Business Acquisitions | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Business Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisitions | 3. Business acquisitions (a) Headstrong Corporation On May 3, 2011, the Company acquired 100% of the outstanding common shares of Headstrong Corporation, a Delaware corporation ("Headstrong") for $550,000 in cash subject to adjustment based on closing date net working capital, funded indebtedness, seller expenses and amount of cash and cash equivalents. The total preliminary estimated purchase price of the acquisition, net of $25,845 of cash acquired and including $19,205 seller expense liability assumed, is $558,455. There are no contingent consideration arrangements in connection with the acquisition. As per the terms of the acquisition agreement with sellers, the preliminary estimated purchase consideration is comprised of the following:
As of the date of these financial statements, the purchase consideration for the acquisition is pending adjustment for closing working capital and final settlement of seller expenses. As part of acquisition, the total amount paid by the Company, net of $25,845 of cash acquired, is $559,512 (including $19,205 of seller expenses). Of the above consideration paid, an amount of $1,057 representing excess of cash paid over preliminary estimated purchase consideration which was accounted for as an amount recoverable from sellers in the period ended June 30, 2011 has been recovered during the current period. Headstrong is a global provider of comprehensive consulting and IT services with a specialized focus in capital markets and healthcare. With this acquisition, the Company acquires critical domain and technology expertise in the capital markets industry vertical. The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. The assets and liabilities of Headstrong were recorded at fair value at the date of acquisition. The Company will continue to evaluate certain assets and liabilities as new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. Changes to the assets and liabilities recorded may result in a corresponding adjustment to goodwill, and the measurement period will not exceed one year from the acquisition date. The following table summarizes the preliminary allocation of the preliminary estimated purchase price based on the fair value of the assets acquired and the liabilities assumed at the date of acquisition:
The fair value of the current assets acquired includes trade receivables with a fair value of $56,257. The gross amount due is $56,497, of which $240 is expected to be uncollectable.
Goodwill represents the excess of the preliminary estimated purchase price over the net assets (including deferred taxes) acquired and is not deductible for tax purposes. The Company is currently evaluating the allocation of acquisition related goodwill to a reporting unit as of the date of the financial statements. The amortizable intangible assets are being amortized over their estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized. The preliminary estimated value and estimated useful lives of the intangibles are follows:
The weighted average amortization period in respect of the acquired intangible assets is 10 years. The results of operations of Headstrong and the fair value of the assets and liabilities are included in the Company's Consolidated Statements of Income from May 3, 2011, the date of acquisition. For the period from the acquisition date through September 30, 2011, Headstrong contributed revenue of $111,655 and net income of $3,280. Pro Forma Financial Information The unaudited pro forma financial information presented below for the nine months ended September 30, 2010 and 2011 summarizes the combined results of operations as if the Headstrong acquisition had been completed as of the beginning of each of the periods presented. The pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of each of the periods presented.
The pro forma net income from continuing operations as above has been adjusted to exclude acquisition related cost of $19,205 and $5,616 incurred by the seller and the Company, respectively, during the nine months ended September 30, 2011. The unaudited pro forma information is not necessarily indicative of the results of operations that would have occurred had the acquisition been made at the beginning of the periods presented or the future results of combined operations. (b) Akritiv Technologies, Inc. On March 14, 2011, the Company acquired 100% of the outstanding equity interest in Akritiv Technologies, Inc., a Delaware corporation ("Akritiv"), for cash consideration of $1,564 and a contingent earn-out component (ranging from $0 to $3,500 based on EBIT levels generated in year ending March 2012, 2013 and 2014), which had an estimated fair value of $1,731 at the acquisition date. Acquisition-related costs incurred by the Company amounted to $30, which have been expensed under 'Selling, general and administrative expenses' in the Consolidated Statements of Income. Through this acquisition, the Company acquired proprietary technology platform and software as a service delivered solutions for functions such as credit and accounts receivable management. This will provide an end-to-end offering to clients for receiving and processing customer sales. Goodwill recorded in connection with Akritiv acquisition amounted to $2,992, which has been allocated to our Americas reporting unit.
The acquisition of Akritiv was accounted for as a business combination, in accordance with the acquisition method. The operations of Akritiv and the estimated fair values of the assets and liabilities have been included in the Company's consolidated financial statements from the date of acquisition of March 14, 2011. The purchase price has been allocated based on management's estimates of the fair values of the acquired assets and liabilities as follows:
The above acquired technology related intangible assets have estimated useful lives of 8 years. (c) Nissan Human Information Services Co., Ltd. On July 1, 2011, the Company acquired 100% of the outstanding equity interest in Nissan Human Information Services Co., Ltd., a Japanese corporation ("NHIS"), for cash consideration of $2,000. There are no contingent consideration arrangements in connection with the acquisition. Subsequent to the acquisition, NHIS was renamed as Genpact Japan Services Co., Ltd. Acquisition-related costs incurred by the Company amounted to $263, which have been expensed under 'Selling, general and administrative expenses' in the Consolidated Statements of Income. This acquisition provides additional delivery capabilities in HR services in Japan. Goodwill recorded in connection with NHIS acquisition amounted to $12 which has been allocated to our China reporting unit. The acquisition of NHIS was accounted for as a business combination, in accordance with the acquisition method. The operations of NHIS and the estimated fair values of the assets and liabilities have been included in the Company's consolidated financial statements from the date of acquisition of July 1, 2011. The purchase price has been allocated based on management's estimates of the fair values of the acquired assets and liabilities as follows:
The above acquired customer related intangible asset has estimated useful life of 14 years.
(d) High Performance Partners LLC On August 24, 2011, the Company acquired an additional 72.79% of the membership interests of High Performance Partners LLC ("HPP"), thereby increasing its interest from 27.21% to 100% and providing the Company control over HPP as a wholly owned subsidiary. The Company acquired the 72.79% membership interest for a contingent earn-out consideration ranging from $0 to $16,000 (based on Earnings Before Interest Depreciation Tax and Amortization (EBIDTA) levels generated in 42 months following the acquisition, free cash flows generated, successful completion of certain sale transactions and revenue generated by the Company's existing business that utilizes HPP technology), which had a preliminary estimated fair value of $6,417 at the acquisition date. Acquisition-related costs incurred by the Company amounted to $49, which have been expensed under 'Selling, general and administrative expenses' in the Consolidated Statements of Income. HPP provides innovative solutions for the mortgage market through its proprietary Quantum Mortgage Technology, including consulting and business solutions. Through the acquisition of HPP, Genpact has acquired the Quantum software platform that can support its Mortgage Business Process. Goodwill recorded in connection with the HPP acquisition amounted to $5,988 which has been allocated to our Americas reporting unit. The Company previously accounted for its 27.21% interest in HPP as an equity method investment. The Company re-measured this equity interest to fair value at the acquisition date and recognized a non-cash gain of $17 in the Consolidate Statements of Income under "equity-method investment activity". The following table summarizes the preliminary consideration to acquire HPP and the preliminary amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the fair value of the Company's existing investment in HPP at the acquisition date:
The above technology related intangibles have estimated useful lives of 7 to 9 years. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||