SurePrep Acquisition: Key Details, Impact, and What Comes Next

Thomson Reuters has acquired SurePrep, a leader in 1040 tax automation software, for $500 million. This strategic move aims to enhance cloud-based workflows for tax professionals, integrating SurePrep's innovative solutions into Thomson Reuters' platform. The acquisition is expected to streamline tax processes, benefiting over 23,000 tax professionals who use SurePrep's products.

What Is SurePrep?

Founded in 2002, SurePrep specializes in tax automation software solutions. Its core products include TaxCaddy, 1040SCAN, SPbinder, Outsource, and API. SurePrep stands out in the market with its advanced OCR technology, which automates 4-7 times more documents than competitors, and its patented auto-verification technology ensuring 100% accuracy for native PDFs. The company’s comprehensive digital workflow addresses the entire 1040 process, enhancing efficiency and client experience.

Who Acquired SurePrep?

Thomson Reuters is a global content and technology company that provides professionals with the intelligence, technology, and human expertise they need to find trusted answers. Operating in sectors such as legal, tax and accounting, trade and supply, risk and fraud, and news and media, its key products include Westlaw Precision, ONESOURCE, and Reuters Connect. Renowned for its authoritative content and innovative technology solutions, Thomson Reuters holds a significant influence across multiple professional industries.

When Was SurePrep Acquired?

Thomson Reuters completed the acquisition of SurePrep on January 3, 2023. This acquisition, initially announced on November 11, 2022, for $500 million, aligns with industry trends towards automation and digital solutions in tax and accounting. The timing reflects a broader push within the sector to enhance productivity and efficiency through advanced technology, addressing the increasing complexity of tax regulations and economic challenges faced by professionals.

Why Was SurePrep Acquired?

• Market Expansion: The acquisition of SurePrep supports Thomson Reuters' strategy to expand its market presence in the tax automation software and services sector. SurePrep's products, used by over 23,000 tax professionals, will now be part of Thomson Reuters' offerings, thereby broadening its customer base and market reach.
• Technology Integration: SurePrep leverages artificial intelligence to automate the collection and processing of digital documents. This technology will be integrated into Thomson Reuters' existing platforms to enhance their cloud-based workflows and provide a more connected tax ecosystem, simplifying tax professionals' workflows and saving time and costs.
• Competitive Advantage: The acquisition enhances Thomson Reuters' competitive advantage by incorporating SurePrep's advanced tax automation solutions into its portfolio. This move is expected to drive insights, improve efficiency, and offer an end-to-end tax automation solution, positioning Thomson Reuters as a more formidable player in the tax and accounting software market.

Acquisition Terms

• Acquisition Price: $500 million
• Payment Method: Cash
• Key Conditions or Agreements:
  • SurePrep will become part of Tax and Accounting Professionals operations within Thomson Reuters.
  • The transaction is subject to regulatory approvals and customary closing conditions.
  • Thomson Reuters will maintain SurePrep’s ability to interoperate with multiple vendors across an open tax software ecosystem.
  • SurePrep is expected to generate approximately $60 million of revenue in 2022 and grow in excess of 20% annually in the next few years.
  • Adjusted EBITDA is expected to be neutral in the first year, followed by annual increases thereafter.
  • Acquired deferred revenue is expected to be a modest free cash flow drag in the first year.

Impact on SurePrep

The acquisition of SurePrep by Thomson Reuters has led to significant changes in operations and management. SurePrep will now operate under Thomson Reuters' Tax and Accounting Professionals division, with David Wyle and his team joining to ensure a smooth transition. This integration aims to maintain continuity for customers, partners, and employees, while leveraging SurePrep's innovative technology to enhance Thomson Reuters' existing platforms. The commitment to maintaining SurePrep’s ability to interoperate with multiple vendors across an open tax software ecosystem remains a priority, ensuring that the transition is seamless for all stakeholders.

In terms of product offerings and services, SurePrep's core products, including 1040SCAN, SPbinder, and TaxCaddy, will continue to be available. Thomson Reuters plans to integrate these solutions into its cloud-based workflows, providing a more connected tax ecosystem that enhances productivity and cost savings for tax professionals. While specific employee and customer reactions have not been detailed, the emphasis on continuity and high-quality service suggests a positive reception. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smooth and efficient transition.