CoStar Group’s $3 Billion Bet on Australia’s Domain Holdings: A Strategic Gamble or a Smart Move?

CoStar Group, the U.S.-based real estate data and analytics giant, is making its largest international play to date with a binding agreement to acquire Domain Holdings Australia Limited, the operator of Australia’s leading property marketplace. The $3 billion deal, which values Domain at an implied enterprise value of A$3.0 billion, marks a bold move into a high-growth market. But is this acquisition a shrewd strategic play or a risky overpayment for a slowing business?

The Deal Unpacked

CoStar’s agreement to acquire 100% of Domain Holdings follows its February 2025 purchase of a 17% stake at A$4.20 per share. Under the terms of the binding Scheme Implementation Deed (SID), it will now pay A$4.43 per share for the remaining 83%, excluding any special dividends. The transaction hinges on regulatory approvals from Australia’s Foreign Investment Review Board (FIRB), a favorable report from an Independent Expert, and shareholder support—Domain’s controlling shareholder, Nine Entertainment (60.1% stake), has pledged its backing.

Financial Analysis: Growth vs. Valuation

Domain’s financials provide critical context. In fiscal 2024, it reported revenue of A$391.1 million, a 13% year-over-year increase, though it missed analyst estimates. Net income rose 19% to A$43.4 million, with EBITDA hitting A$131 million in FY2024—a 29% jump from FY2023’s inferred A$101 million.

Despite this growth, the A$3.0 billion valuation implies an enterprise value/EBITDA multiple of ~23x, which is high for a real estate tech firm. For comparison, CoStar itself trades at around 25x forward EBITDA, suggesting Domain’s multiple isn’t unreasonable if its growth accelerates. However, Domain’s revenue growth slowed to 13% in FY2024 from a 3-year average of 7%, raising questions about its ability to sustain momentum.

Strategic Rationale: Why Australia? Why Now?

CoStar’s pitch centers on synergies. Domain’s 6.6 million monthly users and brands like Domain.com.au, Allhomes, and Pricefinder offer a direct gateway to Australia’s A$8 trillion residential real estate market. CoStar aims to integrate Domain’s local expertise with its global platforms, including 3D digital twin technology and AI-driven analytics, potentially unlocking cross-selling opportunities.

The acquisition also positions CoStar to capitalize on Australia’s tech-driven real estate transition. As buyers increasingly rely on digital tools, Domain’s 60% market share in property listings positions it as a critical data asset—precisely what CoStar needs to expand its subscription-based services.

Risks and Challenges

1. Valuation Concerns: At 23x EBITDA, the deal demands rapid revenue acceleration. If Domain’s growth stagnates, shareholders may question the premium paid.
2. Regulatory Hurdles: FIRB approval is critical, given foreign ownership sensitivities in Australia’s real estate sector. Delays or conditions could complicate financing.
3. Integration Complexity: Merging cultures and tech stacks across continents is no small feat. CoStar’s track record—having acquired 13 companies since 2015—suggests it’s capable, but execution is key.
4. Shareholder Approval: While Nine Entertainment’s support is a lifeline, minority shareholders may push for higher terms, especially if market conditions sour.

Conclusion: A Worthwhile Gamble?

CoStar’s acquisition of Domain Holdings is a calculated bet on Australia’s real estate tech future. The strategic rationale is clear: leveraging Domain’s market dominance to fuel CoStar’s global platform ambitions.

Crucially, the numbers support a cautiously optimistic outlook. Domain’s A$131 million EBITDA in FY2024, combined with its 6.6 million monthly users, justifies the valuation if growth resumes its earlier trajectory. CoStar’s integration prowess and Australia’s tech adoption tailwinds further bolster the case.

However, risks remain. A slowdown in Australia’s housing market or regulatory pushback could derail the deal. For now, though, the acquisition aligns with CoStar’s history of aggressive, accretive growth—a strategy that has rewarded shareholders handsomely. If execution succeeds, this could be the move that cements CoStar’s position as the world’s leading real estate data powerhouse.

In the end, the test will be whether Domain’s value proposition scales under CoStar’s ownership. At 23x EBITDA, the market is pricing in that bet. Investors should monitor Domain’s Q3 2025 results closely—the first true post-acquisition data point—to gauge whether this gamble pays off.