Blucora to buy another broker-dealer with tax-focused advisers

Blucora is paying $180 million in stock for 1st Global, with 850 advisers

Mar 19, 2019 @ 1:00 pm

By Bruce Kelly

Tax preparation software company Blucora Inc. said on Tuesday it intends to continue to add to its wealth management and tax preparation business and will pay $180 million in stock for 1st Global Inc., an independent broker-dealer that focuses on taxes and CPAs.

It is the second such acquisition in the past three-and-a-half years by Blucora; in October 2015, the firm announced its acquisition of HD Vest Financial Services Inc. for $580 million from private equity owners.

1st Global's 850 advisers control close to $18 billion in client assets. The transaction is expected to close by the end of June; at that time, the two broker-dealers will have a combined 4,500 advisers with close to $60 billion in client assets.

Blucora also said on Tuesday morning it intended to buy back $100 million of its shares. Shares of Blucora rose nearly 19% by noon and were trading at $33.78.

HD Vest has recently seen some changes in its senior management. CEO Bob Oros left the firm in November and opened the year as CEO of HighTower Advisors, the RIA consolidator. Todd Mackay is the firm's CEO now.

1st Global specializes in working with large accounting firms with more than one partner, and HD Vest focuses primarily on turning individual tax preparers into financial advisers, the company said in announcing the deal.

Both HD Vest and 1st Global are based in the Dallas area, and there is clearly overlap in the businesses. While merging the two firms was not addressed directly in a press release or presentation to investors, Blucora executives see opportunities for some form of consolidation in the future.

"Combined, we believe that the fact that this is a consolidating, scale-building acquisition with geographic and vendor overlap, lowers the relative risk of the transaction and should make integration, cost savings and synergies easier to achieve," said Blucora's president and CEO, John Clendening, according to comments posted on the firm's website discussing the acquisition.

Anthony "Tony" Batman is the CEO and majority owner of 1st Global. A former chairman of the industry trade group Financial Services Institute, Mr. Batman worked at HD Vest until he branched off in 1992 to launch his own firm.

One adviser who moved to HD Vest last fall from Robert W. Baird said Blucora's announced acquisition of 1st Global was indicative of the firm's focus. "The deal speaks to Blucora's commitment to be the No. 1 tax and wealth management firm on the Street," said the adviser, Evan Guido. "The firm is putting dollars behind key assets."

The acquisition and consolidation of independent broker-dealers like HD Vest and 1st Global has been steady for the past several years.

The number of IBDs has declined 28%, with 904 open for business in 2015, compared with 1,255 firms that were up and running in 2005, according to a 2017 report. And with increased regulation pressuring profits, broker-dealer operating margins dropped from 12% in 2006 to just 3% in 2016, according to Fidelity Clearing & Custody Solutions, which completed the research for the report.

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