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Note 6 - Acquisitions

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

6. Acquisitions:

2022 Acquisitions

On March 1, 2022, we acquired 100 percent of the stock of Opta Information Intelligence Corp. ("Opta") for a net cash purchase price of $217.5 million excluding working capital adjustments, of which $0.8 million represents indemnity escrows. Opta, a leading provider of property intelligence and innovative technology solutions in Canada, has become a part of the underwriting & rating category within our Insurance segment. We believe this acquisition further expands our footprint in the Canadian market and supports Verisk in reshaping risk management with valuable business intelligence.

On February 11, 2022, we acquired 100 percent of the membership interest of Infutor Data Solutions, LLC ("Infutor") for a net cash purchase price of $220.7 million excluding working capital adjustments, of which $1.5 million represents a working capital escrow, plus a contingent earn-out payment of up to $25.0 million subject to the achievement of certain revenue and other performance targets. Infutor, a leading provider of identity resolution and consumer intelligence data, has become a part of the underwriting & rating category within our Insurance segment. We believe this acquisition further enhances Verisk’s marketing solutions offerings to companies across several industries, including the insurance industry.

The "Other" column includes other immaterial acquisitions that have occurred during the period. The preliminary purchase price allocation of the 2022 acquisitions resulted in the following:

		*Opta*				*Infutor*				*Other*				*Total*
Cash and cash equivalents		$	0.4			$	17.0			$	—			$	17.4
Accounts receivable			5.2				10.7				—				15.9
Other current assets			1.3				3.8				0.1				5.2
Fixed assets			1.5				0.9				0.3				2.7
Operating lease right-of-use assets, net			1.0				2.3				—				3.3
Intangible assets			83.4				83.4				2.3				169.1
Goodwill			146.4				140.4				3.0				289.8
Other noncurrent assets			0.1				0.1				—				0.2
Total assets acquired			239.3				258.6				5.7				503.6
Accounts payable and accrued liabilities			4.2				14.5				0.1				18.8
Deferred revenues			0.2				3.1				0.1				3.4
Operating lease liabilities			1.1				3.3				—				4.4
Deferred income tax, net			15.9				—				0.6				16.5
Other noncurrent liabilities			—				—				0.1				0.1
Total liabilities assumed			21.4				20.9				0.9				43.2
Net assets acquired			217.9				237.7				4.8				460.4
Less: Cash acquired			0.4				17.0				—				17.4
Net cash purchase price		$	217.5			$	220.7			$	4.8			$	443.0

The preliminary amounts assigned to intangible assets by type for the 2022 acquisitions are summarized in the table below:

		*Weighted Average Useful Life (in years)*				*Total*
Technology-based			6			$	48.5
Marketing-related			4				2.0
Customer-related			13				118.6
Total intangible assets						$	169.1

The preliminary allocations of the purchase price for the 2022 and 2021 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 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 workforce, 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 $289.8 million in goodwill associated with our acquisitions, $150.0 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 three and nine months ended September 30, 2022, we incurred transaction costs of $0.1 million and $1.7 million, respectively. The transaction costs were included within "Selling, general and administrative" expenses in our accompanying condensed consolidated statements of operations. The 2022 acquisitions were immaterial to our condensed consolidated statement of operations for the three and nine months ended September 30, 2022 and 2021, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

On March 22, 2022, we acquired an additional 16% ownership in Whitespace Software Limited ("Whitespace") for $8.2 million, bringing our total ownership interest to 67%. The remaining 33% ownership interest in Whitespace will be acquired by us, in two equal proportions over the next two years, at a purchase price determined based upon a fixed revenue multiple and adjusted for any free cash flow shortfall.

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, 2022 and December 31, 2021, the current portion of the escrows amounted to $8.2 million and $10.6 million, respectively, and the noncurrent portion of the escrows amounted to $0.0 million and $4.7 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 Rebmark Legal Solutions Limited, ACTINEO GmbH, Data Driven Safety, LLC, and Infutor Data Solutions, LLC included acquisition-related contingent payments, for which the sellers of these acquisitions could receive additional payments by achieving the specific predetermined revenue, EBITDA, and/or EBITDA margin earn-out targets for exceptional performance. We believe that the liabilities recorded as of September 30, 2022 and December 31, 2021 reflect the best estimate of acquisition-related contingent payments. The associated current portion of contingent payments were $16.6 million and $0.5 million as of September 30, 2022 and December 31, 2021, respectively. The associated noncurrent portion of contingent payments were $21.9 million and $21.7 million as of September 30, 2022 and December 31, 2021, respectively.