Case Studies:

Register.com is a leading provider of domain name registration and Internet services to small and medium-sized businesses. With nearly three million domain names under management, Register.com has built a brand based on quality services.

Register.com was a pioneering internet company and launched a very successful IPO during the Nasdaq bubble. Later on, however, as demand for domain names slowed, Register.com’s revenues and market value fell dramatically and the company faced multiple challenges. Low-cost providers had exploded onto the domain registration market and taken significant share from incumbents like Register.com, leading to revenue erosion. To revive growth, Register.com decided to begin marketing value-added services directly to its customers instead of relying on third party providers. This business model shift along with complex revenue recognition rules exacerbated the volatility in Register.com’s revenues and profitability. Finally, the new Sarbanes-Oxley rules exposed several Material Control Weaknesses in Register.com’s systems, leading to several costly financial restatements. All of these events lead to a precipitous decline in Register.com’s market value, attracting several shareholder activists agitating for change.

Through all this complexity, Vector saw great value in Register.com. Low-cost competitors were still continuing to gain share in the overall market, but revenue at Register.com was beginning to stabilize as management regrouped its efforts around its core customers. Revenue from value-added services was beginning to grow rapidly, surpassing the revenue lost from third party partners, and had the potential to become an engine for sustainable growth. Register.com was generating a significant amount of cash, even while spending heavily on public company costs and updating its technology.

Vector and the Register.com management team partnered to take Register.com private through an all cash buy-out. Vector made a cash offer for all outstanding shares of Register.com, providing the current shareholders with a significant premium and serving as a white knight. After the transaction, Vector, its co-investment partners and the employees of Register.com owned 100% of a private Register.com. As a private company, Register.com would be free to make long-term value maximizing decisions for the business as well as shed all of the costs and distractions of being a small public company forced to comply with Sarbanes-Oxley requirements.

Relieved from the short-term demands of public shareholders, the management team at Register.com was able to make several drastic changes to the business including the divestiture of a non-strategic division, elimination of all public company expenses and the start-up of a new growth division.

Register.com is growing once again after several years of declining revenues, while at the same time nearly tripling its profitability. It has regained its former status as a leader in the domain name industry and is now one of the most profitable companies in its industry.