The Royal Bank of Scotland’s BidCo subsidiary will acquire the entire issued and to be issued ordinary share capital of FreeAgent.
If shareholders approve the offer – as the CEO and board are recommending – they will receive 120p (£1.20) for each FreeAgent Share held, making the acquisition worth approximately £53 million.
Shares in FreeAgent were up 84% at 118.80p following the news, while RBS was up 1.2% at 261.70p. The offer price represents an 86% premium to FreeAgent’s closing price of 64.50p on 26 March 2018, and a 43% premium on the company’s initial public offering price of 84p.
RBS plans to keep FreeAgent as an operationally independent brand within the RBS Group. The company’s existing management team and Edinburgh HQ will also reportedly remain in place.
FreeAgent was launched in 2007 by former RAF fighter pilot Ed Molyneux. The company offers Accountancy-as-a-Service to sole traders, micro and small businesses to make it easier to manage their company finances. The company joined London’s Alternative Investment Market in November 2016.
Board Recommends Accepting Offer
In a blog post on the company’s website announcing the offer, Molyneux said: “I, along with the rest of the Board, have thought hard about this and we are recommending that shareholders accept the offer.
“This offer provides us with a unique opportunity to progress towards our vision that we set out in 2007 when the company was founded, and to invest heavily in FreeAgent, making it even better for our customers and partners. As part of a larger organisation we want to accelerate our growth ambitions in the micro-business and accountancy practice space, as well as significantly improve our core product.
“Since we have been working together, our partnership with RBS has taken off and they share our vision of making businesses happier and more successful by putting them in control of their finances. The lines between banking, accounting and tax are becoming increasingly blurred and there are new opportunities for a more integrated experience between banks and accounting software that we believe will benefit businesses.
“Olly, Roan and I – along with the rest of the executive team – will continue to lead the company and we’re more excited and committed than ever about the possibilities ahead.”
Molyneux told The Scotsman: “Today’s announcement represents the beginning of a new and exciting chapter for FreeAgent. Our vision is ‘making businesses happier and more successful by putting them in control of their finances’ and this moves us closer to that vision.
“Having developed a strong strategic partnership with RBS and with over 10,000 of their business banking customers having already signed up to use FreeAgent’s accounting solution, we look ahead to the next chapter, where we will accelerate and further extend our technology capabilities as part of a bigger group. Our working together represents a really compelling opportunity and hence the board is intending to recommend the offer, which we believe makes both good strategic and financial sense.”
A Huge Opportunity
Andy Roberts, chairman of FreeAgent, said: “The combination of FreeAgent and RBS makes sense for our talented people, for our company’s growth prospects, and for the shareholders who have backed our journey so far.
“For those shareholders, today’s offer represents a 5x multiple on our current revenues as well as a very substantial premium to our IPO price. For the FreeAgent team, it opens up a huge opportunity for them: a chance to target the entire RBS SME client base with a product designed with their needs in mind.”
Bank Impressed by FreeAgent
Ross McEwan, chief executive officer of RBS, said: “Since the beginning of our partnership, we have been impressed by FreeAgent and its technology, and are excited by the enhanced offering we will be able to provide to our customers. We believe that a technology-enabled solution for our business banking customers will make it easier for our customers to build their businesses safely and securely.”