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H&R Block to sell RSM McGladrey unit for $610 million

H&R Block Inc. took the final step back to its tax-preparation roots Tuesday by agreeing to sell its accounting and business-consulting firm RSM McGladrey for $610 million.</p><p>RSM McGladrey has struggled against declining revenues and profits in recent years. The business was built through a series of acquisitions intended to diversify Block away from its long concentration in the taxpayer services that made its brand a household name.</p><p>Shares of H&R Block jumped by more than 7 percent on the news, finishing the day at $14.39, up 99 cents.</p><p>Block similarly had acquired a subprime mortgage company called Option One and a discount stock brokerage firm called Olde Financial in hopes of expanding the kinds of services it could offer tax customers. Instead, Block sold off those operations after a contentious battle between management and unhappy shareholders led by now-former chairman Richard Breeden.</p><p>Block still owns H&R Block Bank and has intertwined it with its tax business through its refund anticipation checks and Emerald Card programs that make refunds available to customers quickly. By selling RSM McGladrey, Block largely becomes the core tax business it had been before embarking on the expansion. </p><p>The pending sale of RSM McGladrey &#x93;completely reverses the diversification strategy into financial services under (former CEOs) Mark Ernst and Frank Salizzoni,&#x94; said Alexander Paris, an analyst at Barrington Research.</p><p>Block has said it still hopes to acquire the digital tax business TaxACT despite legal opposition by the Justice Department.</p><p>Tuesday&#x92;s announcement said Block reached a nonbinding agreement to sell nearly all the assets of RSM McGladrey to McGladrey & Pullen, the accounting firm that is Block&#x92;s partner in providing business services. </p><p>The two companies cooperate though an alternative practice structure made necessary by requirements that only certified public accountants can own businesses that attest to the accuracy of clients&#x92; financial statements, which McGladrey & Pullen does for clients.</p><p>RSM McGladrey provides tax and consulting services to principally the same clients.</p><p>Combined, the operations employ 5,000 people in more than 80 offices nationwide, including 135 in Kansas City. Block said it planned to sell or close the portions of RSM McGladrey that were not part of the deal.</p><p>&#x93;This transaction is an important step in refocusing the company on growing clients and market share in our core tax business and improving our (profit) margins,&#x94; Bill Cobb, Block&#x92;s president and CEO, said in a statement.</p><p>Block officials declined to comment beyond the announcement. The deal is expected to be completed by the end of the year.</p><p>In McGladrey & Pullen&#x92;s announcement, managing partner Joe Adams said reuniting the operations under a traditional partnership structure was in the best interests of clients, employees and partners. </p><p>Block agreed to sell RSM McGladrey for $610 million and provide financing for $65 million of the purchase price. Block said the transaction would trigger a $53 million noncash charge against its earnings for the quarter that ended July 31. Block is expected to report the quarter&#x92;s results Sept. 1.</p><p>H&R Block acquired RSM McGladrey for $240 million in 1999.

H&R Block to sell RSM McGladrey unit for $610 million - KansasCity ...

H&R Block Inc. took the final step back to its tax-preparation roots Tuesday by agreeing to sell its accounting and business-consulting firm RSM McGladrey for $610 million.</p><p>RSM McGladrey has struggled against declining revenues and profits in recent years. The business was built through a series of acquisitions intended to diversify Block away from its long concentration in the taxpayer services that made its brand a household name.</p><p>Shares of H&R Block jumped by more than 7 percent on the news, finishing the day at $14.39, up 99 cents.</p><p>Block similarly had acquired a subprime mortgage company called Option One and a discount stock brokerage firm called Olde Financial in hopes of expanding the kinds of services it could offer tax customers. Instead, Block sold off those operations after a contentious battle between management and unhappy shareholders led by now-former chairman Richard Breeden.</p><p>Block still owns H&R Block Bank and has intertwined it with its tax business through its refund anticipation checks and Emerald Card programs that make refunds available to customers quickly. By selling RSM McGladrey, Block largely becomes the core tax business it had been before embarking on the expansion. </p><p>The pending sale of RSM McGladrey &#x93;completely reverses the diversification strategy into financial services under (former CEOs) Mark Ernst and Frank Salizzoni,&#x94; said Alexander Paris, an analyst at Barrington Research.</p><p>Block has said it still hopes to acquire the digital tax business TaxACT despite legal opposition by the Justice Department.</p><p>Tuesday&#x92;s announcement said Block reached a nonbinding agreement to sell nearly all the assets of RSM McGladrey to McGladrey & Pullen, the accounting firm that is Block&#x92;s partner in providing business services. </p><p>The two companies cooperate though an alternative practice structure made necessary by requirements that only certified public accountants can own businesses that attest to the accuracy of clients&#x92; financial statements, which McGladrey & Pullen does for clients.</p><p>RSM McGladrey provides tax and consulting services to principally the same clients.</p><p>Combined, the operations employ 5,000 people in more than 80 offices nationwide, including 135 in Kansas City. Block said it planned to sell or close the portions of RSM McGladrey that were not part of the deal.</p><p>&#x93;This transaction is an important step in refocusing the company on growing clients and market share in our core tax business and improving our (profit) margins,&#x94; Bill Cobb, Block&#x92;s president and CEO, said in a statement.</p><p>Block officials declined to comment beyond the announcement. The deal is expected to be completed by the end of the year.</p><p>In McGladrey & Pullen&#x92;s announcement, managing partner Joe Adams said reuniting the operations under a traditional partnership structure was in the best interests of clients, employees and partners. </p><p>Block agreed to sell RSM McGladrey for $610 million and provide financing for $65 million of the purchase price. Block said the transaction would trigger a $53 million noncash charge against its earnings for the quarter that ended July 31. Block is expected to report the quarter&#x92;s results Sept. 1.</p><p>H&R Block acquired RSM McGladrey for $240 million in 1999.

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