For the first time since the financial crisis, the Royal Bank of Scotland has made an acquisition.
The chosen target is FreeAgent, a software company that provides cloud-based bookkeeping software for UK microbusinesses, freelancers, and their accountants. In what was described as a surprise move, RBS is paying £53 million for FreeAgent. The Edinburgh outfit has been working with RBS for years already, so the companies will be familiar with each other.
“It made sense to work with RBS and get in front of their clients,” FreeAgent founder and CEO Ed Molyneux told ‘Insider’. “As the relationship progressed, the more they realised what we were capable of, and the more we realised that some of the things constraining us came from being two separate organisations. It started to make more and more sense for the bank to bring us inside.” FreeAgent will maintain autonomy within RBS.
FreeAgent had been tapping into a growing market segment: 16% of Britons are working for themselves, and by 2020, this number will be 20%. Out of a total of 5.5 million companies in the UK, 99.3% are small businesses, and furthermore, 76% of the UK’s companies have no employees at all, comprising solely of the owner. These tiny companies have very different needs than even businesses with 5 to 50 employees, which is where FreeAgent comes in: the big banks typically do not cater to this segment.
FreeAgent was set up by Molyneux and two others in 2007, and the company joined the ranks of public companies in November 2016 when it listed on AIM. This is a nice payday for the founders of FreeAgent, as well as a promising sign that the UK’s biggest banks are ready to deal when it comes to keeping up with the fintech competitors. The UK’s fintech sector is full of quality companies like FreeAgent, and we expect this to be a fruitful field in the years to come.