Publicly traded Avantax Inc., a tax-focused financial planning and wealth management provider in Dallas, announced Sept. 11 that it agreed to be taken private by Aretec Group Inc., the holding company of Genstar Capital-backed Cetera Financial Group, in an all-cash transaction worth $1.2 billion, including net debt.
Shareholders of Avantax common stock will receive $26 in cash per share without interest and subject to required withholding taxes. The purchase represents a premium of about 30 percent over the closing price of shares of Avantax common stock on Sept. 8.
In an analyst note in July, Don Bilson of Gordon Haskett Research Advisors said using Avantax’s own EBITDA guidance, he saw a sale at $1.43 billion, or a range between $33 and $34 per share.
Activist shareholder Engine Capital, which called on Avantax to explore a sale in June, said the company could fetch as much as $32 per share.
The transaction is expected to close by year-end if it’s approved by stockholders and regulators. The deal is not subject to any financing condition.
After closing, Avantax will become a standalone business unit within Cetera with 3,078 Avantax financial professionals representing $83.8 billion in assets under administration and $42.6 billion in assets under management as of June 30.
The deal comes as consolidation continues in the asset management industry. Observers say scale is needed to be able to compete nationally, but the industry has not seen every takeover working out well (they noted Bank of America / Merrill Lynch).
The combo would compete with Tampa, Fla.-based rival Osaic, formerly known as Advisor Group, with around 11,000 brokers. LPL Financial is the largest independent broker-dealer with nearly 22,000 brokers.
Avantax had been pursuing a sale since July, according to Bloomberg, after a series of changes, including changing its name from Blucora in January and selling its tax software unit TaxAct in November to an affiliate of UK-based private equity fund Cinven Ltd. for $720 million.
Through the transaction, Cetera will keep Avantax’s legal entities, core technology, product offerings and existing clearing and custody relationships, including with Fidelity Investments.
PJT Partners is financial advisor to Avantax and Sidley Austin and Haynes Boone are legal counsel. Tabitha Bailey, Avantax’s chief legal officer, used to be an associate at Haynes and Boone and later at Akin Gump Strauss Hauer & Feld.
The group from Texas included associates Omar Shariff and Taylor Calvert (M&A); partners Susan Wetzel and Scott Thompson and associate Alex Roldan (benefits and compensation); partners Melissa Goodman and Raquel Alvarenga and associate Sean Lewis (labor and employment); partner Gavin George and associate Tanner Luttrull (intellectual property); partners Paul Amiel and Sakina Rasheed Foster and associate Kierra Jones (finance); and partner David Taubenfeld (insurance recovery).
The Sidley team was led from Chicago by partners Beth Berg and Scott Williams. They were supported by lawyers from Chicago, New York and Washington D.C., and two lawyers from Dallas: private equity partner Kelly Dybala and senior managing associate Daniel Burkhart.
Willkie Farr & Gallagher advised Cetera but the firm has not identified the lawyers involved.
Morgan Stanley & Co. is financial advisor to Cetera. UBS Investment Bank and BMO Capital Markets served as co-advisors.
The sale follows years of previous work and partnership between Haynes and Boone and Avantax, previously known as Blucora, a spokeswoman noted in an email. In 2022, the firm represented Avantax on its sale of TaxAct Inc., following a $175 million acquisition of HK Financial Services in 2020 and $180 million purchase of 1st Global Inc. in 2019.