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Note 6 - Acquisitions

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Business Combination Disclosure [Text Block]

6. Acquisitions:

2023 Acquisitions

On April 20, 2023, we acquired Krug Sachverständigen GmbH ("Krug") for a net cash purchase price of approximately $43.3 million including working capital adjustments, of which $3.8 million represents indemnity escrows. Krug is a Germany-based motor claims solutions provider and has established an industry-leading position in the German insurance market through highly digitalized solutions that help insurers and car manufacturers achieve better and faster customer service, leading to sustainable reductions in costs. The acquisition expands our claims and casualty offerings across Europe. Krug has become a part of our claims category within our Insurance segment.

On February 1, 2023, we acquired 100 percent of the stock of Mavera Holding AB ("Mavera") for a net cash purchase price of $28.3 million, of which $4.2 million represents indemnity escrows. Mavera, a Sweden-based InsurTech firm with a regional presence and established customer base for its personal injury claims management platform, has become a part of the claims category within our Insurance segment. Mavera will support our expansion in continental Europe and our continued growth as a technology and analytics partner to the global insurance industry.

The "Other" column includes other immaterial acquisitions that have occurred during the period. The preliminary purchase price allocation of the 2023 acquisitions resulted in the following:

		*Krug*				*Other*				*Total*
Cash and cash equivalents		$	7.0			$	1.0			$	8.0
Accounts receivable			1.8				0.8				2.6
Other current assets			3.8				0.1				3.9
Fixed assets			0.2				0.1				0.3
Operating lease right-of-use assets, net			—				0.2				0.2
Intangible assets			15.1				18.6				33.7
Goodwill			34.8				22.9				57.7
Total assets acquired			62.7				43.7				106.4
Accounts payable and accrued liabilities			5.8				2.1				7.9
Deferred revenues			—				0.2				0.2
Operating lease liabilities			—				0.2				0.2
Deferred income tax, net			6.5				3.8				10.3
Other noncurrent liabilities			0.1				1.5				1.6
Total liabilities assumed			12.4				7.8				20.2
Net assets acquired			50.3				35.9				86.2
Less: cash acquired			7.0				1.0				8.0
Net cash purchase price		$	43.3			$	34.9			$	78.2

The preliminary amounts assigned to intangible assets by type for the 2023 acquisitions are summarized in the table below:

		Weighted Average Useful Life (in years)				Total
Technology-based			6			$	10.0
Marketing-related			2				0.5
Customer-related			13				23.2
Total intangible assets						$	33.7

The preliminary allocations of the purchase price for the 2023 and 2022 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 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. The $57.7 million in goodwill associated with our acquisitions, 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 six months ended June 30, 2023, we incurred transaction costs of $0.9 million and $1.9 million, respectively. The transaction costs were included within "Selling, general and administrative" expenses in our accompanying condensed consolidated statements of operations. The 2023 acquisitions were immaterial to our condensed consolidated statement of operations for the three and six months ended June 30, 2023 and 2022, 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 June 30, 2023 and December 31, 2022, the current portion of the escrows amounted to $3.8 million and $0.0 million, respectively, there were no noncurrent portions of the escrows. The current portion of the escrows have been included in "Other current assets" in our accompanying condensed consolidated balance sheets.

As of June 30, 2023, the acquisitions of Infutor Data Solutions, Krug, Mavera, and Morning Data 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/or EBITDA margin earn-out targets for exceptional performance. We believe that the liabilities recorded as of June 30, 2023 and December 31, 2022 reflect the best estimate of acquisition-related contingent payments. The associated current portion of contingent payments were $8.0 million and $29.9 million as of June 30, 2023 and December 31, 2022, respectively. The associated noncurrent portion of contingent payments were $2.1 million and $0.0 million as of June 30, 2023 and December 31, 2022, respectively.