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Note 6 - Acquisitions

3 Months Ended

Mar. 31, 2021

Business Combination Disclosure [Text Block]

2021 Acquisitions and Purchase of Controlling Interest

For the three months ended March 31, 2021, we had acquisitions and purchase of controlling interest totaling $13.7 million. On March 2, 2021, we acquired a 51% ownership in Whitespace Software Limited ("Whitespace") for a net cash purchase price of $12.8 million. The remaining 49% ownership interest in Whitespace will be acquired by us, in three equal proportions over the next three years, at a purchase price determined based upon a fixed revenue multiple and adjusted for any free cash flow shortfall. Whitespace, a provider of digital placing technology to the (re)insurance market, has become part of the underwriting & rating category within our Insurance segment. Our investment in Whitespace will enable a seamless real-time quote-to-bind electronic placing and global distribution solution, with straight-through submissions for our customers. The preliminary purchase price allocation of the acquisition is presented in the table below.

The preliminary purchase price allocation of the 2021 acquisitions and purchase of controlling interest resulted in the following:

	*Total*
Cash and cash equivalents	$	3.8
Accounts receivable		1.1
Other current assets		0.8
Fixed assets		0.1
Intangible assets		11.4
Goodwill	20.9
Total assets acquired		38.1
Current liabilities		1.0
Deferred revenues		1.4
Deferred income tax, net		2.2
Total liabilities assumed		4.6
Net assets acquired		33.5
Less: Noncontrolling interest		16.0
Less: Cash acquired		3.8
Net cash purchase price	$	13.7

The preliminary amounts assigned to intangible assets by type for the 2021 acquisitions and purchase of controlling interest are summarized in the table below:

	*Weighted Average Useful Life (in years)*	*Total*
Technology-based	4	$	3.1
Marketing-related	5		0.6
Customer-related	12		7.7
Total intangible assets		$	11.4

The preliminary allocations of the purchase price for the 2021 and 2020 acquisitions and purchase of controlling interest 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 condensed consolidated financial statements. The allocations of the purchase price will be finalized once all the information that was known and knowable as of the acquisition date is obtained and analyzed, 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 $20.9 million in goodwill associated with our acquisitions and purchase of controlling interest, $20.0 million is not deductible for tax purposes. The preliminary amounts assigned to intangible assets by type for these acquisitions and purchase of controlling interest were based upon our valuation model and historical experiences with entities with similar business characteristics.

For the three months ended March 31, 2021, we incurred transaction costs of $0.5 million related to the 2021 acquisitions and purchase of controlling interest. For the three months ended March 31, 2020, we incurred no transaction costs. The transaction costs were included within "Selling, general and administrative" expenses in our accompanying condensed consolidated statements of operations. The 2021 acquisitions and purchase of controlling interest were immaterial to our condensed consolidated financial statements for the three months ended March 31, 2021 and 2020, 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 applicable acquisition dates. At March 31, 2021 and December 31, 2020, the current portion of the escrows amounted to $19.1 million and $1.7 million, respectively, and the noncurrent portion of the escrows amounted to $1.3 million and $18.5 million, respectively. The current and noncurrent portions of the escrows have been included in “Other current assets” and “Other noncurrent assets” in our accompanying condensed consolidated balance sheets, respectively.

The acquisitions of Emergence Network Intelligence Limited, Validus, Arium Limited, and Rebmark Legal Solutions Limited included acquisition-related contingent payments, 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. In addition, as a result of our acquisition of Franco Signor LLC ("Franco Signor") on September 9, 2020, we assumed a preexisting acquisition-related contingent payment arrangement through Franco Signor's asset acquisition of Sharpline, in which Sharpline could receive an additional payment by achieving predetermined revenue earn-out targets for exceptional performance. We believe that the liabilities recorded as of March 31, 2021 and December 31, 2020 reflect the best estimate of acquisition-related contingent payments. The associated current portion of contingent payments were $0.3 million and $0.6 million as of March 31, 2021 and December 31, 2020, respectively. The associated noncurrent portion of contingent payments were $0.0 and $0.2 million as of March 31, 2021 and December 31, 2020, respectively.