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Note 10 - Acquisitions

12 Months Ended

Dec. 31, 2020

Business Combination Disclosure [Text Block]

2020 Acquisitions

On December 16, 2020, we acquired 100 percent of the stock of Lead Intelligence, Inc. ("Jornaya"), a provider of consumer behavioral data and intelligence, for a net cash purchase price of $125.2 million, of which $1.3 million represents indemnity escrows. The acquisition added Jornaya's proprietary view of consumer buying journeys to our growing set of marketing solutions for the insurance and financial services markets, as well as provide customers with the intelligence and agility to time and tailor interactions based on actual in-market behaviors. Jornaya has become part of the underwriting & rating category within our Insurance segment. The preliminary purchase price allocation of the acquisition is presented in the table below.

On September 9, 2020, we 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 our Insurance segment and enhanced the solutions we currently offer, as well as added professional administrative services for Medicare Set Asides to our suite of solutions. The preliminary purchase price allocation of the acquisition is presented in the table below.

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

	*Franco Signor*			*Lead Intelligence*			*Total*
Cash and cash equivalents ⁽¹⁾	$	10.9		$	5.9		$	16.8
Accounts receivable		2.5			2.9			5.4
Other current assets		0.4			0.6			1.0
Fixed assets		0.4			0.7			1.1
Operating lease right-of-use assets, net		1.5			1.7			3.2
Intangible assets		59.1			64.4			123.5
Goodwill		100.3			71.4			171.7
Other assets		8.0			1.3			9.3
Total assets acquired		183.1			148.9			332.0
Current liabilities ⁽¹⁾		(6.4	)		(1.3	)		(7.7	)
Deferred revenues		(0.3	)		(2.3	)		(2.6	)
Operating lease liabilities		(1.5	)		(1.7	)		(3.2	)
Deferred income tax, net		(1.8	)		(11.2	)		(13.0	)
Other liabilities		(8.0	)		(1.3	)		(9.3	)
Total liabilities assumed		(18.0	)		(17.8	)		(35.8	)
Net assets acquired		165.1			131.1			296.2
Cash and cash equivalents		(10.9	)		(5.9	)		(16.8	)
Restricted cash ⁽¹⁾		5.7			—			5.7
Cash acquired		(5.2	)		(5.9	)		(11.1	)
Net cash purchase price	$	159.9		$	125.2		$	285.1

_______________

⁽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 our 2020 acquisitions are summarized in the table below:

	*Weighted Average Useful Life (in years)*	*Total*
Technology	11	$	30.8
Marketing	5		2.1
Customer	11		90.6
Total intangible assets		$	123.5

The preliminary allocations of the purchase price for the 2020 acquisitions with less than a year of 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 our 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 our 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 our ability to grow through adding additional customer relationships or new solutions in the future. Of the $171.7 million in goodwill associated with our acquisitions, $20.8 million is not deductible for tax purposes. The preliminary amounts assigned to intangible assets by type for these acquisitions were based upon our valuation model and historical experiences with entities with similar business characteristics.

For the year ended December 31, 2020, we incurred transaction costs related to acquisitions of $2.2 million, which are included within "Selling, general and administrative expenses in the accompanying consolidated statements of operations. Refer to Note 12. Goodwill and Intangible Assets for further discussion.

Our 2020 acquisitions were not significant, both individually and in the aggregate, to our consolidated financial statements for the years ended December 31, 2020, 2019 and 2018, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

2019 Acquisitions

On December 23, 2019, we acquired 100 percent of the stock of Flexible Architecture and Simplified Technology, LLC ("FAST"), a software company for the life insurance and annuity industry, for a net cash purchase price of $193.9 million, of which $1.9 million represents indemnity escrows. FAST offers a flexible policy administration system that helps insurers accelerate underwriting and claims to enhance the customer experience and support profitable growth. FAST has become part of the underwriting & rating category within our Insurance segment, and expanded and enhanced the suite of solutions that we are developing across the enterprise for life insurers looking to transform the customer experience throughout the life of the policy, from quote to claims. The final purchase price allocation of the acquisition is presented in the table below.

On December 19, 2019, we acquired selected assets of Commerce Signals, Inc. ("Commerce Signals"), a software company that offers a data sharing platform for retail, restaurant and entertainment marketers, for a net cash purchase price of $3.9 million, which consists of a holdback of $1.1 million as security for the indemnification obligations of the seller. Commerce Signals has become part of our Financial Services segment, and enhanced the existing solutions that we currently offer. The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.

On November 5, 2019, we acquired 100 percent of the stock of Genscape, Inc. (“Genscape”), a global provider of real-time data and intelligence for commodity and energy markets, for a net cash purchase price of $351.0 million. Genscape has become part of the Energy and Specialized Markets segment, and enhanced our existing sector intelligence in energy data and analytics. The final purchase price allocation of the acquisition is presented in the table below.

On October 10, 2019, we acquired 100 percent of the stock of BuildFax, Inc. ("BuildFax") for a net cash purchase price of $40.2 million, which consists a holdback of $1.0 million. BuildFax uses building permit, contractor, and inspection data to provide information about the condition of properties to insurance and financial institutions. The data from BuildFax enhances property analytics under the underwriting & rating category within our Insurance segment while helping underwriters gain insight into changes in the property insured. The final purchase price allocation of the acquisition is presented in the table below.

On August 28, 2019, we acquired substantially all of the assets of Property Pres Wizard, LLC. ("PPW") for a net cash purchase price of $15.0 million, of which $1.5 million represents indemnity escrows. PPW is a web and mobile application that manages work order details and property status in the field services industry throughout the supply chain. PPW has become part of the claims category within our Insurance segment, and added a service order and project management application to our PropTech suite of solutions. The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.

On July 31, 2019, we acquired 100 percent of the stock of Keystone Aerial Surveys, Inc. ("Keystone") for a net cash purchase price of $29.4 million, of which $2.7 million represents indemnity escrows, to expand our remote imagery business. Keystone sourced imagery by providing customers geospatial solutions and had become part of the claims category within our Insurance segment. Keystone was a component within the aerial imagery sourcing group, which was qualified as assets held for sale on December 2, 2019. On February 1, 2020, the sale of the aerial imagery sourcing group was closed. See Note 11. Dispositions for further discussion.The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.

On March 29, 2019, we entered into an agreement with an enterprise application software provider to acquire their Content as a Service (“CaaS”) business, which included the Environmental Health and Safety Regulatory Content and Environmental Health and Safety Regulatory Documentation teams and data assets, for a net cash purchase price of $65.2 million. The CaaS business has become part of our Energy and Specialized Markets segment. This transaction strengthened our environmental health and safety services business and extended our global customer footprint and European operations. The final purchase price allocation of the acquisition is presented in the table below.

The final purchase price allocations, inclusive of closing adjustments, of our 2019 acquisitions resulted in the following:

FAST

Genscape

BuildFax

CaaS

Others

Total

Cash and cash equivalents
$ 2.9 $ 0.2 $ 0.4 $ 3.7 $ 3.1 $ 10.3

Accounts receivable
4.7 13.6 1.8 — 3.9 24.0

Other current assets
0.4 1.4 0.1 0.7 0.6 3.2

Fixed assets
1.8 15.9 0.9 0.2 6.3 25.1

Operating lease right-of-use assets, net
1.4 7.4 0.4 — 0.5 9.7

Intangible assets
69.0 153.2 21.9 34.4 14.1 292.6

Goodwill
120.7 241.4 20.2 41.2 28.2 451.7

Other assets
0.1 — — 0.1 4.4 4.6

Total assets acquired
201.0 433.1 45.7 80.3 61.1 821.2

Current liabilities
2.4 17.4 0.9 1.3 1.3 23.3

Deferred revenues
0.3 27.3 2.4 10.1 — 40.1

Operating lease liabilities
1.4 7.4 0.4 — 0.5 9.7

Deferred income tax, net
— 29.8 0.4 — 2.6 32.8

Other liabilities
— — 1.0 — 5.3 6.3

Total liabilities assumed
4.1 81.9 5.1 11.4 9.7 112.2

Net assets acquired
196.9 351.2 40.6 68.9 51.4 709.0

Cash acquired
(3.0 ) (0.2 ) (0.4 ) (3.7 ) (3.1 ) (10.4 )

Net cash purchase price
$ 193.9 $ 351.0 $ 40.2 $ 65.2 $ 48.3 $ 698.6

The final amounts assigned to intangible assets by type for our 2019 acquisitions are summarized in the table below:

Weighted Average Useful Life (in years)

Total

Technology
6 $ 81.9

Marketing
4 3.9

Customer
12 185.5

Database
10 20.7

Total intangible assets
$ 292.0

For the year ended December 31, 2020, we finalized the purchase accounting for our 2019 acquisitions during the measurement periods in accordance with ASC 805, Business Combinations. The impact of finalization of the purchase accounting associated with these acquisitions was not material to our accompanying consolidated statements of operations for the years ended December 31, 2019 and 2018.

The goodwill of $307.1 million associated with the purchases of FAST, Commerce Signals, Genscape, BuildFax, PPW, Keystone, and CaaS is not deductible for tax purposes. For the year ended December 31, 2019, we incurred transaction costs related to acquisitions of $3.0 million, which are included within "Selling, general and administrative" expenses in our accompanying consolidated statements of operations. Refer to Note 12. Goodwill and Intangible Assets for further discussion.

Our 2019 acquisitions were not significant, both individually and in the aggregate, to our consolidated financial statements for the years ended December 31, 2019, 2018, and 2017, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

2018 Acquisitions

On December 14, 2018, we acquired Rulebook for a net cash purchase price of $86.5 million, of which $8.6 million represents contingent escrows. Rulebook’s proprietary pricing engine can be used for internal pricing and underwriting as well as external distribution for the insurance market through its platform. Rulebook furthers our goal of providing solutions to the global insurance market, including a comprehensive chain of solutions to specialty insurers for mitigating risk and optimizing total cost of operations. Rulebook is part of the underwriting and ratings category within our Insurance segment. The final purchase price allocation of the acquisition is presented in the table below.

On June 20, 2018, we acquired 100 percent of the stock of Validus-IVC Limited ("Validus"), a provider of claims management solutions and developer of the subrogation portal in the UK, verify^TM, for a net cash purchase price of $46.1 million, of which $5.9 million represents contingent escrows. Validus has become part of the claims category within our Insurance segment. The integration of Validus' verify^TM platform with our global claims analytic services allows insurers to take advantage of enhanced analytic and technology tools to help improve and automate the claims settlement process. The final purchase price allocation of the acquisition is presented in the table below.

On February 21, 2018, we acquired 100 percent of the stock of Business Insight Limited (“Business Insight”), a provider of predictive analytics for insurers in the U.K. and Ireland, for a net cash purchase price of $18.0 million. Business Insight has become part of the underwriting and ratings category within our Insurance segment. Business Insight offers a comprehensive set of peril models to support underwriting and rating for the commercial property and homeowners insurance market. The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.

On January 5, 2018, we acquired 100 percent of the stock of Marketview Limited ("Marketview") for a net cash purchase price of $4.0 million, of which $0.4 million represents indemnity escrows. Marketview is a provider of consumer spending analysis and insights across the retail, hospitality, property, and government sectors in New Zealand. Marketview has become part of our Financial Services segment. The acquisition helps expand our solutions related to consumer spending analytics across the Australasia and Oceania regions by combining our domain expertise and proprietary data assets with those of Marketview. The final purchase price allocation of the acquisition is presented as part of "Others" in the table below.

The final purchase price allocations, inclusive of closing adjustments, of our 2018 acquisitions resulted in the following:

Rulebook

Validus

Others

Total

Cash and cash equivalents
$ — $ 0.9 $ 2.2 $ 3.1

Accounts receivable
2.0 1.5 1.0 4.5

Current assets
0.1 6.3 0.2 6.6

Fixed assets
1.5 0.4 0.2 2.1

Intangible assets
25.1 20.9 8.4 54.4

Goodwill
58.9 24.8 15.8 99.5

Other assets
8.6 — — 8.6

Total assets acquired
96.2 54.8 27.8 178.8

Current liabilities
0.6 3.9 1.0 5.5

Deferred revenues
0.4 0.1 1.1 1.6

Deferred income taxes, net
0.1 3.6 1.5 5.2

Other liabilities
8.6 0.2 — 8.8

Total liabilities assumed
9.7 7.8 3.6 21.1

Net assets acquired
86.5 47.0 24.2 157.7

Less: Cash acquired
— (0.9 ) (2.2 ) (3.1 )

Net cash purchase price
$ 86.5 $ 46.1 $ 22.0 $ 154.6

The final amounts assigned to intangible assets by type for our 2018 acquisitions are summarized in the table below:

Weighted Average Useful Life (in years)

Total

Technology
6 $ 30.3

Marketing
9 4.0

Customer
10 20.1

Total intangible assets
$ 54.4

For the year ended December 31, 2019, we finalized the purchase accounting for our 2018 acquisitions during the measurement periods in accordance with ASC 805, Business Combinations. The impact of finalization of the purchase accounting associated with these acquisitions was not material to our accompanying consolidated statements of operations for the years ended December 31, 2018 and 2017.

The goodwill of $99.5 million associated with the purchases of Rulebook, Validus, Business Insight and Marketview is not deductible for tax purposes. For the year ended December 31, 2018, we incurred transaction costs related to acquisitions of $1.5 million, which are included within "Selling, general and administrative" expenses in our accompanying consolidated statements of operations. Refer to Note 12. Goodwill and Intangible Assets for further discussion.

Our 2018 acquisitions were immaterial, both individually and in the aggregate, to our consolidated financial statements for the years ended December 31, 2018 and 2017, 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, we have funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the acquisition dates, as well as a portion of the contingent payment. During the years ended December 31, 2020 and 2019, we released $0.8 million and $25.2 million of indemnity escrows related to various acquisitions. At December 31, 2020 and 2019, the current portion of the escrows amounted to $1.7 million and $0.5 million, and the noncurrent portion of the escrows amounted to $18.5 million and $10.5 million, respectively.

Our acquisitions of Emergence Network Intelligence Limited, Validus, 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. We believe that the liabilities recorded as of December 31, 2020 reflect the best estimate of acquisition contingent payments. The associated current acquisition-related liabilities were $0.6 million and $111.2 million as of December 31, 2020 and December 31, 2019, respectively. The prior year acquisition-related liabilities were primarily due to PowerAdvocate. The associated noncurrent acquisition-related liabilities were $0.2 million as of December 31, 2020 and 2019.