Intuit to Acquire Check Inc. - Analyst Blog

Intuit Inc. INTU, a provider of TurboTax and business management software solutions, has reportedly inked a deal with mobile bill payment start-up, Check Inc., for a purchase consideration of $360.0 million.

Increasing adoption of smartphones has paved the way for mobile commerce. This has led to the emergence of a number of start-ups looking to simplify the mobile payment process. Check Inc. is one such start-up, which already has 10 million registered members that use the app to pay their bills. The app is a free download on Google's (GOOGL) Android and Apple's AAPL iTunes stores with the company generating revenue through in-app ads.

We believe that the acquisition will help Intuit to provide value added services to its customers, thereby increasing its customer base going forward.

Following this acquisition, Intuit could encourage customers to download Check's program on their smartphones and pay their bills through it. Also, Intuit's customers will be able to gather bill details, track their transactions and make scheduled payments using Check's app.

Intuit has closed a number of acquisitions of late with the intention of diversifying its offerings and expanding its markets. The strong cash balance ($2.63 billion) and robust operating cash flow ($1.53 billion in the third quarter of 2014) enable the company to go for strategic acquisitions.

One of Intuit's recent acquisitions was Lettuce, an online inventory and order management app worth $30.0 million. Lettuce is a cloud-based platform that offers a wide range of inventory and order management solutions that help to solve related problems faster. With the acquisition of Lettuce, Intuit will be able to build a more comprehensive platform for entrepreneurs as Lettuce's capabilities will boost Intuit's own platform.

We are positive about Intuit's growing small & medium business SMB exposure and believe that all its acquisitions in the space, including Demandforce, Prestwick Services, LLC and Docstoc will continue to provide support to the segment. However, competition from leading payroll solution provider Paychex Inc. PAYX and H&R Block, Inc., seasonality of Intuit's tax business and the ongoing uncertainty in the economy are concerns.

Currently, Intuit has a Zacks Rank #3 (Hold).

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