4. Goodwill and intangible assets

Business combinations

Acquisition of a machine learning company in Argentina

On September 6, 2018, the Company, through its subsidiaries Meli Participaciones S.L. and Marketplace Investment LLC, completed the acquisition of 100% of the equity interest of Machinalis S.R.L., a company that develops machine-learning tools located and organized under the laws of Argentina. The objective of the acquisition was to enhance the capabilities of the Company in machine-learning tools.

The aggregate purchase price for the acquisition was $5,855 thousands, measured at its fair value amount which included: (i) the total cash payment of $2,566 thousands at the time of closing; (ii) an escrow of $2,096 thousands and (iii) a contingent additional cash consideration up to $1,193 thousands.

The Company’s consolidated statement of income includes the results of operations of the acquired business as from September 6, 2018. The net income before intercompany eliminations of the acquired Company included in the Company’s consolidated statement of income since the acquisition amounted to $8 thousands.

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

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


	Machinalis S.R.L. In thousands of U.S. dollars
Cash and cash equivalents	$	285
Other net tangible liabilities		(47)
Total net tangible assets acquired		238
Customer lists		100
Trademark		299
Non-solicitation and Non-compete agreements		239
Goodwill		4,979
Purchase Price	$	5,855

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 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 trademark, customer lists, non-compete and non-solicitation agreements for a total amount of $638 thousands. Management of the Company estimates that customer lists, trademark and non-compete agreements will be amortized over a three-year period, while non-solicitation agreements will be amortized over a five-year period.

The Company recognized goodwill for this acquisition based on management’s expectation that the acquired business will improve the Company’s business. Arising goodwill was 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 segment. Goodwill arising from this acquisition is not deductible for tax purposes.

The results of operations for periods prior to the acquisitions, individually and in the aggregate, were not material to the consolidated statements of operations of the Company and, accordingly, pro forma information has not been presented.

Goodwill and intangible assets

The composition of goodwill and intangible assets is as follows:


	September 30,	December 31,
	2018	2017
	(In thousands)
Goodwill	$ 88,650	$ 92,279
Intangible assets with indefinite lives
- Trademarks	9,439	11,587
Amortizable intangible assets
- Licenses and others	5,692	6,175
- Non-compete agreement	2,338	2,689
- Customer list	14,851	16,584
- Trademarks	3,570	1,772
Total intangible assets	$ 35,890	$ 38,807
Accumulated amortization	(17,171)	(15,633)
Total intangible assets, net	$ 18,719	$ 23,174

Goodwill

The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2018 and the year ended December 31, 2017 are as follows:


	Period ended September 30, 2018
	Brazil	Argentina	Mexico	Chile	Colombia	Other Countries	Total
	(In thousands)
Balance, beginning of the period	$ 32,492	$ 5,761	$ 30,396	$ 18,805	$ 3,632	$ 1,193	$ 92,279
- Business acquisitions	3,110	1,132	543	61	80	53	4,979
- Effect of exchange rates changes	(6,360)	(1,990)	1,895	(2,027)	(73)	(53)	(8,608)
Balance, end of the period	$ 29,242	$ 4,903	$ 32,834	$ 16,839	$ 3,639	$ 1,193	$ 88,650



	Year ended December 31, 2017
	Brazil	Argentina	Mexico	Chile	Venezuela	Colombia	Other Countries	Total
	(In thousands)
Balance, beginning of the year	$ 27,660	$ 6,587	$ 29,342	$ 17,388	$ 5,989	$ 3,643	$ 1,188	$ 91,797
- Business acquisitions	5,966	—	—	—	—	—	—	5,966
- Effect of exchange rates changes	(1,134)	(826)	1,054	1,417	—	(11)	5	505
- Deconsolidation of Venezuelan subsidiaries	—	—	—	—	(5,989)	—	—	(5,989)
Balance, end of the year	$ 32,492	$ 5,761	$ 30,396	$ 18,805	$ —	$ 3,632	$ 1,193	$ 92,279

Intangible assets with definite useful life

Intangible assets with definite useful life are comprised of customer lists, non-compete and non-solicitation agreements, acquired software licenses, other acquired intangible assets including developed technologies and trademarks. Aggregate amortization expense for intangible assets totaled $1,368 thousands and $1,182 thousands for the three-month periods ended September 30, 2018 and 2017, respectively, while aggregate amortization expense for intangible assets for the nine-month periods ended September 30, 2018 and 2017 amounted to $4,696 thousands and $3,247 thousands, respectively.

The following table summarizes the remaining amortization of intangible assets (in thousands of U.S. dollars) with definite useful life as of September 30, 2018:


For year ended 12/31/2018						$ 1,282
For year ended 12/31/2019						2,755
For year ended 12/31/2020						1,711
For year ended 12/31/2021						1,291
Thereafter						2,241
						$ 9,280