Acquisition Criteria – Domain Magnate

Acquisition Criteria

Domain Magnate Acquisition Criteria

At Domain Magnate we have various criteria we use for reviewing our deals and making acquisition decisions. Whether you’re looking to sell your business to us, buy a business from us, or invest with us, this page will help you learn more about what we do and how we approach deals. We divide our buying criteria into different categories.

Ethical Requirements

We believe in following strict ethical consideration when reviewing and making decisions about all our acquisitions. We aim to make a positive contribution to the world and society through our business, for that purpose we current avoid businesses which:

  • promote hate, violence, racism
  • sell or promote sale of highly addicting substances
  • produce a clear negative impact on society
  • use deceptive marketing or promotional methods

Similarly, we also have a preference (however, it’s not a requirement) for businesses which:

  • aim to make the world a better place and have a positive impact on society
  • promote or sell renewable energy technology
  • promote or sell green, eco friendly and sustainable lifestyle
  • solve important problems
  • spread positivity and joy

Legal Concerns

As a US company we comply with all US federal and relevant state laws, so we do not acquire businesses that may violate those. These include businesses which:

  • engage in illegal activity
  • rely on copyright or trademark infringement
  • use fraudulent marketing techniques or promote deceptive products

Strategic Criteria

Our strategic criteria is based on our expertise and experience. We aim to acquire businesses that we can operate successfully, grow and improve. As our main strategic strengths lie in our team’s SEO skills, we focus on acquiring business that primarily (more than 50%) rely on organic search traffic. Additionally, our strategic criteria include:

  • Over 50% of traffic is from organic search
  • Revenues generated through sale of digital products, affiliate programs, advertising networks, ecommerce, drop shipping, SaaS, software and more.
  • Business can be operated remotely, without any local presence requirements
  • Evergreen niche and industry

Price Ranges

As we buy businesses on behalf of our investors and funds we have certain obligations regarding what we can pay for different businesses. Our prices and offers are based on a fair market multiple of annual profit. Recent analysis of top marketplaces like Flippa and Empire Flippers  shows that most content, affiliate, and ad monetized businesses with organic Google traffic sell between 2x and 3x multiple of annual profits. While some exceptional businesses that have a longer track record and good growth potential can fetch higher prices, and newer, higher risk businesses can sell for less. This is also similar to the multiples we pay directly.

When you sell a business via a marketplace or a broker, there is usually a longer process of evaluation, preparation, due diligence, listing, discussions with potential buyers, negotiation and then finally sale, and the commission. The initial listing price may be higher than what we typically offer to buy directly at, however, the final closing price, and what the seller receives after all the commissions is often lower than what we can pay directly. Selling to Domain Magnate directly will allow you to bypass the typical lengthy sale process and save on the marketplace/broker fees and the hustle associated with dealing with multiple, unexperienced buyers.

We are transparent about our pricing, and are happy to explain the sellers our methods and calculations, and deal structures.

Acquisition Preferences

Additionally, our current acquisition preferences (not required) include businesses which have:

  • Substantial opportunities for expansion in their niche through SEO
  • Consistent history of profitability
  • Growing niche
  • Diverse sources of revenue and opportunities for optimizing monetization
  • Competitive advantages
  • Limited risks
  • Reasonably priced based on market value

Funding

The funding for our acquisitions comes from several different sources:

  • Own capital: occasionally we buy businesses for our own portfolio or to integrate with our services. These are typically sites or businesses that fit well with our core services and expertise and server as strategic acquisitions.

  • Our funds: we operate several funds with our investors, where the capital is contributed and polled by the investors, allowing us to manage it to businesses that fit the criteria set for that specific fund.
  • Individual investors: we also buy business on behalf of individual investors and clients and manage the sites for them. In these cases the funding is provided by the investors for the deal, once it approved.

For all the above options most transactions are done via escrow.com, have a look at the discussion between Michael and the owner of escrow.com here.

Acquisition Process

we have a straightforward and transparent process when it comes to reviewing leads and making acquisitions, it involves the following steps:

  1. Initial lead review: at this stage we start engaging with the seller to check that the business meets our preliminary criteria regarding business type, profits, ethical and legal requirements and expected price range. Businesses that carry substantial legal risks, or adhere to questionable ethical standards get discarded at this step. We also reject businesses where profits are too low or too high to meet our current acquisition parameters, and where seller’s price expectation is not in line with current market value. Very often we encounter good businesses that meet our criteria otherwise, however, sellers’ expected prices that far exceed what similar businesses sold for. While we value owner’s right to ask for any price they deem reasonable, we are limited in what we can pay, as our main obligations are to our investors to buy and grow great businesses and provide them good returns.
  2. Confirming criteria: for businesses that pass the initial review, we do a more detailed due diligence and analysis to ensure they meet all the criteria outlined on this page, and we also verify financials, traffic, marketing and operational processes here. This step is intended to help us determine whether the business or website is a good fit for us to acquire and grow. Here we also request access to google analytics and google search console data, and review P&L’s, income statements and revenue verifications. Additionally we often do some background checks or research on sellers, and review the history of the business, the niche, assess the risks and opportunities.
  3. Offer: upon passing all our due diligence and verifying the criteria, we can submit an offer for the business. Depending on the buyer we represent for the deal (one of our funds, or individual investors via buy-manage), a final confirmation by investor/s may be required. In that case we always let the seller know that the offer is not final, but conditioned upon investor confirmation.
  4. Agreement: once a deal is reached and confirmed by investors, we are able to quickly move forward with the transaction, which involves signing a sales agreement for the business, which details the exact structure and terms of the purchase, and setting up a transaction via escrow.com or another service to process the deal.
  5. Closing: Most of our transactions are conducted via escrow.com (we are also a premium partner with them), so the closing process involves us sending funds to escrow.com, them verifying the money and us transferring all the assess, and upon the completion of the inspection, confirming and releasing the funds.

 

 

If you believe that your business meets all the requirements above, fill the form here to see if it fits for our immediate acquisition offer.

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