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Note 6 - Acquisitions

9 Months Ended

Sep. 30, 2020

Business Combination Disclosure [Text Block]

2020 Acquisition

On September 9, 2020, the Company acquired 100 percent of the stock of Franco Signor LLC ("Franco Signor"), for a net cash purchase price of $159.9 million, of which $8.0 million represents indemnity escrows. Franco Signor is a Medicare Secondary Payer compliance solutions provider to large employers, insurers and third-party administrators in the U.S. Franco Signor has become part of the claims category within the Company's Insurance segment and enhanced the solutions the Company currently offers, as well as added professional administrative services for Medicare Set Asides to the Company's suite of solutions. The preliminary purchase price allocation of the acquisitions is presented in the table below.

The preliminary purchase price allocation of the 2020 acquisition resulted in the following:

	*Franco Signor*
Cash and cash equivalents ⁽¹⁾	$	10.9
Accounts receivable		2.6
Other current assets		0.5
Fixed assets		0.5
Operating lease right-of-use assets, net		1.5
Intangible assets		59.2
Goodwill		99.9
Other assets		8.0
Total assets acquired		183.1
Current liabilities ⁽¹⁾		(6.4	)
Deferred revenues		(0.4	)
Operating lease liabilities		(1.4	)
Deferred income tax, net		(1.8	)
Other liabilities		(8.0	)
Total liabilities assumed		(18.0	)
Net assets acquired		165.1
Cash and cash equivalents		(10.9	)
Restricted cash ⁽¹⁾		5.7
Cash acquired		(5.2	)
Net cash purchase price	$	159.9

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⁽¹⁾Within cash and cash equivalents, there is $5.7 million of restricted cash related to Franco Signor's professional administrative services for Medicare Set Asides, with an offsetting liability of $5.7 million included within current liabilities.

The preliminary amounts assigned to intangible assets by type for the 2020 acquisition are summarized in the table below:

	*Weighted Average Useful Life in Years*		*Total*
Technology		6	$	2.1
Marketing		5		1.2
Customer		11		55.9
Total intangible assets			$	59.2

The preliminary allocations of the purchase price for the 2020 and 2019 acquisitions with less than a year ownership are subject to revisions as additional information is obtained about the facts and circumstances that existed as of each acquisition date. The revisions may have a significant impact on the condensed consolidated financial statements. The allocations of the purchase price will be finalized once all the information is obtained, but not to exceed one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to income and non-income taxes, deferred revenues, the valuation of intangible assets acquired, and residual goodwill. The goodwill associated with the Company’s acquisitions include the acquired assembled work force, the value associated with the opportunity to leverage the work force to continue to develop the technology and content assets, as well as the ability to grow the Company through adding additional customer relationships or new solutions in the future. Of the $99.9 million in goodwill associated with the Franco Signor acquisition, $22.8 million is not deductible for tax purposes. The preliminary amounts assigned to intangible assets by type for these acquisitions were based upon the Company's valuation model and historical experiences with entities with similar business characteristics.

For the nine months ended September 30, 2020, the Company finalized the purchase accounting for the acquisitions of Content as a Service ("CaaS") and Property Pres Wizard LLC during the measurement periods in accordance with ASC 805, Business Combinations. The impacts of finalization of the purchase accounting associated with these acquisitions were not material to the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019.

For the three and nine months ended September 30, 2020, the Company incurred transaction costs of $0.5 million related to the 2020 acquisition. For the three and nine months ended September 30, 2019, the Company incurred transaction costs of $0.3 million and $1.6 million, respectively. The transaction costs were included within "Selling, general and administrative" expenses in the accompanying condensed consolidated statements of operations.

The acquisition of Franco Signor was immaterial to the Company's condensed consolidated financial statements for the three and nine months ended September 30, 2020 and 2019, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

Acquisition Escrows and Related Liabilities

Pursuant to the related acquisition agreements, the Company has funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the applicable acquisition date. At September 30, 2020 and December 31, 2019, the current portion of the escrows amounted to $1.7 million and $0.5 million, respectively, and the noncurrent portion of the escrows amounted to $16.8 million and $10.5 million, respectively. The current and noncurrent portions of the escrows have been included in “Other current assets” and “Other assets” in the accompanying condensed consolidated balance sheets, respectively.

The acquisitions of Power Advocate, Inc., Healix International Holdings Limited, Emergence Network Intelligence Limited, Validus-IVC Limited, Arium Limited, and Rebmark Legal Solutions Limited include acquisition related contingencies, for which the sellers of these acquisitions could receive additional payments by achieving the specific predetermined revenue, EBITDA, and EBITDA margin earn-out targets for exceptional performance. The Company believes that the liabilities recorded as of September 30, 2020 and December 31, 2019 reflect the best estimate of acquisition related contingent payments. The associated current acquisition related liabilities were $12.6 million and $111.2 million as of September 30, 2020 and December 31, 2019, respectively. The decrease in the current acquisition related liabilities is related to earnout payments of $98.6 million through the nine months ended September 30, 2020. The associated noncurrent acquisition related liabilities for these acquisitions were $0.2 million as of September 30, 2020 and December 31, 2019.