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Business Combinations, Goodwill and Other Intangible Assets | 12 Months Ended
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Dec. 31, 2016
BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] |
Business Combinations, Goodwill and Other Intangible Assets |
4. | BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
2016 Business Combinations Activity During the year ended December 31, 2016, we completed 28 new acquisitions, as presented in the below table. These acquisitions continued to expand our capabilities and increase our presence in key regional markets.
Acquired Company | Quarter of Acquisition | Primary Country | Primary Service Line
ACREST | Q1 | Germany | Property & Facility Management
Big Red Rooster | Q1 | United States | Project & Development Services
Bill Goold Realty | Q1 | Canada | Capital Markets & Hotels
Cobertura SA | Q1 | Portugal | Capital Markets & Hotels
Colliers Baltimore | Q1 | United States | Leasing/Property & Facility Management
Huntley, Mullaney, Spargo & Sullivan, Inc. | Q1 | United States | Capital Markets & Hotels
Morii Appraisal and Investment Consulting | Q1 | Japan | Advisory, Consulting and Other
Strategic Advisory Group | Q1 | United States | Advisory, Consulting and Other
Trussard Property Consultants | Q1 | South Africa | Leasing
Washington Partners | Q1 | United States | Leasing
CTH | Q2 | France | Project & Development Services
Dazheng | Q2 | China | Advisory, Consulting and Other
Harry K. Moore | Q2 | United States | Leasing
Merritt & Harris | Q2 | United States | Project & Development Services
Procofin | Q2 | Finland | Project & Development Services
Véronique Nocquet | Q2 | France | Leasing
BRG | Q3 | United States | Property & Facility Management
Integral UK Ltd. | Q3 | England | Property & Facility Management
MSCI Global Occupiers | Q3 | England | Advisory, Consulting and Other
PDM International | Q3 | Greater China | Project & Development Services
Sage Capital Advisors | Q3 | United States | Capital Markets & Hotels
Travis Commercial Real Estate Services | Q3 | United States | Leasing
Advanced Technologies Group (ATG) | Q4 | United States | Advisory, Consulting and Other
Integra Realty Resources - Houston LLC | Q4 | United States | Advisory, Consulting and Other
Integra Realty Resources - Dallas LLC | Q4 | United States | Advisory, Consulting and Other
Integra Realty Resources - Chicago | Q4 | United States | Advisory, Consulting and Other
PMX | Q4 | Canada | Project & Development Services
AVS | Q4 | Australia | Capital Markets & Hotels
Aggregate terms of these acquisitions included: (1) cash paid at closing of $483.9 million, (2) guaranteed deferred consideration of $62.7 million subject only to the passage of time and (3) contingent earn-out consideration of $103.3 million subject to provisions that will be paid upon certain performance conditions being met which are recorded at their acquisition date fair value. A preliminary allocation of this purchase consideration resulted in goodwill of $529.8 million, identifiable intangibles of $104.5 million, and other net assets (acquired assets less acquired liabilities) of $15.6 million. As of December 31, 2016, we have not completed our analysis to assign fair values to all tangible and intangible assets acquired and therefore the purchase price allocations for these acquisitions have not been completed. These preliminary purchase price allocations will be subject to further refinement and may result in changes to the allocation of consideration and the fair value assigned to all tangible and intangible assets acquired and identified. These acquisitions are individually immaterial, but deemed material in aggregate. Our Consolidated Statements of Comprehensive Income for the year ending December 31, 2016, includes revenue of $387.6 million for these acquisitions and an immaterial amount of net income. The following table provides unaudited pro forma results of operations as if all 2016 acquisitions occurred on January 1, 2015.
Unaudited Pro Forma Results of Operations for the Year Ended December 31, |
($ in millions) | 2016 | 2015
Revenue | $ | 7,268.0 |  | 6,844.1 |
Net income attributable to common shareholders | 341.4 |  | 473.2 |
These unaudited pro forma results of operations include adjustments for intangible amortization based on our current estimate of the fair value of identifiable intangibles acquired and their associated useful lives as well as an interest expense adjustment based on our estimate of interest that would have been incurred had these acquisitions occurred on January 1, 2015. These unaudited pro forma adjustments are subject to change within the measurement period because the fair value assessments these adjustments are based on are not finalized. In addition, these unaudited pro forma results do not reflect the cost of integration activities or benefits that may result from synergies that may be derived from these acquisitions. Accordingly, these unaudited pro forma results of operations are not necessarily indicative of the results which may occur in the future. During the year ended December 31, 2016, we also paid $53.9 million for deferred business acquisition and earn-out obligations for acquisitions completed in prior years. In addition, we paid $2.8 million to acquire a portion of the redeemable noncontrolling interest related to our 2014 acquisition of Tenzing AB, a Swedish real estate services provider. Of the $539.8 million of total additions to goodwill in 2016, we anticipated being able to amortize and deduct $176.4 million for tax purposes as of December 31, 2016. 2015 Business Combinations Activity During the year ended December 31, 2015, we completed 20 new acquisitions: 9 located in Americas, 8 located in EMEA, and 3 located in Asia Pacific. The aggregate terms of these acquisitions included: (1) cash paid at closing of $373.0 million, (2) guaranteed deferred consideration subject only to the passage of time of $23.1 million, (3) contingent earn-out consideration of $105.1 million subject to provisions that will be paid upon certain performance conditions being met which are recorded at their acquisition date fair value. As of December 31, 2015, a preliminary allocation of this purchase consideration resulted in goodwill of $280.8 million, identifiable intangibles of $200.6 million, and other net assets (acquired assets less acquired liabilities) of $19.8 million. As of December 31, 2015, we had not completed our analysis to assign fair values to all tangible and intangible assets acquired and therefore the purchase price allocations for these acquisitions was not final. During the year ended December 31, 2016, we made adjustments to our preliminary allocation of the purchase consideration for certain acquisitions completed in 2015. These adjustments resulted in a $10.0 million increase to goodwill and related decreases of $4.5 million and $5.5 million to mortgage servicing rights intangible assets and other net assets acquired (assets less acquired liabilities), respectively. During the year ended December 31, 2015, we also paid $51.8 million for deferred business acquisition and earn-out obligations for acquisitions completed in prior years. In addition, we paid $2.7 million to acquire a portion of the redeemable noncontrolling interest related to our 2014 acquisition of Tenzing AB, a Swedish real estate services provider. Of the $288.3 million of total additions to goodwill in 2015, we anticipated being able to amortize and deduct $104.1 million for tax purposes as of December 31, 2015. Earn-Out Payments As of December 31, 2016, we had the potential to make a maximum of $435.0 million (undiscounted) in earn-out payments on 52 completed acquisitions, subject to the achievement of certain performance criteria. We have accrued $229.6 million, representing the fair value of these obligations as of December 31, 2016, which is included in Other current and Other long-term liabilities on our Consolidated Balance Sheet. Assuming the achievement of the applicable performance criteria, we anticipate these earn-out payments will be made over the next six years. Adjustments to earn-out liabilities in periods subsequent to the completion of acquisitions are reflected within Restructuring and acquisition charges in the Consolidated Statements of Comprehensive Income. Refer to Note 9, Fair Value Measurements, and Note 14, Restructuring and Acquisition Charges, for additional discussion of our earn-out liabilities. Goodwill and Other Intangible Assets Significant portions of our goodwill and unamortized intangibles are denominated in currencies other than the U.S. dollar, which means a portion of the movements in the reported book value of these balances is attributable to movements in foreign currency exchange rates. The tables below detail the foreign exchange impact on our goodwill and intangible balances. As of December 31, 2016, the goodwill and unamortized intangibles consists of: (1) goodwill of $2,579.3 million with indefinite useful lives that are not amortized, (2) identifiable intangibles of $286.2 million amortized over their remaining finite useful lives, and (3) $8.8 million of identifiable intangibles with indefinite useful lives that are not amortized. The following table details, by reporting segment, the annual movements in goodwill.
($ in millions) | Americas | EMEA | Asia Pacific | LaSalle | Consolidated
Balance as of December 31, 2014 | $ | 1,008.3 |  | 650.4 |  | 230.8 |  | 18.4 |  | 1,907.9 |
Additions, net of adjustments | 153.7 |  | 92.7 |  | 41.9 |  | — |  | 288.3 |
Impact of exchange rate movements | (0.9 | ) | (46.9 | ) | (6.1 | ) | (0.8 | ) | (54.7 | )
Balance as of December 31, 2015 | 1,161.1 |  | 696.2 |  | 266.6 |  | 17.6 |  | 2,141.5 |
Additions, net of adjustments | 244.3 |  | 253.8 |  | 41.7 |  | — |  | 539.8 |
Impact of exchange rate movements | 0.7 |  | (98.3 | ) | (2.2 | ) | (2.2 | ) | (102.0 | )
Balance as of December 31, 2016 | $ | 1,406.1 |  | 851.7 |  | 306.1 |  | 15.4 |  | 2,579.3 |
The following table details, by reporting segment, the annual movements in the gross carrying amount and accumulated amortization of our identifiable intangibles.
| MSR |  | Other Intangibles |  |
($ in millions) | Americas |  | Americas | EMEA | Asia Pacific | LaSalle |  | Consolidated
Gross Carrying Amount |  |  |  |  |  |  |  |
Balance as of December 31, 2014 | $ | 8.6 |  |  | 94.8 |  | 43.8 |  | 9.5 |  | 7.0 |  |  | 163.7 |
Additions, net of adjustments | 163.0 |  |  | 30.8 |  | 6.9 |  | 5.3 |  | — |  |  | 206.0 |
Impact of exchange rate movements | — |  |  | (0.1 | ) | (2.2 | ) | (0.5 | ) | (0.7 | ) |  | (3.5 | )
Balance as of December 31, 2015 | 171.6 |  |  | 125.5 |  | 48.5 |  | 14.3 |  | 6.3 |  |  | 366.2 |
Additions, net of adjustments | 21.5 |  |  | 41.8 |  | 52.5 |  | 10.2 |  | — |  |  | 126.0 |
Impairments (1) | — |  |  | — |  | — |  | — |  | (6.5 | ) |  | (6.5 | )
Impact of exchange rate movements | — |  |  | (0.2 | ) | (9.9 | ) | (0.3 | ) | 0.3 |  |  | (10.1 | )
Balance as of December 31, 2016 | $ | 193.1 |  |  | 167.1 |  | 91.1 |  | 24.2 |  | 0.1 |  |  | 475.6 |
Accumulated Amortization |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of December 31, 2014 | $ | (2.8 | ) |  | (82.1 | ) | (31.0 | ) | (8.9 | ) | (0.1 | ) |  | (124.9 | )
Amortization expense | (5.8 | ) |  | (6.3 | ) | (3.8 | ) | (0.7 | ) | — |  |  | (16.6 | )
Impact of exchange rate movements | — |  |  | — |  | 2.2 |  | 0.3 |  | — |  |  | 2.5 |
Balance as of December 31, 2015 | (8.6 | ) |  | (88.4 | ) | (32.6 | ) | (9.3 | ) | (0.1 | ) |  | (139.0 | )
Amortization expense | (23.7 | ) |  | (10.8 | ) | (11.0 | ) | (2.3 | ) | — |  |  | (47.8 | )
Impact of exchange rate movements | — |  |  | 0.5 |  | 5.6 |  | 0.1 |  | — |  |  | 6.2 |
Balance as of December 31, 2016 | $ | (32.3 | ) |  | (98.7 | ) | (38.0 | ) | (11.5 | ) | (0.1 | ) |  | (180.6 | )
Net book value as of December 31, 2016 | $ | 160.8 |  |  | 68.4 |  | 53.1 |  | 12.7 |  | — |  |  | 295.0 |
(1) In the third quarter of 2016, we fully impaired an indefinite-lived intangible asset related to a 2011 acquisition of an Australian property fund management business. We amortize our identifiable intangible assets with finite lives on a straight-line basis over their useful lives. The remaining weighted average amortization period of MSRs and other identifiable intangible assets is 4.37 years and 3.30 years, respectively, and the remaining estimated future amortization expense by year as of December 31, 2016 is presented in the following table.
($ in millions) | MSRs | Other Intangibles | Total
2017 | $ | 32.1 |  | $ | 26.9 |  | $ | 59.0 |
2018 | 25.1 |  | 23.7 |  | 48.8 |
2019 | 21.6 |  | 21.7 |  | 43.3 |
2020 | 18.2 |  | 19.2 |  | 37.4 |
2021 | 14.8 |  | 13.1 |  | 27.9 |
Thereafter | 49.0 |  | 20.8 |  | 69.8 |
Total | $ | 160.8 |  | $ | 125.4 |  | $ | 286.2 |

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