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Note 6 - Acquisitions

9 Months Ended

Sep. 30, 2021

Business Combination Disclosure [Text Block]

2021 Acquisitions and Purchase of Controlling Interest

For the nine months ended September 30, 2021, we had acquisitions and a purchase of controlling interest totaling $56.6 million.

On September 1, 2021, we acquired 100% of the stock of Ignite Software Systems Limited ("Ignite") for a net cash purchase price of $13.8 million. Ignite, a provider of insurance policy administration systems to brokers, managing general agents, and insurers, has become a part of the underwriting & rating category within our Insurance segment. We believe that Ignite's client focus and deep domain knowledge will fit into our business model providing new and existing clients with access to a broader expert advice and service.

On June 17, 2021, we acquired 100% of the stock of Roskill Holdings Limited ("Roskill") for a net cash purchase price of $22.1 million, of which $4.8 million represents indemnity escrows. Roskill, a provider of metals and materials supply chain intelligence, has become part of our Energy and Specialized Markets segment. Roskill’s capabilities reinforce our ability to provide comprehensive analysis across the energy, and metals and mining value chain while adding analysis, data, and insight on battery raw materials metals.

On March 2, 2021, we acquired a 51% ownership in Whitespace Software Limited ("Whitespace") for a net cash purchase price of $16.8 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. We expect our investment in Whitespace to 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 2021 acquisitions and purchase of controlling interest resulted in the following:

	*Total*
Cash and cash equivalents	$	5.7
Accounts receivable		2.6
Other current assets		1.0
Fixed assets		0.1
Operating lease right-of-use assets, net		0.9
Intangible assets	25.3
Goodwill		61.0
Other assets		4.8
Total assets acquired		101.4
Current liabilities		3.3
Deferred revenues		4.7
Operating lease liabilities		1.0
Deferred income tax, net		5.5
Other liabilities		4.8
Total liabilities assumed		19.3
Net assets acquired		82.1
Less: Noncontrolling interest	19.8
Less: Cash acquired		5.7
Net cash purchase price	$	56.6

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	$	5.6
Marketing-related		5		1.0
Customer-related		11		16.3
Database-based		2		2.4
Total intangible assets			$	25.3

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 includes 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 $61.0 million in goodwill associated with our acquisitions and purchase of controlling interest, $60.1 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 and nine months ended September 30, 2021, we incurred transaction costs of $0.1 million and $0.9 million, respectively. For the three and nine months ended September 30, 2020, we incurred transaction costs of $0.5 million. 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 and nine months ended September 30, 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 September 30, 2021 and December 31, 2020, the current portion of the escrows amounted to $17.7 million and $1.7 million, respectively, and the noncurrent portion of the escrows amounted to $4.6 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 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. We believe that the liabilities recorded as of September 30, 2021 and December 31, 2020 reflect the best estimate of acquisition-related contingent payments. The associated current portion of contingent payments were $0.5 million and $0.6 million as of September 30, 2021 and December 31, 2020, respectively. The associated noncurrent portion of contingent payments were $0.0 million and $0.2 million as of September 30, 2021 and December 31, 2020, respectively.