New Terms Adjust Purchase Price and Increase Flexibility Around Closing
Blucora, Inc., a leading provider of tax-smart financial solutions that empower people to achieve their financial goals, today announced it has entered into an amended agreement to acquire privately held HK Financial Services (HKFS). The parties mutually agreed to enter into the amended agreement in response to current economic conditions.
The amended agreement adjusts the purchase price to $100 million, from $160 million, while also adding a financing contingency and setting a new target closing window between today and October 1, 2020. The amended agreement allows for the closing window to be extended upon mutual agreement, as well as the potential for performance-based earn-out payments over time, should the asset targets from the original agreement be achieved.
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We believe that the amended transaction terms prioritize flexibility and balance sheet strength, while providing a path for Blucora to capture the valuable strategic and financial benefits of the transaction once it is closed. HKFS ended the first quarter with approximately $4.1 billion in total client assets, and had first quarter net inflows of approximately $214 million. The amended transaction terms value HKFS at approximately 6.3x 2020 EBITDA, including fully realized synergies, and the transaction is expected to enhance Blucora’s revenue growth rate and margins. The Company also expects the transaction to be accretive to EBITDA, EPS and cash flow, net of integration expenses.
The addition of HKFS to Blucora’s wealth management segment is expected to enable end-to-end retirement plan services for Avantax advisors’ small business clients and expands the usage base of our proprietary tax-smart investing software. The acquisition is expected to significantly increase Blucora’s total addressable market, extending the Company’s presence in the fast-growing captive RIA segment and improving conversion of CPA prospects. With this acquisition, Blucora is laying the groundwork for future opportunities, while adding important growth catalysts.
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“We continue to believe that the acquisition of HKFS will bring significant short and long-term strategic value to our advisors, end-customers and stockholders and given the current market environment we felt it was appropriate to undertake a detailed review of the transaction terms and timing,” said Chris Walters, President and Chief Executive Officer at Blucora. “At a time of dynamic change and uncertainty, we believe that the addition of HKFS to our business will allow us to deliver even more compelling solutions and choices to CPA firms, advisors and end-clients, thereby enabling us to serve a greater number of CPA firms and tax professionals, improve asset retention and add a fast-growing, high margin captive RIA platform to our business.”
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