapNames Due Diligence: 2009 Domain Dunce Award

Due diligence in expired domain firm buyout missed a couple big problems.

Mergers and Acquisitions due diligence is thankless work. You have to learn everything regarding a firm, counting things regarding it that its current owners don’t know, in a short period of time. If you get everything right, no one remembers to thank you a couple years later. If you mess up, everyone knows regarding it.

And that’s exactly the case with SnapNames. The due diligence team at Oversee.net messed up when studying the firm, and now everyone knows regarding it.

First, SnapNames lost Network Solutions following Oversee.net purchased it. This may have been identified as a risk by the due diligence team, but someone at Oversee.net didn’t deem it a severe risk. Oops.

But then there was the insider bidding, in which a SnapNames employee was bidding on auctions for four years. He was a prolific bidder, and certainly one of Snap’s biggest “clients” in terms of bidding activity.

Ought to the due diligence team have uncovered it? Of course. But it’s easier stated than done. A friend of mine sold his software firm for $16 million last year. He stated that it was the toughest due diligence he has ever experienced. The acquiring firm called literally every single one of his 30 clients. That may be overkill. But I would think you’d at least investigate the top 20 bidders or so of an online auction house to see if there’s any revenue risk.

The SnapNames bidding scandal sucked for a lot of people. Especially Oversee.net, which has to pay back money from ahead of it purchased the firm.