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Tax Software Firm SurePrep Selling for $500M

Latest OC investment for Thomson Reuters

SurePrep LLC, an Irvine-based tax automation software company that improves tax processing for accounting professionals, is set to be acquired by Canada’s news and information giant Thomson Reuters Corp. for $500 million in cash.

Thomson Reuters (NYSE: TRI) said Nov. 11 it had signed a definitive agreement to acquire SurePrep, which has been among Orange County’s faster-growing software firms in recent years.

The transaction is expected to close in the first three months of 2023, subject to regulatory approvals and closing conditions.

In addition to its global news services, Thomson Reuters, which was valued around $53 billion as of last week, counts a large base of software and related services offerings for the accounting and legal industries, among its varied business units.

“For SurePrep, this deal will give it extensive reach into Thomson Reuters’ existing customer base, while for Thomson Reuters it gets an arsenal of automated tools to bolster its existing tax products,” tech news site TechCrunch.com said shortly after the deal was announced.

$60M in 2022

SurePrep was founded in 2002. Its tax automation products and services “are used by over 23,000 tax professionals at CPA firms, wealth management firms and others,” according to Thomson Reuters.

Its software “automates the collection of digital documents directly from clients and the processing of those documents, automatically extracting and populating key data into its tax compliance software to make certified public accountants more efficient,” according to company documents.

The company’s core software and services offerings are branded under the 1040SCAN, SPbinder and TaxCaddy names.

SurePrep ranked No. 10 on the Business Journal’s list of fastest-growing midsize OC companies two years ago, when it reported revenue of $32.6 million for the 12 months ended June 30, 2020. At the time, it employed about 120 people.

Growth appears to have continued since the onset of the pandemic.

“SurePrep is expected to generate approximately $60 million of revenue in 2022 and grow in excess of 20% annually in the next few years,” Thomson Reuters said when announcing the acquisition this month.

SurePrep’s recent growth came under the watch of private equity firm Bregal Sagemount, which acquired a minority stake in the business three years ago. At the time, SurePrep was reported to count nearly half of the 100 largest accounting firms in the U.S. as clients, and the company reported having 20,000 customers in total.

Tax Automation

“This transaction builds on our existing partnership/reseller arrangement to deliver our vision of end-to-end tax automation that solves our customers’ biggest pain points,” said Dave Wyle, CEO and president of SurePrep. “Additionally, Thomson Reuters has made it clear they are committed to maintaining SurePrep’s ability to interoperate with multiple vendors across an open tax software ecosystem.”

SurePrep products and services are used by tax professional customers ranging from Big Four firms to sole practitioners, to reduce administrative costs, automate workpaper preparation, maximize review efficiency, and improve client service, Thomson Reuters said.

Wyle’s company is one of several firms in OC seeking to harness software to speed up various traditional document-intensive office processes.

They include Irvine’s Kofax, whose products transform paper documents into digital files, and which bought local competitor Ephesoft earlier this year, and Alteryx, which uses the power of data analytics to help businesses make better informed decisions.

Thomson Reuters was an early investor in Irvine’s Alteryx (Nasdaq: AYX) and counted a 12% stake in the company shortly after its well-received IPO in 2017, according to regulatory filings.

Tax Benefit

Thomson Reuters and SurePrep have been partnering since April.

The acquisition “will support our strategy to empower tax and accounting professionals with the very best technology to simplify workflows, drive insights and improve efficiency,” stated Elizabeth Beastrom, president of Tax & Accounting Professionals at Thomson Reuters.

The net acquisition price of SurePrep will ultimately come out to $440 million, considering an estimated tax benefit with a net present value of roughly $60 million, according to O’Melveny & Myers LLP, which serves as legal advisor to SurePrep.

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal
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