Dallas’ Blucora to sell its Tax Act business for $720 million following proxy fight

Dallas-based financial tech firm BlueCora will sell its tax software arm, TaxAct, for $720 million to pay off debt and streamline its business, something one active investor has been pushing to do since last year.

An affiliate of London-based private equity firm Sinven will acquire TaxAct, which has more than three million consumer users and about 21,000 professional users. The deal is expected to close by the end of the year.

Following the completion of the transaction, BlueCora, including its independent broker-dealer, Avantax Wealth Management, and its employee-based registered investment advisor, Avantax Planning Partners, will rebrand as Avantax and focus on their tax-focused wealth business. will streamline its operations.

“We will be laser-focused on distinguishing ourselves as the partner of choice for tax-focused financial professionals, tax professionals and CPAs,” BlueCora CEO Chris Walters said in a call with investors on Tuesday.

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Walters, who became CEO in January 2020, said the deal would allow BlueCora to pay off debt immediately, provide returns to shareholders, and reinvest in Avantax’s growth. BlueCora expects to net approximately $620 million from the deal, with $450 million going back. to shareholders.

Since last year, Blucora has had to defend two of its businesses after a proxy fight with shareholder Anchora Holdings Group called the company’s leaders into question.

Ancora said the tax business should be sold and questioned whether the company was “encouraged to maintain a large, bloated holding company model rather than a focused, well-organized business.” This year, it has pushed for changes at software company Everbridge, toy maker Hasbro and department store chain Kohl’s.

Walters told investors he could use his tax arm to recruit CPAs to his asset management arm to increase the company’s assets under management by $2 billion.

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Walters said during Tuesday’s investor call, “While the decision to sell TaxAct may come as a surprise to some of you, the Board is consistently in its position to remain open to opportunities to create or unlock value for shareholders.” Used to be.”

BlueCora’s tax software segment had revenue of $6.7 million in the past three months, up 34% from the prior year. Its wealth management business generated revenue of $165 million, down 2.4% from the same period last year.

According to market research firm IBIS World, the tax preparation services market in the US has grown to $11.6 billion. Earlier this year, a potential threat to the profitable tax preparation industry was introduced in the Inflation Reduction Act.

Congress approved $15 million for the Internal Revenue Service to study options for an updated free government-backed tax filing program. It will replace its current free system, which is not widely used.

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Walters said BlueCora has about 600 employees in the Dallas area, most of whom work in wealth management. Walters said he expects Sinven to retain the tax business team.

Despite rising interest rates and high inflation, Walters said the wealth management business is “doing better, if not better, than ever.”

“Our outlook is incredibly rosy in the next year,” he said.

Centerview Partners LLC and PJT Partners are acting as financial advisors and Haynes & Boone LLP and Siddeley Austin LLP are acting as legal advisors to BlueCora.

Financial tech firm Bluecora is moving its headquarters to a new building in Cyprus Waters


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