Freelancer.com Acquires Escrow.com for $7.5 Million

When I read this headline this morning, I was expecting to see a huge price tag (at least 9 figures). Wow, was I wrong! According to Freelancer.com, they acquired Escrow.com for a measly $7.5 million in cash.

Here is the full press release via Freelancer:

Freelancer.com announces the acquisition of Escrow.com and completion of capital raising
SYDNEY, April 27, 2015: Freelancer.com, the world’s largest freelancing and crowdsourcing marketplace, today announced that it had entered into a definitive agreement to acquire Escrow.com from a private investor for US$7.5 million in cash, and completed a AUD$10 million placement of ordinary shares to institutional investors.

Headquartered in California, Escrow.com provides online escrow services that facilitate and accelerate e-commerce by assuring secure settlement. It was founded in 1999 by Fidelity National Financial, a Fortune 500 company and the US’s largest provider of commercial and residential mortgage and diversified services.

Escrow.com is the leading provider of secure online payments and online transaction management for consumers and businesses on the Internet, with FY14 gross payment volume of US$265 million, net revenue of US$5 million, US$1.2 million in EBITDA and over US$2.2 billion in transactions to date.

Escrow.com reduces the risk of fraud by acting as a trusted third party that collects, holds and disburses funds according to buyer and seller instructions. Escrow services provided by the company are licensed and regulated.

Escrow.com partners include eBay, GoDaddy, AutoTrader.com, Flippa.com and it is also a strategic partner of the U.S. Commercial Service (USCS) in support of President Obama’s National Export Initiative designed to significantly grow US export volume.

Freelancer.com Chief Executive Matt Barrie said, “We are pleased to acquire Escrow.com, the world’s largest online escrow company. This highly complementary acquisition will enhance the ability of our 15 million users to transact securely, and there are large opportunities for growth and synergies with core offerings. Finally, it is a strong cornerstone for entering the payments space”.

Escrow.com President & Managing Director Brandon Abbey said, “We are excited to be joining the Freelancer.com group. Freelancer’s expertise in marketplaces, combined with our expertise in secure online payments are an excellent strategic fit.”.

The Escrow.com group staff will be continuing with the California-based business.

A capital raising of AUD$10 million of ordinary shares to institutional investors was oversubscribed and has been completed to fund the acquisition, and for general corporate purposes. 10 million ordinary shares were issued at $1.00, a premium to the last close of $0.995. UBS AG, Australia Branch, was sole bookrunner for the deal. The acquisition of Escrow.com is subject to regulatory approval.

Settlement of the placement is currently scheduled to take place on Thursday, 30 April 2015, with allotment and quotation of shares expected to occur on the ASX on Friday, 1 May 2015. Escrow.com was advised in the transaction by Capstone Partners LLC.

About Freelancer®
Quadruple Webby award-winning Freelancer.com is the world’s largest freelancing, crowdsourcing and local services marketplace by total number of users and projects posted. Over 15 million registered users have posted 7.5 million projects and contests to date in over 850 areas as diverse as website development, logo design, marketing, copywriting, astrophysics, aerospace engineering and manufacturing. Freelancer Limited is listed on the Australian Securities Exchange under the ticker ASX:FLN.

Several things come to mind when I’m thinking about this deal:

  • The Escrow.com domain is worth seven figures alone.
  • All the escrow licensing that comes with the business.
  • The brand value of Escrow.com is huge. Everyone in the industry knows, trusts, and uses Escrow.com.
  • The SEO and marketing value of Escrow.com is also huge. This is an established business that regularly receives word-of-mouth referrals, free publicity, and backlinks.
  • It’s a cash cow!

Based on the net revenue and EBITDA numbers from the press release, I’m assuming the company wasn’t making much in profit, which was surprising to me. Also, it appears that Escrow.com was advised by a 3rd party financial advisor. Does this advisor have any experience in valuating websites/domains? I feel like the owner left a lot of money on the table. When it comes to websites, you can’t go strictly off financial numbers – you have to look at the whole picture.

I wonder how this acquisition will affect the partnership between Escrow.com and Flippa because Freelancer is also the parent company of FreeMarket.com (a competitor of Flippa). Come to think of it, Flippa began offering free escrow service earlier this year, so Escrow.com may have lost a good chunk of its business as a result.

In any case, I think Freelancer got a bargain deal on this acquisition.

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