Cetera Holdings Acquires Avantax in $1.2 Billion All-Cash Transaction

Cetera Holdings, a leading wealth management company, has announced its acquisition of Avantax in an all-cash transaction worth approximately $1.2 billion. This valuation includes Avantax's net debt, making it a significant deal in the industry.

Under the terms of the agreement, shareholders of Avantax (ticker: AVTA) will receive $26 in cash per common share. This offer represents a premium of around 30% compared to the closing price of Avantax common stock on September 8, 2023.

The news of the acquisition has already had a positive impact on Avantax's stock. Following the announcement, its shares surged by 28% to approximately $25.50 during early morning trading on Monday. Despite a relatively lackluster performance throughout the year, even after the deal's unveiling, the stock still remains below its 52-week high of $30.23.

The decision to acquire Avantax is driven by Cetera Holding's aspiration to enhance its capabilities in tax-focused financial planning. Mike Durbin, CEO of Cetera Holdings, expressed his enthusiasm for the strategic move, stating, "Avantax was an ideal target and a powerful fit for our business as we sought to expand Cetera's wealth management and tax expertise."

Chris Walters, CEO of Avantax, emphasized the immediate benefits this deal brings to Avantax stockholders, providing them with instant cash value.

This acquisition marks Cetera's second significant purchase this year, following its acquisition of Securian's wealth management business in August. With almost 1,000 advisors and nearly $50 billion in client assets added through this previous deal, Cetera now solidifies its position as a major player in the industry.

Furthermore, the Avantax acquisition elevates Cetera's standing even more, as Avantax boasts 3,078 financial professionals and $83.8 billion in assets under administration. In contrast, Cetera already has an extensive network of over 9,000 advisors with approximately $341 billion in assets under administration.

In summary, Cetera Holdings' acquisition of Avantax is a significant milestone for both companies. This strategic move is expected to strengthen Cetera's position in the wealth management industry while delivering substantial value to Avantax shareholders.

Cetera Acquires Avantax: The Latest in Wealth Management Consolidation

Cetera, a network of broker-dealers, has announced its acquisition of Avantax as a stand-alone business unit. The Dallas-based company, previously known as Blucora, will retain its legal entities, core technology, product offerings, and existing clearing and custody relationships.

Continued Consolidation in the Wealth Management Sector

This deal is just one example of the ongoing consolidation trend among wealth management firms. These firms are looking to achieve greater scale in the face of rising technology and regulatory costs. For many, acquisitions are an attractive way to quickly add a large number of assets. However, these deals also come with risks as advisors and clients may choose to leave for a competing firm.

Cetera's recent Securian deal boasted an impressive 91% advisor retention rate. With regards to the Avantax acquisition, Cetera executives have assured that they will prioritize maintaining the stability of existing advisor and client relationships. For instance, Cetera plans to uphold Avantax's custody relationship with Fidelity, which will prevent any disruptions or account transfers.

"We are committed to taking a thoughtful, personalized, and proactive approach with Avantax to ensure the continued success of its valued financial professionals," said Adam Antoniades, CEO of Cetera Financial Group.

Private-Equity Involvement and the Departure from Public Markets

This acquisition also reflects the broader trend of wealth management companies leaving public markets. Recently, on September 1st, Focus Financial Partners completed its sale to a private-equity firm. Private-equity money has been flooding into the wealth management sector, driving an acquisition frenzy among registered investment advisors. Cetera itself is backed by private-equity firm Genstar Capital Partners.