Web.com Group is not finished divesting its non-core businesses as it enters the second year under Siris Capital’s stewardship, CEO Sharon Rowlands said.
When it was listed, the Jacksonville, Florida-based company became bloated with “a lot of random things not core to the business,” said Rowlands, who joined the company in February. Siris took Web.com private for USD 2bn in October 2018 after a drawn-out process that included an activist filing and a busy go-shop.
With Rowlands at the helm, Web.com has been shedding non-core assets like TORCHx, a marketing solutions business for real estate professionals that The Constellation Real Estate Group bought in May; and Lighthouse 360, a software provider for dental practices it sold to Henry Schein [NASDAQ:HSIC] in March.
There are still one or two small divestitures that Web.com would like to make, Rowlands noted. She would only describe them as “things on the edges” of Web.com’s core businesses, which are domain name registration and web development services.
After months cleaning up the business, Rowlands said Web.com is looking to grow through acquisitions, as it did in July when it bought Dreamscape Networks for USD 73.8m.
A ‘very aggressive’ M&A strategy
Singapore-based Dreamscape Networks, which Rowlands said has similar offerings as Web.com, provides the company a significant customer base in Australia and Singapore.
The acquisition is also opening up other high-growth Southeast Asian markets like Indonesia and Vietnam, and she said it could provide an entry point to India, too.
It was “a fabulous deal”, said Rowlands, who called Dreamscape a “highly complementary” business with advanced technology and capable management.
Web.com paid a 32% premium to where Dreamscape’s shares had been trading on the Australian Securities Exchange. Dreamscape posted 2018 fiscal year revenue of AUD 61.6m, net profit after tax of AUD 2.7m, and adjusted EBITDA of AUD 10.3m.
Law firms Gilbert + Tobin and Sidley Austin advised Web.com on the transaction.
The deal is the first of many that Rowlands plans to execute in the years ahead.
“We are going to be very aggressive in M&A,” she said. “We generate a lot of cash, have a strong balance sheet and a private equity owner that is very supportive of non-organic growth. We are talking with a lot of potential targets.”
Regional businesses located in emerging Southeast Asian markets with deep website hosting experience and website development capabilities are of interest, according to Rowlands. Expanding into Europe is another priority. Web.com has an office in the UK, and Rowlands says it is searching for acquisition targets in multiple European cities.
In addition to entering new markets, the company wants to acquire businesses with innovative technologies that can expand and enhance its capabilities, the CEO noted.
Targets should either be profitable or be able to become profitable quickly, she added.
A year ago, when founder and CEO David Brown announced he was retiring from the company he founded in 1997, Web.com reported USD 750m in 2018 revenue. Before its sale, it reported 2017 adjusted EBITDA of USD 193.3m.
Now that the company is private, Rowlands declined to update its financials.
Unifying its platform
One of Rowlands’ objectives in 2020 is to unify the company’s platform with its three brands — Network Solutions, Register.com and Web.com — on the same architecture.
Network Solutions is Web.com’s largest brand with 1.4m customers. Network Solutions is the world’s first commercial domain provider. In the early 1990s, it won a grant from the National Science Foundation that made it the sole register for .com, .net and .org domain names on the Internet. Web.com acquired it for USD 550m in 2011.
Register.com has 350,000 customers and its eponymous brand has 250,000 customers, the executive explained.
In the second half of 2020, Rowlands said all three brands will share the same technology stack, which will provide customers with a broader set of services.
Before joining Web.com, Rowlands served as CEO of ReachLocal, a public digital marketing company she led through a strategic transformation from 2014 until its sale to Gannett [NYSE:GCI] in 2016. At Gannett, Rowlands served as president of USA Today’s marketing solutions business and continued to serve as CEO of ReachLocal.
Rowlands’ other prior executive roles include serving as president and CEO of Thomson Financial from 2005-2008, and COO of that media conglomerate from 2000-2005. In all, she spent 11 years at Thomson.