Domainz

Computerworld has an article on Domainz, and how it is promoting its expanded services. They mention that Domainz turns 10 this month.

I take a degree of personal pride in seeing Domainz celebrate its 10th birthday, as I was very involved with its sale.

Domainz was set up by my predecessors at InternetNZ to take over running the .nz registrer from Waikato University. Cutting a long story short, it was then decided in 2000 that the functions of Domainz should be split into two parts – one company running the .nz register as a shared registration system, and another to be a Registrar which would be opened to competition.

NZRS was set up to become the new registry, and it has operated the register since October 2002. I’m one of five Directors of NZRS.

ISPs and others were allowed to bulk transfer their customers away from Domainz over the next year, to reduce Domainz’s market share from 100% to a competitive level. Once the market was deemed competitive, InternetNZ wanted to sell Domainz as it would be a conflict of interest to be the market regulator, own the registry and also own one of the competitive registrars. If only the Govt would adopt the same principles!

Now selling a commercial companny isn’t something InternetNZ, or myself, had a lot of experience with. We were fortunate we managed to hire a first class expert in this area, and we eventually asked for bids from interested parties to buy Domainz.

Now we had seen some scenarios that said Domainz couldn’t possibly survive as a stand alone Registrar and would not attract any significant bids for it. So we had a background of a very uncertain future for Domainz, as it was unknown how many customers would leave it.

There were around 13 bids which was superb. Now those without a commercial background may think this is all simple. You just go for the highest bid. If only. You see each bid was for different things. One or two wanted to buy the company whole. Another wanted just the assets. Some wanted the residual cash, some did not. One just wanted the names in the database. Some wanted to merge with their business. Others wanted to keep it separate as a going concern. Some wanted the tax imputation credits preserved, others didn’t value these.

I couldn’t make a decision based on the 13 bids, as they were so different. So I spent many hours with spreadsheets trying to analyse each bid in terms of total gain to InternetNZ. It turned out that the expert liked my analysis so much, that it became the official basis for comparison and decision making. I was pretty thrilled with that, as this was a new area for me.

We decided on a preferred bidder. Now again as a novice you may think that’s the end of the process. You just accept their bid. The hard work was still to come. As due diligence continued the negotiations over the actual sale deed were ferocious and complex. Australian companies especially are quite ruthless in their approach, and while we ended up all on good terms, there were some very tense moments incuding negotiations at 4 am in the morning with myself and two others in the Domainz CEO’s office reviewing the latest accounts and final valuations. The approval meetings were scheduled for 10 am and we only decided at 5 am that we would recommend we proceed.

Even after the sale was formally agreed to, there was ongoing negotiations over certain values and valuations. I became one of around six people in NZ I suggest who is now an expert on how you value prepayments for domain names. The entire sale process ended up taking up around two years, as one can file against the funds held in trust for 18 months after sale.

So having been so involved in the decision to split from the registry, and so involved in its sale, I retain a certain pride that the company is still doing well today, especially as at one stage many thought it would not survive.

It also gave me some very valuable commercial experience. It’s not often you get involved with a company sale, unless you are a lawyer or accountant. It remains one of the most intellectually challenging things I have been involved with.

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