Blucora, the parent company of HD Vest Financial Services, announced plans to acquire 1st Global, a tax-focused independent broker/dealer in Dallas, bringing the company’s total advisor head count to 4,500 managing $60 billion in client assets. Blucora, a publicly traded company that also owns tax preparation software TaxACT, said it would pay $180 million in stock for the IBD, funded via cash on hand and a $125 million add-on to its existing credit facility.
The deal, which will combine the two broker/dealers, is expected to close in the second quarter. It expands Blucora’s footprint in the tax-focused wealth management space. 1st Global, which works primarily with multipartner CPA firms, has about 850 advisors with $18 billion in total client assets, including $9 billion in advisory assets. By contrast, HD Vest focuses on converting individual tax preparers into wealth advisors.
“Clients are underserved unless their financial advisor has the capability to advise specifically on the tax implications of investment decisions,” said John Clendening, president and CEO of Blucora. “We now have the opportunity to leverage each business’s unique capabilities and technologies to help advisors deepen their relationships with clients while expanding our footprint in the marketplace to drive scale and growth.”
1st Global Chairman and CEO Tony Batman said he expects the deal to bring more capabilities and support to his firm’s advisors.
Blucora expects the acquisition to bring a higher base of recurring revenues and cash; it’s expected to generate $23 to $24 million of run-rate-adjusted EBITDA accretion by the end of this year. The company also expects revenue and cost synergies as a result of the purchase. First-quarter net income should be in the range of $57.5 to $60 million, Blucora said.
The public company made its first foray into wealth management with the purchase of HD Vest in October 2015 for $580 million. HD Vest was previously owned by an investor group led by Parthenon Capital Partners and includes Lovell Minnick Partners and Fisher Lynch. Blucora felt its TaxACT customers, many of whom are millennials, would represent a potential lead generation opportunity for HD Vest advisors.