4. Business combinations, goodwill and intangible assets

Business combinations

Acquisition of a software development company in Argentina

On February 12, 2016, the Company completed, through its subsidiaries Meli Participaciones S.L. and Marketplace Investment LLC, a limited liability company organized under the laws of Delaware, USA (together referred to as the “Buyers”), the acquisition of the 100% of equity interest of Monits S.A., a software development company located and organized under the laws of the Buenos Aires City, Argentina. The objective of the acquisition was to enhance the capabilities of the Company in terms of software development.

The aggregate purchase price for the acquisition of the 100% of the acquired business was $3,056 thousands, measured at its fair value, amount that included: (i) the total cash payment of $1,713 thousands at closing day; (ii) an escrow of $128 thousands and iii) a contingent additional cash consideration up to $1,215 thousands.

The Company’s unaudited interim condensed consolidated statement of income includes the results of operations of the acquired business as from February 12, 2016. The net revenues and net loss before intercompany eliminations of the acquired Company included in the Company’s interim condensed consolidated statement of income since the acquisition amounted to $195 thousands and $142 thousands, respectively.

In addition, the Company incurred in certain direct costs of the business combination which were expensed as incurred.

As of March 31, 2016, the fair value of the contingent consideration recorded is $1,215 thousands. Contingent additional cash considerations are to be paid after the achievement of the performance targets.

The following table summarizes the preliminary purchase price allocation for the acquisition:


	Monits S.A. In thousands of U.S. dollars
Cash and cash equivalents	$	3
Other net tangible assets		25
Total net tangible assets acquired		28
Non solicitation agreement		196
Goodwill		2,832
Purchase Price	$	3,056

The purchase price was allocated based on the provisional measurement of the fair value of assets acquired and liabilities assumed considering the information available as of the date of these unaudited interim condensed consolidated financial statements. The valuation of identifiable intangible assets acquired reflects management’s estimates based on the use of established valuation methods. Such assets consist of non-solicitation agreement for an amount of $196 thousands. Management of the Company estimates that the non-solicitation agreement will be amortized over a two-year period.

The Company recognized goodwill for this acquisition based on management expectation that the acquired business will improve the Company’s business.

Arising goodwill has been allocated proportionally to each of the segments identified by the Company’s management, considering the synergies expected from this acquisition and it is expected that the acquiree will contribute to the earnings generation process of such segments.

Supplemental pro forma financial information required by U.S. GAAP for each acquisition, both individually and in the aggregate, was not material to the interim condensed consolidated financial statements of income of the Company and, accordingly, such information has not been presented.

Goodwill is not deductible for tax purposes.

Goodwill and intangible assets

The composition of goodwill and intangible assets is as follows:


	March 31,	December 31,
	2016	2015
	(In thousands)
Goodwill	$ 91,379	$ 86,545
Intangible assets with indefinite lives
- Trademarks	13,221	13,074
Amortizable intangible assets
- Licenses and others	8,562	8,691
- Non-compete/solicitation agreement	1,862	1,615
- Customer list	13,748	12,971
Total intangible assets	$ 37,393	$ 36,351
Accumulated amortization	(8,337)	(7,360)
Total intangible assets, net	$ 29,056	$ 28,991

Goodwill

The changes in the carrying amount of goodwill for the three-month period ended March 31, 2016 and the year ended December 31, 2015 are as follows:


	Three-month period ended March 31, 2016
	Brazil	Argentina	Chile	Mexico	Venezuela	Colombia	Other Countries	Total
	(In thousands)
Balance, beginning of the period	18,526	$ 7,430	$ 16,438	$ 33,834	$ 5,729	$ 3,437	$ 1,151	$ 86,545
- Business acquisition	1,593	700	—	190	260	57	32	2,832
- Effect of exchange rates changes	1,477	(821)	942	265	—	131	8	2,002
Balance, end of the period	$ 21,596	$ 7,309	$ 17,380	$ 34,289	$ 5,989	$ 3,625	$ 1,191	$ 91,379



	Year ended December 31, 2015
	Brazil	Argentina	Chile	Mexico	Venezuela	Colombia	Other Countries	Total
	(In thousands)
Balance, beginning of year	$ 10,557	$ 11,859	$ 19,101	$ 15,719	$ 5,729	$ 4,521	$ 1,343	$ 68,829
- Business acquisition	14,066	—	—	22,978	—	—	—	37,044
- Effect of exchange rates changes	(6,097)	(4,429)	(2,663)	(4,863)	—	(1,084)	(192)	(19,328)
Balance, end of the year	$ 18,526	$ 7,430	$ 16,438	$ 33,834	$ 5,729	$ 3,437	$ 1,151	$ 86,545

Intangible assets with definite useful life

Intangible assets with definite useful life are comprised of customer lists and user base, non-compete and non-solicitation agreements, acquired software licenses and other acquired intangible assets including developed technologies. Aggregate amortization expense for intangible assets totaled $814 thousands and $510 thousands for the three-month periods ended March 31, 2016 and 2015, respectively.

The following table summarizes the remaining amortization of intangible assets (in thousands of U.S. dollars) with definite useful life as of March 31, 2016:


For year ended 12/31/2016						$ 3,320
For year ended 12/31/2017						3,628
For year ended 12/31/2018						2,945
For year ended 12/31/2019						1,995
Thereafter						3,947
						$ 15,835