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Business Acquisitions, Goodwill, and Intangible Assets | 12 Months Ended
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Sep. 30, 2013
Business Acquisitions, Goodwill, and Intangible Assets |
Business Acquisitions, Goodwill, and Intangible Assets | 4. Business Acquisitions, Goodwill, and Intangible Assets The Company completed three, one, and six business acquisitions during the years ended September 30, 2013, 2012 and 2011, respectively. Business acquisitions completed during the years ended September 30, 2013, 2012 and 2011 did not meet the quantitative thresholds to require pro forma disclosures of operating results, either individually or in the aggregate, based on the Company's consolidated assets, investments and net income. Business acquisitions during the year ended September 30, 2013 included South Africa-based BKS Group and Asia-based KPK Quantity Surveyors. During the year ended September 30, 2012, the Company acquired an environmental engineering firm in Asia. Business acquisitions during the year ended September 30, 2011 included four separate global cost and project management consultancy firms that operated under the Davis Langdon name, including businesses in Europe and Middle East, Australia and New Zealand, Africa, and North America. Each of the four acquisitions were separately negotiated, executed by separate purchase agreements, with no one acquisition contingent upon the other, and the businesses, although operating as part of a Swiss Verein, under which they shared certain naming and marketing rights, were not under common control or management. Business acquisitions for the year ended September 30, 2011 also included RSW, Inc., an international engineering firm based in Montreal, Quebec, Canada and Spectral Services Consultants Pte. Ltd. (Spectral), a building services consultancy in India. The aggregate value of all consideration for acquisitions consummated during the years ended September 30, 2013, 2012 and 2011 were $82.0 million, $15.4 million and $453.3 million, respectively. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition dates, from acquisitions consummated during the fiscal years presented:
|  | Fiscal Year Ended |
--- | --- | --- | ---
|  | September 30, 2013 |  | September 30, 2012 |  | September 30, 2011 |
|  | (in millions) |
Cash acquired |  | $ | 20.1 |  | $ | 1.9 |  | $ | 19.3 |
Other current assets |  |  | 41.5 |  |  | 7.8 |  |  | 149.2 |
Goodwill |  |  | 72.6 |  |  | 10.5 |  |  | 405.2 |
Intangible assets |  |  | 9.4 |  |  | 1.5 |  |  | 44.3 |
Other non-current assets |  |  | 8.6 |  |  | 3.3 |  |  | 51.5 |
Current liabilities |  |  | (54.9 | ) |  | (8.8 | ) |  | (140.5 | )
Non-current liabilities |  |  | (15.3 | ) |  | (0.8 | ) |  | (75.7 | )
Net assets acquired |  | $ | 82.0 |  | $ | 15.4 |  | $ | 453.3 |
Acquired intangible assets above includes the following:
|  | Fiscal Year Ended |
--- | --- | --- | ---
|  | September 30, 2013 |  | September 30, 2012 |  | September 30, 2011 |
|  | (in millions) |
Backlog |  | $ | 4.2 |  | $ | 0.7 |  | $ | 10.7 |
Customer relationships |  |  | 5.2 |  |  | 0.8 |  |  | 30.2 |
Trademark / tradename |  |  | — |  |  | — |  |  | 3.4 |
Total intangible assets |  | $ | 9.4 |  | $ | 1.5 |  | $ | 44.3 |
Consideration for acquisitions above includes the following:
|  | Fiscal Year Ended |
--- | --- | --- | ---
|  | September 30, 2013 |  | September 30, 2012 |  | September 30, 2011 |
|  | (in millions) |
Cash paid |  | $ | 62.1 |  | $ | 14.5 |  | $ | 384.8 |
Promissory notes |  |  | 5.6 |  |  | — |  |  | — |
Equity issued |  |  | 14.3 |  |  | 0.9 |  |  | 68.5 |
Total consideration |  | $ | 82.0 |  | $ | 15.4 |  | $ | 453.3 |
All of the above acquisitions were accounted for under the acquisition method of accounting. As such, the purchase consideration of each acquired company was allocated to acquired tangible and intangible assets and liabilities based upon their fair values. Although the final purchase price allocation has not been completed for acquisitions made during the year ended September 30, 2013, the Company does not expect material changes to the preliminary purchase price allocation. The excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The results of operations of each company acquired have been included in the Company's financial statements from the date of acquisition. At the time of acquisition, the Company preliminarily estimates the amount of the identifiable intangible assets acquired based upon historical valuations of similar acquisitions and the facts and circumstances available at the time. The Company determines the final value of the identifiable intangible assets as soon as information is available, but not more than 12 months from the date of acquisition. Post-acquisition adjustments primarily relate to project related liabilities. During the fourth quarter of its fiscal year, the Company conducts its annual goodwill impairment test. The impairment evaluation process includes, among other things, making assumptions about variables such as revenue growth rates, profitability, discount rates, and industry market multiples, which are subject to a high degree of judgment. As a result of the first step of the fiscal 2012 impairment analysis, the Company identified adverse market conditions and business trends within the Europe, Middle East, and Africa (EMEA) and MSS reporting units, which led the Company to determine that goodwill was impaired. Adverse market conditions included prolonged and sustained deterioration of European macroeconomic conditions in EMEA and decreased U.S. government military activities and unsuccessful contract pursuits in MSS. The reporting units' goodwill impairments largely relate to the following acquired businesses: • MSS—McNeil Technologies, Inc. • EMEA—Davis Langdon Europe and Middle East Significant changes to the assumptions used in the September 30, 2012 as compared to the September 30, 2011 analysis were financial forecasts and market multiples. While both the MSS and the EMEA reporting units have historically generated positive cash flows, and are expected to continue to generate positive cash flows, the fair value of future cash flows of the Company's EMEA and MSS reporting units decreased. Additionally, the market multiples for the two reporting units decreased. The market multiples used were as follows:
|  | September 30, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |
Market multiple of revenue: |  |  |  |  |  |  |
EMEA |  |  | 0.35 |  |  | 0.5 |
MSS |  |  | 0.35 |  |  | 0.5 |
The second step of the analysis was performed to measure the impairment as the excess of the goodwill carrying value over its implied fair value. This analysis resulted in an impairment of $336.0 million, or $317.2 million, net of tax. The goodwill carrying values of the EMEA and MSS reporting units before and after the goodwill impairment expense were as follows:
|  | September 30, 2012 |
--- | --- | --- | ---
|  | EMEA |  | MSS |
Carrying value before impairment |  | $ | 345.5 |  | $ | 347.8 |
Goodwill impairment |  |  | (155.0 | ) |  | (181.0 | )
Carrying value after impairment |  | $ | 190.5 |  | $ | 166.8 |
The changes in the carrying value of goodwill by reportable segment for the fiscal years ended September 30, 2013 and 2012 were as follows:
|  | Fiscal Year 2013 |
--- | --- | --- | ---
|  | September 30, 2012 |  | Post- Acquisition Adjustments |  | Foreign Exchange Impact |  | Acquired |  | Goodwill Impairment |  | September 30, 2013 |
|  | (in millions) |
Professional Technical Services |  | $ | 1,608.6 |  | $ | — |  | $ | (36.2 | ) | $ | 72.6 |  | $ | — |  | $ | 1,645.0 |
Management Support Services |  |  | 166.8 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 166.8 |
Total |  | $ | 1,775.4 |  | $ | — |  | $ | (36.2 | ) | $ | 72.6 |  | $ | — |  | $ | 1,811.8 |
|  | Fiscal Year 2012 |
--- | --- | --- | ---
|  | September 30, 2011 |  | Post- Acquisition Adjustments |  | Foreign Exchange Impact |  | Acquired |  | Goodwill Impairment |  | September 30, 2012 |
|  | (in millions) |
Professional Technical Services |  | $ | 1,733.9 |  | $ | (1.2 | ) | $ | 20.4 |  | $ | 10.5 |  | $ | (155.0 | ) | $ | 1,608.6 |
Management Support Services |  |  | 352.4 |  |  | (4.6 | ) |  | — |  |  | — |  |  | (181.0 | ) |  | 166.8 |
Total |  | $ | 2,086.3 |  | $ | (5.8 | ) | $ | 20.4 |  | $ | 10.5 |  | $ | (336.0 | ) | $ | 1,775.4 |
The gross amounts and accumulated amortization of the Company's acquired identifiable intangible assets with finite useful lives as of September 30, 2013 and 2012, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:
|  | September 30, 2013 |  | September 30, 2012 |  |
--- | --- | --- | --- | --- | --- | ---
|  | Gross Amount |  | Accumulated Amortization |  | Intangible Assets, Net |  | Gross Amount |  | Accumulated Amortization |  | Intangible Assets, Net |  | Amortization Period (years)
|  | (in millions) |  |
Backlog |  | $ | 94.9 |  | $ | (89.4 | ) | $ | 5.5 |  | $ | 91.1 |  | $ | (83.8 | ) | $ | 7.3 |  | 1 - 5
Customer relationships |  |  | 147.1 |  |  | (69.5 | ) |  | 77.6 |  |  | 143.6 |  |  | (54.1 | ) |  | 89.5 |  | 10
Trademark / tradename |  |  | 7.8 |  |  | (7.8 | ) |  | — |  |  | 7.8 |  |  | (7.6 | ) |  | 0.2 |  | 2
Total |  | $ | 249.8 |  | $ | (166.7 | ) | $ | 83.1 |  | $ | 242.5 |  | $ | (145.5 | ) | $ | 97.0 |  |
Amortization expense of acquired intangible assets included within cost of revenue was $21.2 million and $22.5 million for the years ended September 30, 2013 and 2012, respectively. The following table presents estimated amortization expense of existing intangible assets for the succeeding years:
Fiscal Year |  | (in millions) |
--- | --- | --- | ---
2014 |  | $ | 18.7 |
2015 |  |  | 15.8 |
2016 |  |  | 13.1 |
2017 |  |  | 11.9 |
2018 |  |  | 8.5 |
Thereafter |  |  | 15.1 |
Total |  | $ | 83.1 |
In addition to the above, amortization of acquired intangible assets included within equity in earnings of joint ventures was $0.2 million and $1.0 million for the fiscal years ended September 30, 2013 and 2012, respectively. In connection with the goodwill impairment recognized in the year ended September 30, 2012 discussed above, the Company performed testing of acquired intangible assets and concluded that no impairment existed.

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- Definition Description of a business combination completed during the period, including background, timing, and recognized assets and liabilities and includes disclosure of goodwill and intangible assets of the entire business. + References No definition available. + Details
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