Blucora Acquires HK Financial Services For $160M

IRVING, Texas, Jan. 07, 2020 (GLOBE NEWSWIRE) -- Blucora, Inc. (NASDAQ:BCOR), a leading provider of tax-smart financial solutions that empower people’s goals, today announced it has entered into an agreement

Benzinga · 01/07/2020 11:02

IRVING, Texas, Jan. 07, 2020 (GLOBE NEWSWIRE) -- Blucora, Inc. (NASDAQ:BCOR), a leading provider of tax-smart financial solutions that empower people’s goals, today announced it has entered into an agreement to acquire privately-held HK Financial Services (HKFS), a CPA-focused, (captive) registered investment advisor (RIA). The combination adds approximately $4.4 billion to Blucora’s total client assets, bringing the total to more than $72 billion, with approximately 42% in advisory assets.

“This transaction further reinforces Blucora’s strategy of delivering tax-advantaged wealth management solutions to advisors and end-clients while maintaining healthy margins and profitable growth,” said John Clendening, President and Chief Executive Officer of Blucora. “We look forward to joining with HK Financial Services to provide more CPA firms, advisors and end-clients with additional capabilities and choice, while providing our Avantax advisors new opportunities for growth, broader solution sets, efficiency and profitability.”

The complementary nature of the transaction is expected to expand Blucora’s established leadership in tax-aware investing and enhance its ability to better service clients and enable better outcomes through four primary drivers:   

  • Increasing Blucora’s total addressable market by swiftly entering the large, adjacent captive RIA space that has favorable tailwinds and is the fastest growing segment in the wealth management industry, featuring attractive recurring revenues.
  • Expanding Blucora’s product offerings enabling it to serve more CPA firms and tax professionals in more ways, expanding the reach of its Tax-Smart Investing software, as well as enabling the company to offer end-to-end retirement plan services for small business clients.
  • Enhancing the company’s revenue growth rate, increasing margins and being accretive to EBITDA, EPS and free cash flow with the addition of a strong growth and profit engine in HKFS.
  • Providing multiple avenues for enhancing future growth opportunities by improving asset retention, increasing prospect conversion and offering turn-key retirement plan services to the full Avantax advisor and customer base, all on top of what is a highly scalable HKFS platform.

HKFS’ CPA partner firms are also expected to benefit from the ability to leverage Tax-Smart Investing software to better serve accounts and ultimately increase revenue.

Louie Rosalez, President of HK Financial Services, said, “Blucora embodies our mission to take a holistic approach to serving our clients’ wealth management needs, and is the ideal partner for HKFS.  We look forward to working together with them to provide the best products, solution and service to clients.”

Blucora anticipates that HKFS will operate as a third division of Blucora, in addition to Avantax Wealth Management and TaxAct.

Transaction Details
The acquisition is being structured as a stock purchase with a price of $160 million, representing an attractive multiple of approximately  9.3x fully realized synergies on pro-forma 2020 EBITDA of HKFS.  As part of the transaction Blucora expects to issue $165 million of add-on term loan fungible with existing debt. The transaction is expected to close by the end of the first quarter of 2020, subject to regulatory approval and customary closing conditions.