Flagstone, the UK’s leading cash deposit platform**, has announced a £108 million ($138 million) equity investment by Estancia Capital Partners, a US financial services specialist private equity firm with deep expertise in the cash management market. Under the terms of the deal, Estancia takes a minority stake in the Flagstone business.
Co-founded by Andrew Thatcher and Simon Merchant, Flagstone launched in 2015 with a single ambition: to create a service-driven fintech platform that helps UK savers make their money work harder.
Today, Flagstone is the largest UK cash savings platform by the number of banks and savings accounts on its panel. Individual savers, small and medium-sized enterprises (SMEs) and charities using Flagstone – either directly or through multiple fintech platforms, financial advisers or brand partnerships - have the opportunity to access over 200 savings account offerings available from 60 of the UK’s leading cash savings providers, from the largest incumbent banks to the challengers.
Serving a customer base of over 600,000, Flagstone’s total Assets under Administration (AUA) now stand at more than £11 billion. The company’s AUA increased by more than £1 billion per quarter in 2023 as more personal and business savers looked to maximise the interest earned on their cash and have the opportunity to benefit from the security of FSCS protection.
Flagstone recorded its first quarter of profitability in December 2022 and the company has maintained accelerating quarterly profitability ever since. Flagstone’s resilient growth strategy is underpinned not only by the management team’s significant investment in building partnerships and creating strong, scalable operations functions, but by providing seamless cash solutions to the UK’s undisrupted £1.7 trillion savings market. £1.1 trillion of these funds are held in accounts earning 2% or less per annum***, and in the first half of 2023, only 23% of UK savers switched accounts to earn more interest.**** Conversely, the average Flagstone customer has five accounts and actively manages their savings by reinvesting seven times a year.
Simon Merchant, Co-Founder and CEO of Flagstone, commented:
“We selected Estancia based on the strength of their team’s experience in supporting ambitious businesses to transform the shape of the cash management market in the US. At a time when funding capacity is down on a global scale, Estancia’s investment and market expertise provides us with the firepower necessary to really capitalise on the opportunities ahead of us, whether those be through organic growth, partnership and acquisitions, and prompt further consolidation of our market leadership position.”
Takashi Moriuchi, Co-Founder & Managing Director of Estancia, commented:
“We are excited to mark our entry into the UK savings market at a time when the opportunity to disrupt this status quo is enormous, and innovators like Flagstone must take the lead. We are thrilled to partner with Simon, Andrew, and the talented Flagstone team. Flagstone consistently demonstrates its ability to meet its ambitious client growth targets by providing an easy to use platform, an excellent array of cash management solutions across yield and maturity options, and industry-leading levels of service that clients value.”
Darrin Jeffries, COO & Managing Director, and Keegan Mitchell, Vice President at Estancia, added:
“Our partnership with Flagstone is an all-around winning combination, as we see many parallels with our two most recent successful investments in the US deposit marketplace, R&T Deposit Solutions and PMA Financial Network. Flagstone’s success since launching in 2015 is already impressive. However, in-depth industry research indicates that the growth opportunities remain vast providing Estancia with an excellent opportunity to assist accelerating their growth to an even more exciting level.”
Andrew Thatcher, Co-Founder and CEO of Flagstone International, commented:
“As we mark this important milestone, we are delighted to work with an investment team with the track record and international expertise that Estancia brings. It is evident that the market opportunity is significant for our business on a global scale, and we are excited to take advantage of that and move our business on to the next stage.”
Originally created as a platform for individual savers to access and maintain multiple cash savings accounts in one place, Flagstone today provides white-label and API-integrated capabilities for businesses to offer their customers easy-to-use, adaptable, and competitive savings options. Flagstone partners with many of the UK’s leading wealth management firms, including St. James’s Place, powers a range of savings products at financial services providers, including Saga and Revolut, and through its international subsidiary, has already put in place a number of distribution relationships outside of the UK.
The deal combines primary and secondary investments. The primary investment will be used to further consolidate Flagstone’s position in the cash deposit market, building greater brand awareness, doubling down on partnerships, and matching competitive savings products with a premium customer service. The secondary investment will be used to reward Flagstone’s earliest backers, enabling them to realise a significant return on their investments.
Estancia’s Takashi Moriuchi and Keegan Mitchell will join the Flagstone Board of Directors. Darrin Jeffries will be a Board Observer.
The transaction is expected to close in the second quarter of 2024 after receipt of necessary regulatory approvals.
Flagstone was advised by Houlihan Lokey and CMS LLP on the transaction; Estancia was advised by Jefferies LLC and Dechert LLP.
* Beauhurst data, March 2024
** Based on the number of banks on the panel, savings accounts on the platform, and Trustpilot customer review ratings
*** Analysis of Bank of England Credit data, Jan 2024
**** FCA Cash Savings Market Review, July 2023
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Carmen Dixon: 07717 278 846 | carmen@ripplecomms.co
Jo Candy: 07909 992082 | jo@ripplecomms.co
