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Business Combinations, Goodwill and Other Intangible Assets | 6 Months Ended
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Jun. 30, 2017
BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] |
Business Combinations, Goodwill and Other Intangible Assets |
4. | BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
2017 Business Combinations Activity During the six months ended June 30, 2017, we completed four new strategic acquisitions, as presented in the table below. These acquisitions reflect continued efforts to grow scale in key regional markets across various business lines.
Acquired Company | Quarter of Acquisition | Country | Primary Service Line
Maloney Field Services | Q1 | Australia | Capital Markets & Hotels
Meridian Immobilier SA | Q1 | Switzerland | Leasing
Urbis Partners, LLC | Q1 | United States | Leasing
Zabel Property AG | Q1 | Germany | Capital Markets & Hotels
Aggregate terms of these acquisitions included: (1) cash paid at closing of $22.2 million (exclusive of $5.6 million in cash acquired), (2) guaranteed deferred consideration of $1.8 million subject only to the passage of time, and (3) contingent earn-out consideration of $10.7 million, which we will pay upon satisfaction of certain performance conditions and which we have initially recorded at their respective acquisition date fair value. A preliminary allocation of purchase consideration resulted in goodwill of $24.0 million, identifiable intangibles of $9.5 million, and other net assets (acquired assets less assumed liabilities) of $1.2 million. As of June 30, 2017, we have not completed our analysis to assign fair values to all of the identifiable intangible and tangible assets acquired and, therefore, we may further refine the purchase price allocations for our 2017 acquisitions during their open measurement periods. During the six months ended June 30, 2017, we paid $23.2 million for deferred business acquisition and earn-out obligations for acquisitions completed in prior years. We also paid $2.4 million to acquire a portion of the redeemable noncontrolling interest related to our 2014 acquisition of Tenzing AB, a Swedish real estate services provider. 2016 Business Combination Activity During the six months ended June 30, 2017, we made adjustments to our preliminary allocation of the purchase consideration for certain acquisitions completed in 2016. These adjustments resulted in a $5.2 million increase to goodwill, which included a $3.2 million net working capital adjustment payment for a 2016 acquisition, and a $0.4 million reduction to identifiable intangibles. As of June 30, 2017, we have not completed our analysis to assign fair values to all the identifiable intangible and tangible assets acquired and, therefore, we may further refine the purchase price allocations for our 2016 acquisitions with open measurement periods. Earn-Out Payments As of June 30, 2017, we had the potential to make a maximum of $436.0 million (undiscounted) in earn-out payments on 55 completed acquisitions, subject to the achievement of certain performance criteria. We accrued $225.6 million, representing the fair value of these obligations as of June 30, 2017, which is included in Short-term earn-out liabilities and Long-term earn-out liabilities within our Condensed Consolidated Balance Sheet. Assuming the achievement of the applicable performance criteria, we anticipate making these earn-out payments over the next six years. 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 accrued $229.6 million, representing the fair value of these obligations as of December 31, 2016. Refer to Note 7, Fair Value Measurements, and Note 10, 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. Goodwill and unamortized intangibles of $2,970.9 million as of June 30, 2017 consisted of: (1) goodwill of $2,668.9 million, (2) identifiable intangibles of $293.2 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 tables detail, by reporting segment, movements in goodwill with indefinite useful lives.
| Real Estate Services |  |  |
(in millions) | Americas | EMEA | Asia Pacific | LaSalle |  | Consolidated
Balance as of December 31, 2016 | $ | 1,406.1 |  | 851.7 |  | 306.1 |  | 15.4 |  |  | $ | 2,579.3 |
Additions, net of adjustments | 4.5 |  | 18.2 |  | 6.5 |  | — |  |  | 29.2 |
Impact of exchange rate movements | 0.4 |  | 52.1 |  | 7.2 |  | 0.7 |  |  | 60.4 |
Balance as of June 30, 2017 | $ | 1,411.0 |  | 922.0 |  | 319.8 |  | 16.1 |  |  | $ | 2,668.9 |
| Real Estate Services |  |  |
(in millions) | Americas | EMEA | Asia Pacific | LaSalle |  | Consolidated
Balance as of December 31, 2015 | $ | 1,161.1 |  | 696.2 |  | 266.6 |  | 17.6 |  |  | $ | 2,141.5 |
Additions, net of adjustments | 102.7 |  | 36.6 |  | 13.2 |  | — |  |  | 152.5 |
Impact of exchange rate movements | 0.9 |  | (34.7 | ) | 3.6 |  | (1.1 | ) |  | (31.3 | )
Balance as of June 30, 2016 | $ | 1,264.7 |  | 698.1 |  | 283.4 |  | 16.5 |  |  | $ | 2,262.7 |
The following tables detail, by reporting segment, movements in the gross carrying amount and accumulated amortization of our identifiable intangibles.
| MSRs |  | Other Intangibles |  |
(in millions) | Americas |  | Americas | EMEA | Asia Pacific | LaSalle |  | Consolidated
Gross Carrying Amount |  |  |  |  |  |  |  |
Balance as of December 31, 2016 | $ | 193.1 |  |  | 167.1 |  | 91.1 |  | 24.2 |  | 0.1 |  |  | $ | 475.6 |
Additions, net of adjustments(1) | 29.0 |  |  | 0.2 |  | 3.1 |  | 5.8 |  | — |  |  | 38.1 |
Adjustment for fully amortized intangibles | (6.0 | ) |  | (50.0 | ) | (7.7 | ) | (8.0 | ) | (0.1 | ) |  | (71.8 | )
Impact of exchange rate movements | — |  |  | — |  | 4.8 |  | 0.9 |  | — |  |  | 5.7 |
Balance as of June 30, 2017 | $ | 216.1 |  |  | 117.3 |  | 91.3 |  | 22.9 |  | — |  |  | $ | 447.6 |
Accumulated Amortization |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of December 31, 2016 | $ | (32.3 | ) |  | (98.7 | ) | (38.0 | ) | (11.5 | ) | (0.1 | ) |  | $ | (180.6 | )
Amortization, net (2) | (18.9 | ) |  | (6.9 | ) | (7.6 | ) | (1.2 | ) | — |  |  | (34.6 | )
Adjustment for fully amortized intangibles | 6.0 |  |  | 50.0 |  | 7.7 |  | 8.0 |  | 0.1 |  |  | 71.8 |
Impact of exchange rate movements | — |  |  | 0.2 |  | (2.2 | ) | (0.2 | ) | — |  |  | (2.2 | )
Balance as of June 30, 2017 | $ | (45.2 | ) |  | (55.4 | ) | (40.1 | ) | (4.9 | ) | — |  |  | $ | (145.6 | )
Net book value as of June 30, 2017 | $ | 170.9 |  |  | 61.9 |  | 51.2 |  | 18.0 |  | — |  |  | $ | 302.0 |
(1) Included in this amount for MSRs was $4.3 million relating to prepayments/write-offs due to prepayments of sold warehouse receivables for which we retained the servicing rights. (2) Amortization of MSRs is included in Revenue within the Condensed Consolidated Statements of Comprehensive Income.
| MSRs |  | Other Intangibles |  |
(in millions) | Americas |  | Americas | EMEA | Asia Pacific | LaSalle |  | Consolidated
Gross Carrying Amount |  |  |  |  |  |  |  |
Balance as of December 31, 2015 | $ | 171.6 |  |  | 125.5 |  | 48.5 |  | 14.3 |  | 6.3 |  |  | $ | 366.2 |
Additions, net of adjustments | 6.3 |  |  | 13.0 |  | 6.6 |  | 1.2 |  | — |  |  | 27.1 |
Impact of exchange rate movements | — |  |  | (0.2 | ) | (3.3 | ) | 0.3 |  | 0.2 |  |  | (3.0 | )
Balance as of June 30, 2016 | $ | 177.9 |  |  | 138.3 |  | 51.8 |  | 15.8 |  | 6.5 |  |  | $ | 390.3 |
Accumulated Amortization |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of December 31, 2015 | $ | (8.6 | ) |  | (88.4 | ) | (32.6 | ) | (9.3 | ) | (0.1 | ) |  | $ | (139.0 | )
Amortization, net (1) | (11.4 | ) |  | (4.2 | ) | (4.0 | ) | (0.7 | ) | — |  |  | (20.3 | )
Impact of exchange rate movements | — |  |  | 0.3 |  | 2.6 |  | (0.2 | ) | — |  |  | 2.7 |
Balance as of June 30, 2016 | $ | (20.0 | ) |  | (92.3 | ) | (34.0 | ) | (10.2 | ) | (0.1 | ) |  | $ | (156.6 | )
Net book value as of June 30, 2016 | $ | 157.9 |  |  | 46.0 |  | 17.8 |  | 5.6 |  | 6.4 |  |  | $ | 233.7 |
(1) Amortization of MSRs is included in Revenue within the Condensed Consolidated Statements of Comprehensive Income. The remaining estimated future amortization expense of MSRs and other identifiable intangible assets, by year, as of June 30, 2017, is presented in the following table.
(in millions) | MSRs | Other Intangibles |  | Total
2017 (6 months) | $ | 14.9 |  | 17.4 |  |  | $ | 32.3 |
2018 | 28.4 |  | 24.2 |  |  | 52.6 |
2019 | 25.1 |  | 22.2 |  |  | 47.3 |
2020 | 21.8 |  | 19.5 |  |  | 41.3 |
2021 | 18.2 |  | 13.3 |  |  | 31.5 |
2022 | 15.2 |  | 13.5 |  |  | 28.7 |
Thereafter | 47.3 |  | 12.2 |  |  | 59.5 |
Total | $ | 170.9 |  | 122.3 |  |  | $ | 293.2 |

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