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Note 10 - Acquisitions

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Business Combination Disclosure [Text Block]

10. 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				18.4				33.5
Goodwill			33.1				22.8				55.9
Total assets acquired			61.0				43.4				104.4
Accounts payable and accrued liabilities			5.8				2.1				7.9
Operating lease liabilities			—				0.1				0.1
Deferred income tax, net			4.8				3.9				8.7
Other noncurrent liabilities			0.1				1.4				1.5
Total liabilities assumed			10.7				7.5				18.2
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 our 2023 acquisitions are summarized in the table below:

		*Weighted Average Useful Life (in years)*		*Total*
Technology-based		5		$	9.9
Marketing-related		2			0.5
Customer-related		13			23.1
Total intangible assets				$	33.5

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 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 $55.9 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 year ended December 31, 2023, we incurred transaction costs of $2.5 million. The transaction costs were included within "Selling, general and administrative" expenses in our accompanying consolidated statements of operations.

Our 2023 acquisitions were not significant, both individually and in the aggregate, to our consolidated financial statements for the years ended December 31, 2023, 2022, and 2021, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

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 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 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 final purchase price allocations, inclusive of closing adjustments, of our 2022 acquisitions resulted in the following:

		*Opta*				*Infutor*				*Others*				*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			1.1				2.3				-				3.4
Intangible assets			87.0				83.4				2.3				172.7
Goodwill			141.1				140.3				3.0				284.4
Other assets			-				0.1				-				0.1
Total assets acquired			237.6				258.5				5.7				501.8
Current liabilities			4.9				14.4				0.1				19.4
Deferred revenues			0.2				3.1				0.1				3.4
Operating lease liabilities			1.1				3.3				-				4.4
Deferred income tax, net			13.5				-				0.5				14.0
Other liabilities			-				-				0.2				0.2
Total liabilities assumed			19.7				20.8				0.9				41.4
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 final amounts assigned to intangible assets by type for our 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			122.2
Total intangible assets				$	172.7

For the year ended December 31, 2023, we finalized the purchase accounting for our 2022 acquisitions during the measurement periods in accordance with ASC 805, Business Combinations ("ASC 805"). The impact of finalization of the purchase accounting associated with these acquisitions was not material to our accompanying consolidated financial statements for the years ended December 31, 2023 and 2022.

Of the $284.4 million in goodwill associated with our acquisitions, $144.5 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, 2022, we incurred transaction costs related to acquisitions of $1.8 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 2022 acquisitions were not significant, both individually and in the aggregate, to our consolidated financial statements for the years ended December 31, 2022 and 2021, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

2021 Acquisitions

On December 23, 2021, we acquired approximately 96.7 percent of the stock of ACTINEO GmbH ("ACTINEO") with an option to acquire the remaining shares at a future date, for a net cash purchase price of $148.9 million. ACTINEO offers a comprehensive portfolio of services, technology and data solutions to support the entire bodily injury settlement process. With this acquisition, we add ACTINEO's established claims management solutions to our leading data analytics and insurance ecosystem, providing customers with digitalization and medical expertise solutions throughout the entire claims process. ACTINEO is part of the claims vertical within our Insurance segment.

On November 2, 2021, we acquired 100 percent of the stock of Data Driven Safety, LLC ("Data Driven Safety") for a net cash purchase price of $93.5 million, of which $2.0 million represents indemnity escrows. Data Driven Safety, a leading public record data aggregation firm that specializes in driver risk assessment in the U.S., has become a part of the underwriting category within our Insurance segment. We believe that Data Driven Safety will expand our robust auto insurance analytics, providing insurers with information to further refine underwriting, improve the customer experience and promote public safety.

On September 1, 2021, we acquired 100 percent 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 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 percent 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, was 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. This acquisition was excluded from the table below due to the announcement of the sale of our Energy business.

On March 2, 2021, we acquired a 51.0 percent ownership in Whitespace Software Limited ("Whitespace") for a net cash purchase price of $16.8 million. The remaining 49.0 percent 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 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 final purchase price allocations, inclusive of closing adjustments, of our 2021 acquisitions resulted in the following:

		*ACTINEO*				*Data Driven Safety*				*Others*				*Total*
Cash and cash equivalents		$	0.2			$	2.5			$	3.7			$	6.4
Accounts receivable			1.8				1.0				1.4				4.2
Other current assets			—				2.0				1.0				3.0
Fixed assets			1.4				—				0.1				1.5
Operating lease right-of-use assets, net			4.2				0.4				1.3				5.9
Intangible assets			48.3				42.1				19.0				109.4
Goodwill			121.9				74.1				39.6				235.6
Other assets			—				—				0.1				0.1
Total assets acquired			177.8				122.1				66.2				366.1
Current liabilities			2.1				2.7				1.7				6.5
Deferred revenues			—				0.4				1.4				1.8
Operating lease liabilities			4.2				0.4				1.4				6.0
Deferred income tax, net			15.8				—				3.7				19.5
Other liabilities			—				21.7				—				21.7
Total liabilities assumed			22.1				25.2				8.2				55.5
Net assets acquired			155.7				96.9				58.0				310.6
Less: Noncontrolling interests			6.6				—				19.8				26.4
Cash acquired			0.2				3.4				3.7				7.3
Net cash purchase price		$	148.9			$	93.5			$	34.5			$	276.9

The final amounts assigned to intangible assets by type for our 2021 acquisitions are summarized in the table below:

		*Weighted Average Useful Life (in years)*		*Total*
Technology-based		5		$	21.1
Marketing-related		3			1.1
Customer-related		13			81.2
Database-related		6			6.0
Total intangible assets				$	109.4

For the year ended December 31, 2022, we finalized the purchase accounting for our 2021 acquisitions during the measurement periods in accordance with ASC 805. The impact of finalization of the purchase accounting associated with these acquisitions was not material to our accompanying financial statements for the year ended December 31, 2021.

Of the $235.6 million in goodwill associated with our acquisitions, $161.3 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, 2021, we incurred transaction costs related to acquisitions of $2.8 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 2021 acquisitions were not significant and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

Acquisition Escrowsand 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, 2023 and 2022, we released $0.0 million and $12.8 million of indemnity escrows related to various acquisitions. At December 31, 2023 and 2022, the current portion of the escrows amounted to $3.9 million and $0.0 million. There were no noncurrent portions of the escrows. The current and noncurrent portions of the escrows have been included in "Other current assets" and "Other noncurrent assets" in our accompanying consolidated balance sheets, respectively.

The acquisitions of Infutor Data Solutions, LLC, 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 EBITDA margin earn-out targets for exceptional performance. We believe that the liabilities recorded as of December 31, 2023 and 2022 reflect the best estimate of acquisition-related contingent payments. The associated current portion of contingent payments were $10.0 million and $29.9 million as of December 31, 2023 and 2022, respectively. The associated noncurrent portion of contingent payments were $2.1 million and $0.0 million as of December 31, 2023 and 2022, respectively.