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Acquisitions | 12 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisitions | Acquisitions The Company’s consolidated financial statements include the operating results and cash flows of the acquired businesses from the dates of acquisition. Acquisitions in Fiscal 2020 Gain Capital Holdings, Inc. On February 26, 2020, the Company entered into a definitive merger agreement to acquire Gain. The Company agreed to acquire Gain for $6.00 per share in an all-cash transaction. Gain is a global provider of trading services and solutions to institutional and retail investors, specializing in both OTC products and exchange-traded futures and options on futures. Gain provides its clients with access to a diverse range of global OTC financial markets, including spot foreign exchange, precious metals, and CFDs (where permitted). As a result of the acquisition, the Company added a new digital platform to its global financial network, significantly expanded its offerings to retail clients, as well as added a complementary exchange-traded futures and options on futures business. The acquisition of Gain is also expected to accelerate the digitization of the Company’s trading platforms. The merger closed on July 30, 2020 (“the Gain acquisition date”) subsequent to approval by Gain’s shareholders, approval by regulators, and the completion of customary closing conditions. On the Gain acquisition date, each issued and outstanding share of Gain common stock (other than shares of Gain common stock held by those Gain stockholders who had properly demanded and not waived or withdrawn appraisal rights under Delaware law as further discussed below) automatically converted into the right to receive $6.00 per share in cash. Purchase Price The aggregate merger consideration was (in millions):
Aggregate cash consideration | $ | 215.0 |
Accrual for merger cash consideration | 21.6 |
Total merger consideration | $ | 236.6 |
Subsequent to the Gain acquisition date, holders of 3.6 million shares of Gain common stock outstanding at the Gain acquisition date who did not vote to approve the merger (“Dissenting Holders”, and the shares held by such Dissenting Holders, the “Dissenting Shares”) purportedly demanded appraisal rights pursuant to Section 262 of the Delaware General Corporation Law in the Court of Chancery of the State of Delaware. The $21.6 million accrual for merger consideration included in the aggregate merger consideration was based upon 3.6 million Dissenting Shares assuming a right to receive $6.00 per share at the Gain acquisition date. Any subsequent settlement with the Dissenting Holders will be considered the settlement of a post-acquisition contingency to be included in the Company’s post-acquisition consolidated income statements. Preliminary Purchase Price Allocation The consolidated financial statements have been prepared using the acquisition method of accounting under U.S. GAAP with the Company treated as the acquirer of Gain for accounting purposes. Under the acquisition method of accounting, the aggregate merger consideration was allocated to the assets acquired and liabilities assumed generally based on their fair value at the Gain acquisition date. The Company has made significant estimates and assumptions in determining the fair value of assets acquired and liabilities based upon discussions with management and informed insights into the industries in which Gain operates. These significant estimates and assumptions include, but are not limited to, projected cash flows of the acquired business, client attrition rates, discount rates, royalty rates, and economic lives of the identified assets. The Company engaged a third party valuation specialist to assist with assessing the overall reasonableness of the bargain purchase gain as further discussed below and determining the fair value of the net identifiable assets acquired. The following table summarizes the preliminary purchase price allocation as of the Gain acquisition date (in millions):
| Preliminary Purchase Price Allocation
Cash and cash equivalents | $ | 507.2 |
Cash, securities and other assets segregated under federal and other regulations | 497.4
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties (1) | 249.7
Receivables from clients, net (2) | 2.0
Income taxes receivable | 0.4
Deferred income taxes, net | 23.0
Property and equipment, net | 6.1
Right of use assets, net | 15.0
Other assets | 17.9
Total fair value of tangible assets acquired | 1,318.7
Accounts payable and other accrued liabilities | 52.7
Operating lease liabilities | 15.0
Payable to clients | 863.4
Payable to broker-dealers, clearing organizations, and counterparties | 0.5
Income taxes payable | 12.4
Convertible senior notes (3) | 92.0
Total fair value of tangible liabilities assumed | 1,036.0
Fair value of tangible net assets acquired (4) | 282.7
Identifiable intangible assets acquired |
Trademarks/domain names(5) | 3.7
Software programs/platforms(5) | 22.2
Customer base(5) | 9.8
Total fair value of intangible assets acquired | 35.7
Fair value of identifiable net assets acquired | 318.4
Total merger consideration | 236.6
Bargain purchase gain | $ | 81.8 |
(1) Amount represents the contractual amount of deposits with and receivables from broker-dealers, clearing organizations, and counterparties, all of which the Company expects to be collectible as of the Gain acquisition date. (2) Amount represents the contractual amount of receivables due from clients for trading activity, all of which the Company expects to be collectible as of the Gain acquisition date. (3) As $91.5 million of the $92.0 million in aggregate principal of the Gain Notes were redeemed on September 1, 2020, the Company believes that the face value of the Gain Notes approximated their fair value as of the Gain acquisition date due to the fundamental change right provided for in the Gain Notes indenture. Refer to Note 12 for further discussion of the Gain Notes redemption. (4) With the exception of deferred income taxes and the convertible senior notes, the Company believes that the fair value of the tangible assets acquired and tangible liabilities assumed approximate their carrying values as of the Gain acquisition date due either to their short-term nature, the Company’s ability to initiate the withdrawal and settlement of client related trading balances, or the fact that the balances are recorded at fair value on a recurring basis. (5) The trademark/domain names, software programs/platforms, and customer base intangible assets have been assigned useful lives of 5 years, 3 years, and 4 years, respectively. The Company believes that the transaction resulted in a bargain purchase gain primarily due to the significant market volatility experienced during the first calendar quarter of 2020, primarily as a result of the COVID-19 pandemic. The market volatility experienced during 2020 through the Gain acquisition date increased significantly compared to corresponding historical periods. This resulted in Gain generating windfall profits and a corresponding increase in net tangible book value. The bargain purchase gain is included in ‘Gain on acquisitions and other gains’ on the Company’s consolidated income statement for the year ended September 30, 2020. Post-Acquisition Results and Unaudited Pro Forma Information Gain’s results of operations and cash flows have been included in the Company’s consolidated financial statements for the period subsequent to July 31, 2020. For the year ended September 30, 2020, the Company’s results include total revenues and net income from Gain of $49.0 million and $1.8 million, respectively. The following unaudited pro forma financial information (in millions, except per share amounts) has been adjusted to give effect to the Gain merger as if it were consummated on October 1, 2018.
| Year Ended September 30, 2020 | Year Ended September 30, 2019
Total revenues | $ | 54,414.1 |  | $ | 33,160.0 |
Net income | $ | 138.5 |  | $ | 38.3 |
Basic earnings per share | $ | 7.17 |  | $ | 2.01 |
Diluted earnings per share | $ | 7.02 |  | $ | 1.97 |
The unaudited pro forma financial information includes material, nonrecurring pro forma adjustments directly attributable to the Gain acquisition primarily including the adjustment for a goodwill impairment loss, adjustment for the bargain purchase gain, adjustments to the amortization of intangible assets, and adjustments for direct and incremental acquisition-related costs and the related tax effects. The unaudited pro forma financial information does not include any revenue or cost saving synergies from operating efficiencies or the effect of incremental costs incurred from integrating the companies. The Company incurred costs related to the merger of $5.2 million for the year ended September 30, 2020, that are included within ‘Professional fees’ on the consolidated income statement. The business acquired has been assigned to the Company’s Retail and Institutional reportable segments. UOB Bullion and Futures Limited On March 19, 2019, the Company’s subsidiary StoneX Financial Pte Ltd executed an asset purchase agreement to acquire the futures and options brokerage and clearing business of UOB Bullion and Futures Limited (“UOB”), a subsidiary of United Overseas Bank Limited. Closing was conditional upon receiving regulatory approval by the Monetary Authority of Singapore. This acquisition provides the Company access to an established institutional client base and also augments the Company’s global service capabilities in Singapore. The cash purchase price for the acquired assets was $5.0 million of which $2.5 million was due upon the execution of the asset purchase agreement and the remaining $2.5 million was due upon the closing of the acquisition, which occurred on October 7, 2019. The purchase price allocation resulted in the recognition of liabilities assumed related to the futures and options on futures client account balances of approximately $351.8 million as of the acquisition date, which was recorded within ‘payables to clients’ on the consolidated balance sheet, and an equal and offsetting amount of assets acquired. The carrying amount of the client assets and related liabilities was assumed to approximate fair value due to their short-term nature, the Company’s ability to initiate the withdrawal and settlement of client related trading balances, and the fact that the open derivative positions are recorded at fair value on a recurring basis. The Company also acquired certain client base intangible assets and property and equipment in connection with the acquisition. The Company engaged a third-party valuation specialist to assist with the valuation of the acquired intangible assets and property and equipment. As of the acquisition date, $0.8 million of the purchase price was allocated to the fair value of the property and equipment acquired and $3.1 million was allocated to the fair value of the client base intangible assets acquired. The remaining excess of the purchase price over the fair value of the net assets acquired of $1.1 million was allocated to goodwill. The Company believes the goodwill represents the synergies that can be realized from integrating the acquired business into its existing exchange-traded futures and option business. The allocation of the purchase price to the fair value of assets acquired and liabilities assumed is considered final as of September 30, 2020. The business acquired has been assigned to the Company’s Institutional reportable segment. The client base intangible assets have been assigned a useful life of 5 years. UOB’s results of operations and cash flows have been included in the Company’s consolidated financial statements for the period subsequent to October 7, 2019. For the year ended September 30, 2020, the Company’s results include total revenues and net loss from UOB of $10.3 million and $1.4 million, respectively. Tellimer In December 2019, the Company executed a definitive purchase agreement to acquire the brokerage businesses of Tellimer Group (“Tellimer”). This transaction involved the stock purchase of 100% of Exotix Partners, LLP, based in the United Kingdom, and the stock purchase of 100% of Tellimer Capital Ltd based in Nigeria. The closing of this transaction was subject to limited conditions including regulatory approval in the relevant jurisdictions. The cash purchase price was equal to the net tangible book value of the acquired entities upon closing. Regulatory approval for the acquisition of Exotix Partners, LLP, was obtained during the period with the acquisition closing on April 1, 2020. The cash purchase price for the acquisition of Exotix Partners, LLP, was $4.7 million. The final allocation of the cash purchase price to the fair value of assets acquired and liabilities assumed resulted in the recognition of $1.0 million in cash and cash equivalents, $1.0 million in receivables from clients, net, $0.3 million in property and equipment, net, $3.4 million in other assets, and $1.0 million in liabilities assumed. Regulatory approval for the acquisition of Tellimer Capital Ltd was obtained during the period with the acquisition closing on June 1, 2020. The cash purchase price for the acquisition of Tellimer Capital Ltd and the related allocation to the fair value of assets acquired and liabilities assumed was not material to the Company’s consolidated financial statements. Tellimer’s results of operations and cash flows have been included in the Company’s consolidated financial statements from the dates of acquisition. For the year ended September 30, 2020, the Company’s results include total revenues and net loss from Tellimer of $5.9 million and less than $0.1 million, respectively. The acquired business have been assigned to the Company’s Institutional reportable segment. IFCM Commodities On January 2, 2020, the Company’s wholly owned subsidiary, INTL Netherlands B.V., executed and closed on a stock purchase agreement to acquire 100% of the equity interests of IFCM Commodities GmbH (“IFCM”) based in Germany. IFCM specializes in providing commodity price risk management solutions for base metals serving clients across Germany and continental Europe and historically introduced clients to StoneX Financial Ltd. This purchase is part of the Company’s overall strategic plan to expand the Company’s footprint in Germany and continental Europe in order to handle European clients and regional metals business following Brexit. The cash purchase price of $1.9 million was equal to net tangible book value upon closing plus a premium of $1.0 million. The excess of the cash consideration over the fair value of the net tangible assets acquired on the closing date was allocated to the fair value of IFCM’s client relationships. This client base intangible asset has been assigned, and will be amortized over, a useful of five years. IFCM’s results of operations and cash flows have been included in the Company’s consolidated financial statements for the period subsequent to January 2, 2020. For the year ended September 30, 2020, the Company’s results include total revenues and net income from IFCM of $1.8 million and $0.5 million, respectively. GIROXX In January 2020, the Company’s wholly owned subsidiary, StoneX Financial Ltd, executed a stock purchase agreement to acquire 100% of GIROXX based in Germany. Through its digital platform, GIROXX provides online payment and foreign exchange hedging services to small and medium sized enterprises in Germany, Austria, and Switzerland. The Company offers a wide range of financial services including advisory and execution services in commodities, which will be offered to GIROXX’s institutional client base. This purchase completes a series of acquisitions and restructurings to ensure that all clients of the Company are secure with their continuity of service and market access following Brexit. The closing of the transaction was conditional upon the approval of financial services regulators in Germany, which was obtained during the period with the transaction closing on May 1, 2020. The cash purchase price for the acquisition of GIROXX was $4.4 million. The preliminary allocation of the cash purchase price to the fair value of tangible assets acquired and liabilities assumed resulted in the recognition of cash and cash equivalents of $6.5 million, property and equipment of $0.1 million, accounts payables and other accrued liabilities of $0.6 million, and payables to clients of $5.8 million as of the acquisition date. The Company acquired certain identifiable intangible assets in connection with the acquisition of GIROXX, primarily related to a business license permitting the Company to facilitate payment transactions in the European Union and certain proprietary developed software. The Company has preliminarily allocated $0.4 million and $1.5 million of the excess purchase price over net tangible assets acquired to the business license and proprietary developed software, respectively. The remaining excess purchase price over the net tangible assets acquired of $2.3 million has preliminary been allocated to goodwill. The Company believes the preliminary allocation to goodwill represents the synergies that can be realized from integrating the acquired business into its existing Global Payments reportable segment. The Company is in the process of gathering the information necessary to complete a valuation analysis of the intangible assets acquired. Once the valuation analysis is complete, the Company will record measurement period adjustments to reflect the final determination of the fair value of the identifiable intangible assets acquired with any remaining excess consideration allocated to goodwill. The acquired business license has been assigned an indefinite life and the proprietary developed software has been preliminarily assigned a useful life of 3 years. GIROXX’s results of operations and cash flows have been included in the Company’s consolidated financial statements for the period subsequent to May 1, 2020. For the year ended September 30, 2020, the Company’s results include total revenues and net loss from GIROXX of $0.5 million and $0.6 million, respectively. The acquired business has been assigned to the Company’s Global Payments reportable segment. Asset Acquisitions Quest Capital In August 2019, the Company’s subsidiary, SA Stone Wealth Management, executed an asset purchase agreement to acquire certain client accounts of Quest Capital Strategies, Inc. The asset purchase agreement was subject to FINRA approval and other conditions to closing. FINRA approval was obtained and the other conditions to closing were fulfilled and the closing of the transaction occurred on December 9, 2019. The cash purchase price for the acquired client accounts was equal to $1.7 million. This transaction was accounted for as an asset acquisition at cost. The cash purchase price was allocated to the fair value of the client lists and relationships obtained and has been assigned, and will be amortized, over a useful life of seven years. Acquisitions in Fiscal 2019 Carl Kliem S.A. On November 30, 2018, the Company acquired the entire issued and outstanding share capital of Carl Kliem S.A., an independent interdealer broker based in Luxembourg, which provides foreign exchange, interest rate and fixed income products to institutional clients across the European Union (“E.U.”). Carl Kliem S.A. employs approximately 40 people and has more than 400 active institutional clients. This acquisition provides the Company with access to additional European institutional clients that can benefit from the Company’s full suite of financial services and a E.U.-based entity in anticipation of the U.K.’s planned exit from the E.U. The purchase price was $2.1 million of cash consideration, and was equal to the net tangible book value on the closing date less restructuring costs. The Company subsequently renamed Carl Kliem S.A. to StoneX Financial Europe S.A. The final purchase price allocation resulted in cash and cash equivalents of $1.7 million, receivables from clients of $1.1 million, property and equipment of $0.1 million, income tax receivables of $0.1 million, accounts payable and other accrued liabilities of $0.6 million, and payable to broker-dealers, clearing organizations, and counterparties of $0.2 million. The net fair value of the assets acquired exceeded the aggregate cash purchase price; accordingly, the Company recorded a bargain purchase gain of $0.1 million during the year ended September 30, 2019, which is presented within ‘Gain on acquisitions and other gains’ in the consolidated income statement. The business activities of INTL FCStone Europe S.A. have been included within the Company’s Institutional reportable segment. The Company’s consolidated income statement for the year ended September 30, 2019 includes operating revenues and a net loss of $4.2 million and $2.3 million, respectively, for the post-acquisition results of the acquired business. GMP Securities LLC On January 14, 2019 the Company acquired 100% of the U.S.-based broker-dealer GMP Securities LLC (“GMP”), formerly known as Miller Tabak Securities, LLC, an independent, SEC-registered broker-dealer and Financial Industry Regulatory Authority, Inc. (“FINRA”) member. GMP has an institutional fixed-income trading business which deals in high yield, convertible and emerging market debt and makes markets in certain equity securities. This transaction also involved the purchase of GMP’s U.S.-based parent. This acquisition allows the Company to expand its fixed income product offerings to clients and adds new institutional clients who can benefit from the Company’s full suite of financial services. The purchase price was $8.2 million of cash consideration was equal to the final net tangible book value determined as of the acquisition date less $2.0 million. The net fair value of the assets acquired exceeded the aggregate cash purchase price, and accordingly the Company recorded a bargain purchase gain of $5.4 million during the year ended September 30, 2019, which is presented within ‘Gain on acquisitions and other gains’ in the consolidated income statement. The Company believes the transaction resulted in a bargain purchase gain due to the Company’s ability to incorporate GMP’s business activities into its existing business structure, and its ability to utilize certain deferred tax assets, including net operating loss carryforwards, and other assets while operating the business that may not have been likely to be realized by the seller nor was contemplated in the purchase price. On May 1, 2019, GMP was merged into the Company’s wholly owned regulated U.S. subsidiary, StoneX Financial. The Company’s consolidated income statement includes the post-acquisition results, which include operating revenues and a net loss before tax of $8.2 million and $2.1 million, respectively, for the year ended September 30, 2019. The acquired businesses are included within the Company’s Institutional reportable segment. The following represents the final allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed as of the acquisition date (in millions):
| Fair Value
Cash and cash equivalents | $ | 1.1 |
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties (1) | 7.7 |
Financial instruments owned, at fair value (2) | 7.1 |
Deferred income taxes | 2.7 |
Property and equipment | 0.7 |
Other assets | 0.7 |
Total fair value of assets acquired | 20.0 |
Accounts payable and other accrued liabilities | 1.9 |
Payable to broker-dealers, clearing organizations, and counterparties | 0.1 |
Financial instruments sold, not yet purchased, at fair value (2) | 4.4 |
Total fair value of liabilities assumed | 6.4 |
Fair value of net assets acquired | 13.6 |
Purchase price | 8.2 |
Bargain purchase gain | $ | 5.4 |
(1) Amount represents the contractual amount of deposits and receivables due from the clearing organization for trading activity as of the acquisition date. (2) Financial instruments owned and sold, not yet purchased, at fair value primarily includes equity securities and high yield, convertible and emerging market fixed income securities. Equity securities have been included within Level 1 of the fair value hierarchy and fixed income securities have been included in Level 2 of the fair value hierarchy as disclosed in Note 4. Coininvest GmbH and European Precious Metal Trading GmbH On April 1, 2019, the Company’s subsidiary StoneX (Netherlands) B.V. acquired 100% of the outstanding shares of Coininvest GmbH and European Precious Metal Trading GmbH. Through the websites coininvest.com and silver-to-go.com, Coininvest GmbH and European Precious Metal Trading GmbH are leading European online providers of gold, silver, platinum, and palladium products to retail investors, institutional investors, and financial advisors. The addition of Coininvest GmbH and European Precious Metal Trading GmbH to the Company’s global product suite expands its offering, providing clients the ability to purchase physical gold and other precious metals, in multiple forms, and in denominations of their choice, to add to their investment portfolios. The purchase price consisted of cash consideration of $22.0 million, including $11.2 million for the purchase of shareholders loans outstanding with the acquired entities. The cash consideration transferred exceeded the final fair value of the tangible net assets acquired on the closing date by $6.8 million. The Company acquired certain identifiable intangible assets, including website domain names and internally developed software. The Company has engaged a third-party valuation specialist to assist with the valuation of these acquired intangible assets. Based upon the final valuation analysis, the Company allocated $2.1 million and $2.5 million of the excess consideration over the final fair value of tangible net assets acquired on the closing date to the identifiable domain names and internally developed software, respectively. The remaining excess of $2.2 million was allocated to goodwill. The goodwill represents the synergies expected to be achieved by combining the acquired business with the Company’s existing precious metals offering and the acquired assembled workforce. The internally developed software was assigned to the Retail reportable segment and is being amortized over a useful life of 5 years. The useful life of the domain names was determined to be indefinite. The Company’s consolidated income statement includes the post-acquisition results, including operating revenues and a net loss before tax of $0.6 million and $0.3 million, respectively, for the year ended September 30, 2019. Operating revenues during the year ended September 30, 2019 include unrealized losses on derivatives held to manage the downside price risk of physical commodities inventory, which is valued at the lower of cost or net realizable value; therefore, inventory was not recorded above its cost basis. The acquired businesses are included within the Company’s Commercial reportable segment. The following represents the final allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed as of the acquisition date (in millions):
| Fair Value
Cash and cash equivalents | $ | 2.0 |
Receivables from clients (1) | 1.2 |
Receivable from affiliate | 1.1 |
Income tax receivable | 0.1 |
Physical commodities inventory | 9.8 |
Deferred tax assets, net | 0.2 |
Other assets | 1.2 |
Total fair value of tangible assets acquired | 15.6 |
Accounts payable and other accrued liabilities | 0.2 |
Payables to clients | 0.2 |
Total fair value of tangible liabilities assumed | 0.4 |
Fair value of net tangible assets acquired | 15.2 |
Purchase price | 22.0 |
Excess purchase price over fair value of tangible net assets acquired | $ | 6.8 |
Excess purchase price over fair value of tangible net assets acquired allocated to identifiable intangible assets: |
Domain names | $ | 2.1 |
Internally developed software | 2.5 |
Total excess purchase price allocated to identifiable intangible assets | 4.6 |
Remaining excess allocated to goodwill | $ | 2.2 |
(1) Amount represents the contractual amount of receivables due from clients for trading activity, all of which was collected. Fillmore Advisors, LLC On September 1, 2019, the Company acquired 100% of the U.S.-based trading firm Fillmore Advisors, LLC (“Fillmore”). Fillmore is an independent, SEC-registered broker-dealer firm and FINRA member firm and a leading provider of outsourced trading solutions and operational consulting to institutional asset managers. The firm, headquartered in Park City, Utah, is composed of traders that specialize in global buy-side and sell-side experience. Institutional clients can benefit from Fillmore’s comprehensive product coverage offering for equities, equity-linked, foreign exchange, credit, rates, and commodities. Fillmore will become an extension of the newly established prime brokerage division of the Company’s Institutional reportable segment. The purchase price consists of $1.4 million of cash consideration and also includes a contingent earn-out with payments over the eight quarters following the acquisition. The contingent earn-out payments are variable in nature and equal to 50% of Segment Income, as defined in the SPA, for each quarterly period. The fair value of the contingent consideration was estimated at $1.8 million as of the closing date. See Note 5 for fair value measurement considerations. The Company acquired certain identifiable intangible assets related to Fillmore’s client base. Based upon the final valuation analysis, the Company has allocated $0.7 million of the excess consideration over the final fair value of tangible net assets acquired on the closing date to this intangible asset. The remaining excess of $1.9 million was allocated to goodwill. The goodwill represents the synergies expected to be achieved by combining the acquired business with the Company’s existing prime brokerage offering and the acquired assembled workforce. The client base intangible asset and goodwill were assigned to the Institutional reportable segment. The client base intangible asset will be amortized over a useful life of 5 years. The following represents the final allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed as of the acquisition date (in millions):
| Fair Value
Cash and cash equivalents | $ | 0.2 |
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties | 0.3 |
Receivables from clients, net (1) | 0.2 |
Other assets | 0.4 |
Total fair value of tangible assets acquired | 1.1 |
Accounts payable and other accrued liabilities | 0.5 |
Total fair value of tangible liabilities assumed | 0.5 |
Fair value of net tangible assets acquired | 0.6 |
Purchase price (2) | 3.2 |
Excess purchase price over fair value of tangible net assets acquired | $ | 2.6 |
Excess purchase price over fair value of tangible net assets acquired allocated to identifiable intangible assets: |
Client relationships | $ | 0.7 |
Total excess purchase price allocated to identifiable intangible assets | 0.7 |
Remaining excess allocated to goodwill | $ | 1.9 |
(1) Amount represents the contractual amount of receivables due from clients for trading activity, all of which was collected. (2) Includes the fair value of contingent consideration of $1.8 million. Acquisitions in Fiscal 2018 PayCommerce Financial Solutions, LLC On September 5, 2018, the Company acquired all of the outstanding membership interests of PayCommerce Financial Solutions, LLC (“PCFS”). Subsequent to the acquisition, the Company renamed PCFS to INTL Technology Services, LLC (“ITS”). ITS is a fully accredited Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) Service Bureau provider. This acquisition enables the Company to act as a SWIFT Service Bureau for its 300-plus correspondent banking network, thus providing another important service for delivering local currency, cross-border payments to the developing world. The purchase price was approximately $3.8 million of cash consideration. The final purchase price allocation resulted in $0.7 million in receivables, $0.8 million in property, plant, and equipment, a $0.5 million equity investment related to a minority interest in the joint venture entity Akshay Financeware, Inc., and $2.2 million in liabilities assumed. Additionally, the Company acquired identifiable, definite-lived client relationship and client list assets that have been assigned a fair value of $1.3 million and a useful life of 5 years. The fair value of the consideration transferred exceeded the final fair value of identifiable assets acquired and liabilities assumed. The excess of the purchase consideration over the final fair value of net tangible and identifiable intangible assets acquired of $2.6 million was recorded as goodwill as of September 30, 2018. On February 13, 2019, the Company paid $0.2 million to acquire the majority interest in Akshay Financeware, Inc. The acquisition of the majority interest in Akshay Financeware, Inc. was accounted for as a step acquisition. As a result, the Company changed the classification and measurement of the $0.5 million previously held equity interest and recognized all identifiable assets and liabilities of the wholly-owned entity at fair value. The Company recorded $2.7 million of indefinite-lived intangible assets related to SWIFT licenses held by the acquired entity and an associated deferred tax liability of $0.7 million. Additionally, the Company recorded a measurement period adjustment to goodwill of $1.3 million. As of September 30, 2019, the Company had recorded goodwill of $1.3 million related to the acquisition of PCFS and the step acquisition of Akshay Financeware, Inc. Management believes that the goodwill represents the synergies expected from the incremental revenue that can be realized from combining the technologies acquired with the Company’s pre-existing correspondent banking network. This business has been included within the Company’s Global Payments Segment. The Company’s consolidated income statement for the year ended September 30, 2018 includes the post-acquisition results of ITS, which was immaterial in relation to the Company’s consolidated results.

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