US-based private equity firm TA Associates has sold its stake in TaxACT, a provider of tax preparation software and related online services, to Nasdaq-listed online search engine company InfoSpace for $287.5m in cash.
Based in Cedar Rapids, Iowa, TaxACT is the second largest provider of online tax services. With around 70 full-time employees, the company participates in the large and growing $20bn tax preparation market. TaxACT had more than five million tax filers last season, with the vast majority of those customers filing online.
For the twelve months ending 30 September 2011, TaxACT had revenues of $78.1m and adjusted EBITDA of $37.8m. For the same period, InfoSpace and TaxACT together generated pro forma revenue of $290m, pro forma adjusted EBITDA of $72.5m, and pro forma non-GAAP net income of $45.6m, or $1.21 per diluted share.
The transaction is expected to be immediately accretive to InfoSpace earnings per share and year one return on shareholder capital is expected to exceed 16 per cent, the company said in a statement. TA Associates initially invested in the company in 2004.
InfoSpace will fund the acquisition through a combination of cash on hand and debt, and has secured a commitment for approximately $95m of financing in connection with this transaction. The combined company is expected to have a solid balance sheet, with an estimated cash and short-term investments in excess of $90m.
Upon completion of the acquisition, 2nd Story Software, the operating company for the TaxACT business, will become a wholly-owned subsidiary of InfoSpace, and will continue operations in Cedar Rapids, Iowa as a standalone business unit led by the TaxACT management team.
Founded in 2004 and headquartered in Cambridge, Massachusetts, the company addresses the needs of ‘dual eligibles’, individuals who qualify for Medicare, for those aged 65 or over, and Medicaid, based on financial need.
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