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Freelancer.com Acquires Escrow.com

Freelancer.com Acquires Escrow.com

In breaking news, Australian company, Freelancer.com has reached an agreement to acquire Escrow.com for $7.5m in cash. Freelancer.com is the world’s largest freelancing and crowdsourcing marketplace by number of users and projects.

For many years, Escrow.com has been the company of choice used by many domain investors for their sales and acquisitions. Escrow also partners with eBay, GoDaddy, AutoTrader.com and Flippa.com and has a strategic partnership with the U.S. Commercial Service (USCS) in support of President Obama’s National Export Initiative designed to significantly grow US export volume.

Escrow.com

Since Escrow.com has been a private company this is the first time that we’ve had a glimpse into the financials driving the business. As can be seen from the chart below, Escrow.com has experienced continued growth even in the downturn years of 2012 and 2013. According to the press release announcement, for the FY14, Escrow.com has facilitated a gross payment volume of US$265 million, net revenue of just over US$5 million, US$1.2 million in EBITDA.

Escrow.com Revenue

What's really interesting is where all the revenue is coming from and the fact that  only 41% is coming solely from the US market. This really shows that the Escrow.com team is viewing the world as their marketplace rather than just the USA.

Revenue sources

Given the $7.5 million price tag this means that Freelancer is paying at least a multiple of 6.25. This seems reasonable given the strength, sustainability and market position of the Escrow.com business.

What many people may not realise is that Escrow.com has conducted over US$2.2 billion in transactions to date! This is an incredible achievement and really shows the strength of the business model and also the market adaptation of the escrow process.

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.”

So how is this going to impact Escrow.com? According to the press release, Escrow.com staff will be retained and continue to operate out of their California-based offices. Given the Escrow.com tight knit team and unique expertise developed over the years this is a smart move by Freelancer. Why break something that works?

As a part of the Freelancer group Escrow.com will become part of a public company. I believe that this will further enhance Escrow.com’s reputation as the only licensed, bonded and audited secure online solution that protects both the buyer and seller.

So how and why did Freelancer acquire this “jewel in the crown” payment facilitator? First of all, every major marketplace from amazon, ebay, Alibaba, papal etc. have their own captive payments businesses. Like the other marketplaces, there’s a lot of synergy that is accessible by adding the Freelancer transaction volume to the Escrow payment process.

Freelancer funded the acquisition by issuing 10 million additional shares at $1/share. This is a slight premium on the current share price of $0.995 and despite this, the issuance was oversubscribed.

In the past year Freelancer’s share price has fallen from a high of just over AU$1.18 to a low of AU$54.5 in December last year. Since that time it has accelerated upwards to its present levels. Even as I write this article I can see the price has gone over the $0.995 level to $1.013….so it looks like today will be a good day.

Freelancer share price

What’s nice for domain investors is that for the first time they are able to invest in Escrow.com through Freelancer….so it will be interesting to see what happens to the share price over the weeks and months ahead

DISCLAIMER: Escrow.com has been an anchor supporter of whizzbangsblog. I wish to reassure readers that at no stage have either Freelancer.com or Escrow.com attempted to influence the writing of my take on the acquisition. If you are considering investing in Freelancer.com then I would highly recommend that you seek professional advice prior to the investment.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

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Comments

impulse on 27 April 2015
Escrow.com sale

That seems like a much lower price for escrow.com than I would have imagined. It is a business with growing sales and a large annual profit, an industry leader, and aside from all of that the buyer is getting a killer domain name.

That seems like a much lower price for escrow.com than I would have imagined. It is a business with growing sales and a large annual profit, an industry leader, and aside from all of that the buyer is getting a killer domain name.
mgilmour on 27 April 2015
RE:Escrow.com sale

It could be argued that it's a bit of a steal but at the same time my guess is that the single shareholder was a motivated seller. It could be that they had other more profitable options to invest. I'm only reading between the lines but to take ONLY cash suggests that this is the case.

It could be argued that it's a bit of a steal but at the same time my guess is that the single shareholder was a motivated seller. It could be that they had other more profitable options to invest. I'm only reading between the lines but to take ONLY cash suggests that this is the case.
impulse on 27 April 2015
re: escrow.com sale

Yes, that is very true. That is exactly why I sold Bored.com for $4.5 million in 2008, see my reasons at
http://www.impulsecorp.com/the-psychology-of-a-multi-million-dollar-sale

Yes, that is very true. That is exactly why I sold Bored.com for $4.5 million in 2008, see my reasons at http://www.impulsecorp.com/the-psychology-of-a-multi-million-dollar-sale
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