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Avantax Wealth Management

Report: Avantax Eyeing Potential Sale

Avantax has engaged a financial advisor to see if there’s interest from potential buyers, but the firm may not end up selling.

Avantax, the publicly traded wealth management company that was created after Blucora shed its tax software business and changed its name earlier this year, is eyeing strategic options, including a potential sale, according to a Bloomberg report.

A spokesman for Avantax declined to comment on the report, which cites “people with knowledge of the matter.”

The report states Avantax has engaged a financial advisor to see if there’s interest from potential buyers, but that the firm may not end up selling.

The news follows a move in early June by one of Avantax’s shareholders, Engine Capital, to urge the board of directors to consider selling the entire company.

Engine Capital’s letter outlines 10 arguments for selling the business, including the firm’s holding company structure, which it contends is creating unnecessary duplications across the organization; its deteriorating competitive positioning; and the fact its recent business momentum, such as improvements in recruitment and advisor experience, would make a sale more timely.

The activist investor said despite the company’s efforts, its stock continues to trade at a discount to its strategic value. Year to date, its stock price is down nearly 3%, but on Tuesday, it gained 6% in trading as of the market close on the news of the sale exploration.

“Given the benefits of scale in the asset management space and Avantax’s own inefficiencies, it is obvious that the value of Avantax to a large consolidator is vastly superior to its standalone value,” the letter stated.

Avantax, formerly called Blucora, sold off its TaxAct business last November, with an affiliate of Cinven, a global private equity firm, buying the software business for $720 million in cash. The wealth management business of Avantax was created from the acquisitions of HD Vest and 1st Global, two tax-focused broker/dealers. The firm had about 3,100 financial advisors and $80.6 billion in total client assets as of March 31, 2023.

“Having dumped the tax business, AVTA is now a sub-scale ‘registered investment advisor’ business that should be ‘red meat’ for any number of PE funds that have been buying RIA rollups in recent years,” said Don Bilson, head of the events-driven team at Gordon Haskett Research Advisors, in an analyst note. “Using AVTA’s own EBITDA guidance of $130m, we see a sale at 11x translating into a purchase price in the $33-$34 range.”

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