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ACQUISITIONS | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
ACQUISITIONS | ACQUISITIONS STR, Inc. and STR Global Ltd. On October 22, 2019, the Company acquired all of the issued and outstanding equity interests of STR for a purchase price of $435 million. STR is a global provider of benchmarking and analytics for the hospitality industry. The combination of STR's and CoStar's offerings is expected to allow for the creation of valuable new and improved tools for industry participants. The Company applied the acquisition method to account for the STR transaction, which requires that assets acquired and liabilities assumed be recorded at their fair values as of the acquisition date. The following table summarizes the amounts recorded for acquired assets and assumed liabilities recorded at their fair values as of the acquisition date (in thousands):
| Preliminary: October 22, 2019
Cash and cash equivalents | $ | 11,710 |
Accounts receivable | 8,067 |
Lease right-of-use assets | 7,306 |
Goodwill | 261,436 |
Intangible assets | 178,000 |
Lease liabilities | (7,306 | )
Deferred revenue | (10,966 | )
Deferred tax liabilities | (7,980 | )
Other assets and liabilities | (4,815 | )
Fair value of identifiable net assets acquired | $ | 435,452 |
The net assets of STR were recorded at their estimated fair values. In valuing the acquired assets and assumed liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations and appropriate discount rates. The purchase price allocation is preliminary, subject to the final determination of net working capital as of the acquisition date and the Company's assessment of certain tax matters. The customer base assets incorporated significant assumptions that had a material impact on the estimated fair value, such as discount rates, projected revenue growth rates, customer attrition rates and projected profit margins. The following table summarizes the fair values (in thousands) of the identifiable intangible assets included in each of the Company's operating segments, their related estimated useful lives (in years) and their respective amortization methods:
| North America |  | International |  |
| Estimated Fair Value |  | Estimated Useful Life |  | Estimated Fair Value |  | Estimated Useful Life |  | Amortization Method
Customer base | $ | 97,000 |  |  | 13 |  | $ | 42,000 |  |  | 10 |  | Accelerated
Trade name | 24,000 |  |  | 15 |  |  |  |  |  | Straight-line
Other intangible assets | 10,000 |  |  | 5 |  | 5,000 |  |  | 5 |  | Straight-line
Total intangible assets | $ | 131,000 |  |  |  |  | $ | 47,000 |  |  |  |  |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the STR acquisition includes but is not limited to: (i) the expected synergies and other benefits that the Company believes will result from combining its operations with STR's operations; and (ii) any intangible assets that do not qualify for separate recognition, such as the assembled workforce. Goodwill recorded in connection with this acquisition is not amortized, but is subject to an annual impairment test. Of the $261 million of goodwill recorded as part of the acquisition, $159 million and $102 million are associated with the Company's North America and International operating segments, respectively. The goodwill recognized in the North America operating segment is expected to be deductible for income tax purposes in future periods. As part of the STR acquisition, the Company incurred $2 million of transaction costs. Additionally, the Company paid $15 million cash into a cash escrow account for deferred compensation for certain STR employees, to be paid to active employees after a defined one year period following the acquisition or when earlier terminated without cause or terminated for good reason. In the event some or all of those employees are not entitled to their retention bonus, the funds will be remitted to the seller. The Company is recognizing compensation expense for the deferred compensation over the one year post-combination period. ForRent On February 21, 2018, the Company acquired all of the issued and outstanding capital stock of DE Holdings, Inc., including its ForRent division ("ForRent"), a wholly owned subsidiary of Dominion Enterprises ("Seller"), for a purchase price of approximately $376 million. The purchase price was comprised of approximately $340 million in cash and 103,280 shares of Company common stock, valued at approximately $36 million. ForRent's primary service is digital advertising provided through a network of four multifamily websites. The acquisition has yielded increased revenue, significant cost synergies and an improved competitive position in the industry. The Company applied the acquisition method to account for the ForRent transaction, which requires that assets acquired and liabilities assumed be recorded at their fair values as of the acquisition date. The following table summarizes the amounts recorded for acquired assets and assumed liabilities recorded at their fair values as of the acquisition date (in thousands):
| Final: February 21, 2018
Cash and cash equivalents | $ | 59 |
Accounts receivable | 8,769 |
Indemnification asset | 5,443 |
Goodwill | 266,595 |
Intangible assets | 141,300 |
Deferred tax liabilities | (34,032 | )
Contingent sales tax liability | (6,260 | )
State uncertain income tax position liability | (2,047 | )
Other assets and liabilities | (3,535 | )
Fair value of identifiable net assets acquired | $ | 376,292 |
The net assets of ForRent were recorded at their estimated fair values. In valuing acquired assets and assumed liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations and appropriate discount rates. Measurement period adjustments related to the determination of working capital as of the acquisition date and recognized in 2018 were not material. The acquired customer base for the acquisition is composed of acquired customer contracts and the related customer relationships, and has a weighted average estimated useful life of ten years. The acquired technology has an estimated useful life of three years. The acquired trade name has a weighted average estimated useful life of ten years. The acquired building photography had an estimated useful life of one year. Amortization of the acquired customer base is recognized on an accelerated basis related to the expected economic benefit of the intangible asset, while amortization of the acquired technology, acquired building photography and acquired trade names and other intangible assets is recognized on a straight-line basis over their respective estimated useful lives. Goodwill recorded in connection with this acquisition is not amortized, but is subject to an annual impairment test. The $267 million of goodwill recorded as part of the acquisition is associated with the Company's North America operating segment. $8 million of goodwill that was recognized is expected to be deductible for income tax purposes in future periods. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the ForRent acquisition includes but is not limited to: (i) the expected synergies and other benefits that the Company believes will result from combining its operations with ForRent's operations; and (ii) any intangible assets that do not qualify for separate recognition, such as the assembled workforce. Upon acquisition, the Company assessed the (i) probability of a contingent sales tax liability and (ii) a state uncertain income tax position liability due to apportionment factors, and recorded accruals of $6 million and $2 million, respectively. The Company could not determine the fair value for the pre-acquisition state sales tax liability and therefore estimated a liability in accordance with ASC 450, Contingencies, using a state-by-state assessment. The uncertain income tax position was determined in accordance with the provisions of ASC 740, Income Tax, and was recorded as part of the purchase price allocation. The Seller has provided an indemnity for tax liabilities related to periods prior to the acquisition. The Seller's indemnification obligation for sales taxes in the state of Texas is limited to approximately $2 million. The total sales tax and uncertain income tax indemnification assets established as of the acquisition date were $5 million and $2 million, respectively. $0.9 million and $0.5 million of the contingent sales tax liability and related indemnification asset recognized as of the acquisition date were reversed during 2019 and 2018, respectively, upon expiration of the statute of limitations applicable to the contingent sales tax liability. $0.6 million and $0.9 million of the uncertain income tax position liability and related indemnification asset recognized as of the acquisition date were reversed during 2019 and 2018, respectively, upon expiration of the statute of limitations applicable to the uncertain income tax position. As part of the ForRent acquisition, the Company incurred $3 million of transaction costs. Additionally, the Company paid $12 million cash into a cash escrow account for retention compensation for certain ForRent employees, payable if they remained employed by the Company for a defined six-month period following the acquisition or were earlier terminated without cause or resigned for good reason. In the event funds remained in the escrow account after the employees were compensated and the defined six-month period ended, those funds were remitted to the Seller. The Company expensed all of the retention compensation as the services were performed in the post-combination period in 2018. Other Acquisitions On June 12, 2019, the Company acquired Off Campus Partners, LLC ("OCP"), a provider of student housing marketplace content and technology to U.S. universities for $16 million. The purchase agreement required an initial payment of $14 million, net of cash acquired, at the time of closing, with the remainder of the purchase price payable one year following the acquisition date, subject to offset for indemnification claims or adjustments to the purchase price after final determination of closing net working capital. As part of the acquisition, the Company recorded goodwill and intangibles assets of $8 million and $9 million, respectively. The net assets of OCP were recorded at their estimated fair value. The estimated fair values are preliminary, subject to the Company's assessment of certain tax matters. Measurement period adjustments recognized in 2019 were not material. On November 8, 2018, the Company acquired Cozy Services, Ltd. ("Cozy"), a provider of online rental solutions that provides a broad spectrum of services to both landlords and tenants, for $65 million, net of cash acquired. As part of the acquisition, the Company recorded goodwill and intangible assets of $52 million and $11 million, respectively. The net assets of Cozy were recorded at their estimated fair value. Measurement period adjustments recognized in 2019 were not material. On October 12, 2018, the Company acquired Realla Ltd. ("Realla"), the operator of a commercial property listings and data management platform in the U.K. for £12 million ($15 million). The purchase agreement required an initial payment of £10 million ($13 million), net of cash acquired, at the time of closing, with the remainder of the purchase price paid one year following the acquisition date, subject to offset for claims under the purchase agreement. In connection with the acquisition, the Company recorded goodwill and intangible assets of £8 million ($10 million) and £4 million ($5 million), respectively. The net assets of Realla were recorded at their estimated fair value. Measurement period adjustments recognized in 2019 were not material. Pro Forma Financial Information The unaudited pro forma financial information presented below summarizes the combined results of operations for the Company, ForRent and STR as though the companies were combined as of January 1, 2017 and January 1, 2018, respectively. The impact of Realla, Cozy and OCP on the pro forma financial information was not material and therefore those acquisitions were not included. The unaudited pro forma financial information for all periods presented includes amortization charges from acquired intangible assets, retention compensation, as referenced above, and the related tax effects, along with certain other accounting effects, but excludes the impacts of any expected operational synergies. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions of ForRent and STR had taken place on January 1, 2017 and January 1, 2018, respectively. The unaudited pro forma financial information for the years ended December 31, 2019, 2018 and 2017 combine the historical results of the Company for the years ended December 31, 2019, 2018 and 2017, the historical results of ForRent and STR for the periods prior to the acquisition dates, and the effects of the pro forma adjustments listed above. The unaudited pro forma financial information, in aggregate, was as follows (in thousands, except per share data):
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Revenue | $ | 1,450,954 |  |  | $ | 1,264,696 |  |  | $ | 1,067,742 |
Net income | $ | 306,755 |  |  | $ | 226,305 |  |  | $ | 103,000 |
Net income per share - basic | $ | 8.45 |  |  | $ | 6.28 |  |  | $ | 3.09 |
Net income per share - diluted | $ | 8.37 |  |  | $ | 6.21 |  |  | $ | 3.06 |
Revenue and net loss attributable to STR from October 22, 2019 through December 31, 2019 was not material. The Company began integrating the sales force and operations of ForRent after the closing of the acquisition in an effort to create operating synergies. As a result of these integration activities, it is impracticable to disclose revenue and earnings from ForRent from the acquisition date through December 31, 2018.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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