H&R Block To Acquire Wave Financial For Small Business Accounting

Summary

• H&R Block has agreed to acquire Wave Financial for $405 million in cash.
• Wave provides a range of small business and freelancer accounting and related services.
• With the deal, HRB gains a logical extension of its tax solutions as it seeks inroads in the lucrative small business accounting market.
• Looking for a community to discuss ideas with? IPO Edge features a chat room of like-minded investors sharing investing ideas and strategies. Start your free trial today »

Quick Take

H&R Block (NYSE:HRB) announced it has agreed to acquire Wave Financial for $405 million.

Wave has developed a small business financial solutions platform that covers payments, payroll, invoicing, accounting, and receipts, with over 400,000 users globally.

HRB is making a logical push into expanding its range of offerings beyond its traditional tax software solutions. The deal makes excellent strategic sense.

Target Company

Toronto, Ontario-based Wave was founded in 2009 to provide free accounting, invoicing, and receipt-tracking software while generating revenue by offering payment processing, payroll services, as well as bookkeeping services.

Management is headed by Co-Founder and CEO Kirk Simpson, who has previously co-founded Outdoorsica.com and served as a board member at Sustainability Network.

Below is an overview video of the company’s offerings:

Source: Wave Apps

Wave’s primary offerings include accounting, invoicing and receipts solutions.

Company major customers include:

• Steel & Oak Designs
• Change Connect
• Geek Girls in Vegas
• Happy Pops
• Ftiness4Youth

Source: Wave

Investors have invested at least $79.5 million in the company and include Social Capital, CRV, HarbourVest Partners, Exhibition Ventures, BDC Venture Capital, OMERS Ventures, NAB Ventures, National Australia Bank, OurCrowd, and Portag3 Ventures, among others (Source: Crunchbase).

Market & Competition

According to a market research report by Transparency Market Research, the global accounting software market was valued at $5.72 billion in 2017 and is projected to reach $11.77 billion by 2026.

This represents a CAGR of 8.6% between 2018 and 2026.

The main drivers for this expected growth are the need for better accounting software and nearly consumer-like interface, as well as its many benefits, such as rapid identification of cash flows, broad reporting possibilities, cost- and time-effectiveness, and gaining valuable insight.

The North American region is projected to dominate the market during the forecast period due to the integration of accounting software

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.