Surprisingly, Tucows Inc., the leading provider of network access, domain names and other internet services, has released a claim earlier on Jan 20th, 2017 to acquire the wholesale domain name registrar eNom from Rightside Group, Ltd, for $83.5 million.
As one of the great and long-lived brands in the domain name industry, eNom prides itself on providing the technological infrastructure to support a network of 28,000 active resellers, who as a whole is managing about 14.5 million domains and is estimated to generate nearly $116.5 million in revenue through the third quarter of 2016. Besides domain name services, eNom also offers a wide range of related products like web hosting, SSL certificates, website building software, and email & apps. What attracts Tucows Inc. the most in the acquisition of eNom is, the latter has an outstanding reputation among the resellers as well as end-customers for delivering innovative products and excellent service, according to the President and Chief Executive Officer of Tucows, Elliot Noss.
It is also said that the Tucows buying eNom will make the total number of its global resellers increase to 40,000 and make that of its domains under management increase to 29 million. Undoubtedly, the Toronto-based company then will slips to second rank in domain name registration business, following the No.1 of GoDaddy.
For so many years since its inception in 1993, Tucows is dedicated to helping people unlock the power of the internet by offering them simple but useful services. After several times of reinventing itself, the company has grown up from a startup software distribution firm to an industry leader in domain name registration and digital services. The main star products of Tucows includes OpenSRS—the first wholesale platform for selling and integrating domain names, hosted email, SSL certificates and web security products, Hover—offering a simple and easy way for individuals and businesses to manage their domain names, Ting Mobile—a mobile phone service that helps US families and businesses save money on their monthly mobile bills, and Ting Internet—fast, reliable, gigabit fiber internet for homes and businesses.
But just as Elliot Noss said that, the industry has changed a lot in the past 15 years, after when eNom and Tucows rolled out wholesale registrar services and the namespace were essentially represented by .net, .com, and .org. And from then on, it gets more and more difficult for a company to succeed in this field. Therefore scale becomes absolutely critical. Through the expanded scale, both Tucows and its investors can benefit from concrete cash flow exchange and an immediate return on investment.
However, on the other side, there’s still a large group of people wondering what drives Rightside to give up eNom. The only possible explanation should be that the company is looking to cutting off non-essential brands for better focusing on the higher growth and higher margin Registry and Name.com businesses.
According to Rightside’s CEO Taryn Naidu, the divesture of eNom for Rightside is not only the best way to receive increased shareholder value, but also helpful for creating a strong alignment between its vision, strategy, and financial profile. The net cash proceeding from the transaction could be as high as $76.7 million, excluding working capital adjustments. Meanwhile, after paying $4 million of transaction related expenses plus repaying all the debt outstanding under its credit facility, Rightside will be a well-capitalized company with approximately $90 million in cash on its balance sheet.
In other words, both sellers and buyers will benefit from the transaction. And eNom is also believed to move forward and make real progress with the support of Tucows. In terms of some people’s worry that the domain name industry will be entirely monopolized by GoDaddy and Tucows after the transaction, we need to go and keep observing. But one thing for sure is, the domain name registration space has intensified with recent development of acquisition happening one after the other.