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Note 3 - Acquisitions
 12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Business Combination Disclosure [Text Block]
3.
Acquisitions
 
2019
acquisitions:
The Company acquired controlling interests in
four
businesses,
two
operating in the Americas (Virginia; North Carolina),
one
operating in EMEA (Sweden), and
one
operating in Asia Pacific (India).
 
These acquisitions were completed to expand the Company’s geographic presence. These acquisitions were accounted for by the acquisition method of accounting for business combinations and accordingly, the consolidated statements of earnings do
not
include any revenues or expenses related to these acquisitions prior to their closing dates.
 
The acquisition date fair value of consideration transferred and purchase price allocation was as follows:
 
    Aggregate  
    Acquisitions  
       
Current assets, excluding cash   $
29,720
  
Non-current assets    
7,989
  
Current liabilities    
(18,616
 )
Long-term liabilities    
(11,913
 )
    $
7,180
  
         
Cash consideration, net of cash acquired of $4,765   $
(80,576
 )
Acquisition date fair value of contingent consideration    
-
  
Total purchase consideration   $
(80,576
 )
         
Acquired intangible assets   $
42,226
  
Acquired goodwill   $
58,221
  
Redeemable non-controlling interest   $
27,051
  
 
The acquisition in India, completed in
October 2019,
represents
$57,405
of the total aggregate cash consideration above.
 
In addition, the Company purchased a portfolio of real estate assets in connection with the establishment of a new Investment Management fund. The assets do
not
constitute a business under US GAAP. As at
December 31, 2019,
the net value of the real estate assets held for sale totals
$94,223.
(See Note
4
).
 
2018
acquisitions:
The Company acquired controlling interests in
twelve
businesses,
five
operating in the Americas (Utah; Manitoba; Florida; Quebec; Pittsburgh, Pennsylvania),
four
operating in EMEA (Finland; Denmark; Spain; Germany),
two
operating in Asia Pacific (China; Australia) and
one
operating in the Investment Management segment, being a
75%
voting equity interest in Harrison Street Real Estate Capital, LLC (“Harrison Street”) acquired on
July 5, 2018.
The Finland business was acquired on
January 3, 2018,
is headquartered in Helsinki and provides property management services to owners of commercial and residential real estate. Harrison Street, headquartered in Chicago, provides real estate investment management services to institutional investors. These acquisitions were completed to expand the Company’s geographic presence and, in the case of Harrison Street, to enter a new service line.
 
The acquisition date fair value of consideration transferred and purchase price allocation was as follows:
 
              Harrison               Aggregate  
      Finland       Street       Other       Acquisitions  
                                 
Current assets, excluding cash   $
4,734
     $
16,948
     $
31,623
     $
53,305
  
Non-current assets    
2,581
      
4,678
      
3,616
      
10,875
  
Current liabilities    
(9,421
 )    
(14,544
 )    
(27,853
 )    
(51,818
 )
Long-term liabilities    
(6,072
 )    
-
      
(15,608
 )    
(21,680
 )
    $
(8,178
 )   $
7,082
     $
(8,222
 )   $
(9,318
 )
                                 
Cash consideration, net of cash acquired of $23,777   $
(57,287
 )   $
(447,513
 )   $
(81,442
 )   $
(586,242
 )
Acquisition date fair value of contingent consideration    
-
      
(40,889
 )    
(19,212
 )    
(60,101
 )
Total purchase consideration   $
(57,287
 )   $
(488,402
 )   $
(100,654
 )   $
(646,343
 )
                                 
Acquired intangible assets   $
26,841
     $
278,600
     $
69,495
     $
374,936
  
Acquired goodwill   $
38,624
     $
366,350
     $
60,708
     $
465,682
  
Redeemable non-controlling interest   $
-
     $
163,630
     $
21,327
     $
184,957
  
 
Acquisition-related transaction costs for the year ended
December 31, 2019
totaled
$5,725
(
2018
-
$11,747
) and were recorded as expense under the caption “acquisition-related items”.
 
In all years presented, the fair values of non-controlling interests were determined using an income approach with reference to a discounted cash flow model using the same assumptions implied in determining the purchase consideration.
 
The purchase price allocations of acquisitions resulted in the recognition of goodwill. The primary factors contributing to goodwill are assembled workforces, synergies with existing operations and future growth prospects. For acquisitions completed during the year ended
December 31, 2019,
goodwill in the amount of
$12,816
is deductible for income tax purposes (
2018
-
$379,486
).
 
During the year ended
December 31, 2018,
the Company sold the Finland residential property management business acquired earlier in the same year. The disposed business had net assets of
$17,713
mostly comprised of intangible assets and goodwill allocated from the acquisition of Finland and the sale resulted in a net gain of
$98.
 
The Company typically structures its business acquisitions to include contingent consideration. Certain vendors, at the time of acquisition, are entitled to receive a contingent consideration payment if the acquired businesses achieve specified earnings levels during the
one
- to
five
-year periods following the dates of acquisition. The ultimate amount of payment is determined based on a formula, the key inputs to which are (i) a contractually agreed maximum payment; (ii) a contractually specified earnings level and (iii) the actual earnings for the contingency period. If the acquired business does
not
achieve the specified earnings level, the maximum payment is reduced for any shortfall, potentially to
nil.
 
Unless it contains an element of compensation, contingent consideration is recorded at fair value each reporting period. The fair value recorded on the consolidated balance sheet as at
December 31, 2019
was
$84,992
(see note
22
). Contingent consideration with a compensatory element is revalued at each reporting period and recognized on a straight-line basis over the term of the contingent consideration arrangement. The liability recorded on the balance sheet for the compensatory element of contingent consideration arrangements as at
December 31, 2019
was
$23,014.
The estimated range of outcomes (undiscounted) for these contingent consideration arrangements is determined based on the formula price and the likelihood of achieving specified earnings levels over the contingency period, and ranges from
$159,358
to a maximum of
$187,480.
These contingencies will expire during the period extending to
March 2023.
During the year ended
December 31, 2019,
$23,962
was paid with reference to such contingent consideration (
2018
-
$19,946
).
 
The consideration for the acquisitions during the year ended
December 31, 2019
was financed from borrowings on the Revolving Credit Facility and cash on hand.
 
The amounts of revenues and earnings contributed from the dates of acquisition and included in the Company’s consolidated results for the year ended
December 31, 2019,
and the supplemental pro forma revenues and earnings of the combined entity had the acquisition dates been
January 1, 2018,
are as follows:
 
    Revenues     Net earnings  
             
Actual from acquired entities for 2019   $
75,288
     $
1,479
  
Supplemental pro forma for 2019 (unaudited)    
3,093,751
      
139,807
  
Supplemental pro forma for 2018 (unaudited)    
3,049,050
      
144,877
  
 
Supplemental pro forma results were adjusted for non-recurring items.