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Business Combinations
12 Months Ended
Sep. 30, 2011
Business Combinations 
Business Combinations

3. Business Combinations

Acquisitions of TechTeam, Sula, DSWA, Magellan Consulting, Alpha Telecom, and CES

In October 2010, we acquired TechTeam Government Solutions, Inc. ("TechTeam"), formerly a wholly-owned subsidiary of TechTeam Global, Inc. TechTeam is a 500-person information technology ("IT") solutions company that provides support to U.S. federal, state and local government agencies, including the United States Department of Homeland Security, U.S. Army, and U.S. Army Corps of Engineers. The firm's core competencies include systems integration, enterprise application integration, ERP implementation support, IT infrastructure support, network operations management, and call center operations. The primary purpose for acquiring TechTeam was to expand the Company's IT, modeling, and simulation services capabilities with the U.S. federal government.

Also in October 2010, we acquired Sula Systems Ltd ("Sula"), a 70-person professional services firm headquartered in Gloucestershire, England. Founded in 1996, Sula provides systems engineering and technical services on large, complex programs and projects to clients in the United Kingdom's defense and aerospace markets. Sula is also involved in a number of major defense programs in areas such as armored vehicles, complex weapons, test and evaluation, submarine nuclear propulsion, and capability and network level systems engineering. Sula also provides services relating to civil airliners and space-based subsystems. The primary purpose for acquiring Sula was to expand the Company's position in the defense and aerospace markets.

In December 2010, we acquired the assets of Damon S. Williams Associates, L.L.C. ("DSWA"). DSWA is a 50 person professional services firm headquartered in Phoenix, Arizona specializing in water and wastewater facilities, with expertise in planning, design, construction administration and operations services. The primary purpose for acquiring DSWA was to expand our water and wastewater capabilities to better serve our customers in the western United States.

Also in December 2010, we acquired the assets of two other, smaller niche firms: (i) Magellan Consulting which provides services to clients in the education market, and (ii) Alpha Telecom Services Company which provides services to clients in the telecommunications industry.

In May 2011, we acquired an additional 55% interest in Consulting Engineering Services (India) Private Limited ("CES") bringing our ownership interest to 70%. CES is a leading power, infrastructure, and civil engineering company in India, headquartered in Delhi. CES employs approximately 2,000 people and provides a range of solutions in infrastructure, development, planning, engineering, and construction management. The acquisition of CES significantly expands the Company's resources and capabilities in India and expands our presence in other regions in Asia and the Middle East.

The results of operations of the acquired businesses have been included in the Company's consolidated results of operations commencing with the dates control of the acquired businesses were obtained.

The above acquisitions were not material to the Company's consolidated financial statements at September 30, 2011 and for the year then ended.

The Aker Solutions ASA Transactions

On February 1, 2011, we acquired certain operations within the process and construction business of Aker Solutions ASA, and in April 2011, we completed the acquisition of Aker Projects (Shanghai) Company Limited (Aker Solutions' onshore P&C operations in China) (the acquired operations are referred to herein as the "Aker Entities"). We believe this acquisition will significantly expand Jacobs' global presence in the mining and metals market; provide a new geographic region with South America; and strengthen Jacobs' presence in China and Australia. Jacobs' regional presence in Europe and North America will also be enhanced as a result of this acquisition.

The purchase price was $675.0 million plus approximately $234.6 million representing certain transactions specified in the share purchase agreement ("SPA") and a preliminary estimate of net cash and working capital acquired. At closing, the Company funded approximately $909.6 million pursuant to the SPA. The acquisition was financed through a combination of cash-on-hand and borrowings under a number of new, bilateral credit facilities with major U.S. and European banks. The results of operations of the Aker Entities have been included in the Company's consolidated results of operations commencing with the date control of the entities was obtained.

The following table presents the unaudited, pro forma consolidated results of operations for each of fiscal 2011 and 2010 as if the acquisition of the Aker Entities had occurred at the beginning of fiscal 2010. These pro forma results are not necessarily indicative of (i) the results of operations that would have occurred had the Aker Entities operations actually been acquired at the beginning of fiscal 2010; or (ii) future results of operations (in thousands):

 

     2011      2010  

Revenues

    $ 10,733,797       $ 10,633,975   

Net earnings attributable to Jacobs

    $ 339,437       $ 262,114   

Due to the size of the Aker transaction and considering the number of geographies in which it operates, we have not completed the purchase price allocation. The following table presents the preliminary allocation of the purchase price to the net assets (excluding intangibles and goodwill) of the Aker Entities as of the dates of acquisition (in thousands):

 

Assets:

   

Cash and cash equivalents

    $ 329,689   

Receivables and other current assets

      145,049   

Property and equipment, and other assets

      115,911   
  

 

 

  

Total assets

      590,649   
  

 

 

  

Liabilities:

   

Current liabilities

      195,910   

Long-term liabilities

      22,534   
  

 

 

  

Total liabilities

      218,444   
  

 

 

  

Net assets acquired

    $ 372,205   
  

 

 

  

The Company expects to collect substantially all of the acquired receivables of $134.2 million.

 

The following table presents the Company's latest estimate of the values of the acquired intangible assets (in thousands):

 

Customer relationships / backlog

    $ 136,000   

Technology

      23,000   
  

 

 

  
   $ 159,000   
  

 

 

  

The preliminary values of intangible assets subject to amortization are included in "Other Noncurrent Assets" in the accompanying Consolidated Balance Sheet at September 30, 2011, and are being amortized over lives that range from 1 year to 15 years (the weighted average life for all intangibles is 12.8 years). The preliminary amount of goodwill created as a result of this transaction is summarized as follows (in thousands):

 

Purchase price

    $ 910,000   

Amount assigned to net assets acquired

      (372,000 ) 

Estimated amount assigned to intangible assets

      (159,000 ) 

Deferred taxes related to intangible assets

      55,000   
  

 

 

  

Goodwill recognized, preliminary

    $ 434,000   
  

 

 

  

Some of the factors contributing to a purchase price that resulted in the recognition of goodwill include: (i) access to a large, highly-trained and stable workforce; (ii) the opportunity to expand our client base in the United States, the United Kingdom, Canada, Australia, and China; (iii) the opportunity to enter new geographic markets in South America; (iv) the opportunity to expand our presence in the mining and minerals market; and (v) the opportunity of achieving operating synergies.

We do not expect a material amount of the goodwill recognized during fiscal 2011 to be deductible for income tax purposes. Included in selling, general and administrative expense for fiscal 2011 is $15.2 million of acquisition-related costs pertaining to our acquisition activities.