Blucora to Buy Brokerage HD Vest Financial for $580 Millionby and
Chief Executive Ruckelshaus to resign once successor is found
Deal transforms former InfoSpace into tax-advisory specialist
Blucora Inc., the onetime Internet giant known as InfoSpace that became a poster child for the excesses of the dot-com boom, agreed to pay $580 million for HD Vest Financial Services, one of the few brokerages that specialize in helping tax advisers become licensed to sell investment products.
The deal brings together two companies with tangled histories looking for makeovers. It creates an exit for Parthenon Capital Partners, Lovell Minnick and Fisher Lynch Capital, the investment firms that bought HD Vest in 2011 from Wells Fargo & Co., which had acquired the company a decade earlier.
The transaction also enables Bellevue, Washington-based Blucora -- whose market value briefly peaked at more than $30 billion in 2000 -- to double down on tax-preparation services and shift further away from online search and content services. To that end, it will sell its InfoSpace and Monoprice units and use the proceeds to pay down debt, according to a statement Wednesday.
HD Vest complements TaxAct, an online tax-preparation service that Blucora bought for almost $288 million in 2012. The idea is that the post-merger Blucora will have a steadier, more predictable business model as Blucor’s tax advisers look to sell mutual funds and other types of securities to the roughly 25,000 people that use TaxAct’s software.
“This is a transformative acquisition,” Blucora Chief Executive Officer Bill Ruckelshaus said in the statement. “Our company will generate substantial free cash flow that will be returned to shareholders starting in 2017.”
The change in direction will result in Ruckelshaus resigning as president and CEO as soon a successor is found, according to the statement. Ruckelshaus, a former technology banker with Credit Suisse Group AG who also did a stint as Expedia Inc.’s in-house dealmaker before joining Blucora in 2011, is leaving because his skill set is buying technology-focused companies and Blucora now needs someone who knows how to run a brokerage.
Blucora changed its name in 2012 from InfoSpace, which was founded in 1996 by former Microsoft engineer Naveen K. Jain, who was ousted as its CEO 2002.
InfoSpace was a major player at one time in online search and information services, selling everything from classified ads, news, shopping and other content to America Online and other customers. By the time Ruckelshaus took over, InfoSpace was essentially a shell company that owned some metasearch engines, which aggregate results from other search providers. His mandate was to use InfoSpace as an acquisition vehicle for more promising ventures. He bought TaxAct in 2012, the e-commerce company Monoprice in 2013, and online content provider HowStuffWorks in 2014.
Irving, Texas-based HD Vest is the largest of the three main brokerages that help certified public accountants become registered as investment advisers with the U.S. Securities and Exchange Commission, a process that clears them for selling mutual funds and other securities products to clients. The other two are 1st Global and Cetera Financial Specialists, a subsidiary of Cetera Financial Group Inc.
HD Vest has a network of more than 4,500 representatives that manage more than $36 billion in assets for small businesses and wealthy people and families, according to Wednesday’s statement. It has to ensure that its representatives, independent contractors, are complying with securities laws.