Verio, the internet services company that recently took its brand name national, has announced yet another acquisition – this time of web hosting and domain name registration outfit TabNet Inc. Verio says the purchase makes it one of the fastest-growing web hosting companies worldwide, with a base of hosted sites that now tops 60,000 with […]
Verio, the internet services company that recently took its brand name national, has announced yet another acquisition – this time of web hosting and domain name registration outfit TabNet Inc. Verio says the purchase makes it one of the fastest-growing web hosting companies worldwide, with a base of hosted sites that now tops 60,000 with the addition of TabNet’s roughly 20,000. TabNet also boasts about 70,000 domains hosted. But perhaps the most important reason for the acquisition is that it also significantly bolsters Verio’s marketing power with the addition of TabNet’s preferential online advertising placement deals with search engines including Netscape, Yahoo!, AltaVista, HotBot and more. The company also has revenue sharing agreements with Excite, Infoseek and WhoWhere? Those agreements will be added to Verio’s own stable of indirect marketing partners to give the company a more comprehensive attack. The marketing aspects of the deal are important to Verio, which recently consolidated about 30 local ISPs it had acquired over the years under its brand name in an effort to gain national recognition (CI No 3,368). Under terms of the deal, Verio will hand over $45.5m in cash to TabNet shareholders, as well as additional payments of up to $43.2m if TabNet’s recurring revenue and EBITDA (earnings before interest, tax, interest, depreciation and amortization) grows at pre- determined rates through December of this year. To bag the maximum amount, the company must see 37% growth month-over-month in recurring revenue and 42% growth in EBITDA. The scenario is unlikely, however, as recurring revenue has been growing at about 12% thus far this year. If those levels don’t improve at least somewhat, none of the contingent payments will be made. Verio would not comment on the likelihood of contingent payments being made or on expected growth at its new possession. Although TabNet is currently a profitable concern, Verio figures that the cost of upgrading its systems and integrating them with its own, will offset any cash flow contribution through the end of 1998. Once the integration process is complete, however, TabNet is expected to contribute substantially to revenue growth.