Freetrade Acquisition: Key Details, Impact, and What Comes Next

IG Group's acquisition of Freetrade for £160 million marks a significant move in the wealth technology sector. This deal, which values Freetrade at a 29% discount to its last valuation, underscores the ongoing consolidation within the industry. Despite the acquisition, Freetrade will continue to operate independently, maintaining its brand and management team.

What Is Freetrade?

Founded in 2016, Freetrade is a stock trading and investment platform that offers commission-free trading. Its core services include Stocks and Shares ISA, Personal Pension (SIPP), and General Investment Account (GIA). Freetrade differentiates itself with features like unlimited commission-free trades, tax-wrapped accounts, and a user-friendly interface. Additionally, it has been recognized as the Best online trading platform at the British Bank Awards for six consecutive years, highlighting its industry-leading position.

Who Acquired Freetrade?

IG Group is a global leader in online trading and investments, operating in nineteen countries across five continents. The company offers a wide range of trading and investment opportunities through advanced technology and platforms. With a market capitalization of £2.7 billion and over 358,300 active clients, IG Group holds a significant position in the financial industry. The company reported a total revenue of £1,022.6 million as of May 2023, highlighting its strong market influence.

When Was Freetrade Acquired?

IG Group announced the acquisition of Freetrade on January 16, 2025. This move comes amid a period of significant consolidation in the wealth technology sector. The timing is notable as it follows a challenging phase for Freetrade, marked by high inflation, reduced venture funding, and a 65% drop in valuation in 2023. The acquisition aligns with broader industry trends of increased M&A activity, as companies seek stability and growth opportunities in a volatile market.

Why Was Freetrade Acquired?

• Market Expansion: The acquisition allows IG Group to enter the UK's direct investment market, which has been growing at an annual rate of 10 percent. This move is expected to broaden IG Group's target addressable market and strengthen its UK trading and investment offerings. Additionally, Freetrade's focus on its core market and its growth prospects will be accelerated under IG Group's ownership.
• Technology Integration: IG Group plans to invest in expanding Freetrade's product range, adding new features, and increasing marketing activities. This includes leveraging Freetrade's existing technology to enhance its platform and possibly integrating new technologies to improve its services. The resources and vision from IG Group will support Freetrade in delivering new products and features more efficiently.
• Competitive Advantage: The acquisition strengthens IG Group's position against competitors by combining Freetrade's commission-free investment platform with IG Group's broader range of financial products, including contracts for differences (CFDs) and spread betting instruments. The backing from IG Group is expected to provide significant benefits, such as accelerated growth, enhanced product offerings, and a strong financial strategy aimed at achieving a return on invested capital exceeding its weighted average cost of capital in years three to five.

Acquisition Terms

• Acquisition Price: £160 million
• Payment Method: IG will fund the deal with cash from its capital resources
• Key Conditions or Agreements:
  • The transaction is subject to customary closing conditions, including regulatory approvals, expected to be granted by mid-2025
  • Freetrade will continue to operate as a commercially standalone entity under its own brand
  • The current management team, including CEO and co-founder Viktor Nebehaj, will remain at the company
  • IG plans to reinvest the majority of Freetrade's forecast profit in growing the business over the next two years
  • IG highlighted its regulatory capital surplus of £638 million at the end of May 2024 and plans to return the unused surplus capital to shareholders, extending the existing share buyback program of £150 million

Impact on Freetrade

The acquisition of Freetrade by IG Group is expected to bring several operational and strategic changes. Freetrade will continue to operate as an independent entity, retaining its current management team, including CEO Viktor Nebehaj. This continuity aims to ensure a smooth transition and maintain the company's established brand identity. IG Group plans to invest in expanding Freetrade's product range, adding new features, and increasing marketing activities. This strategic backing is anticipated to accelerate the growth and delivery of new products, enhancing Freetrade's competitive edge in the market.

Reactions to the acquisition have been mixed. While Viktor Nebehaj expressed optimism, describing the deal as transformative, some early investors voiced dissatisfaction, feeling the sale undervalued their investments. Employees and customers have shown cautious optimism, with many hopeful that IG Group's resources will drive further innovation and growth. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smoother transition and better alignment with strategic goals.