Acquisition

3 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Powerline Plus Ltd

On January 4, 2022, the Company acquired all issued and outstanding shares of capital stock of Powerline Plus Ltd. and its affiliate PLP Redimix Ltd. (collectively, the “Powerline Plus Companies"), a full-service electrical distribution construction company based in Toronto, Ontario. Consideration paid, funded through a combination of cash on hand and borrowings under the Facility (as defined below), was $110.6 million, net of cash acquired, and is subject to working capital and net asset adjustments. Additionally, the acquisition includes contingent earn-out consideration that may be payable if the Powerline Plus Companies achieve certain performance targets over a three-year post-acquisition period. As of the acquisition date, the fair value of the contingent earn-out consideration was $10.6 million. The future payout of the contingent earn-out consideration, if any, is unlimited and could be significantly higher than the acquisition date fair value. If the minimum thresholds of the performance targets are achieved the contingent earn-out consideration payment will be approximately $17.7 million. There were no changes in contingent earn-out consideration, subsequent to the acquisition, for the three months ended March 31, 2022. The results of the Powerline Plus Companies is included in the Company’s consolidated financial statements beginning on the transaction date. Approximately $0.1 million of acquisition-related costs associated with this acquisition were expensed by the Company during the three months ended March 31, 2022.

The purchase agreement also includes contingent consideration provisions for down-side margin guarantee adjustments based upon certain contract performance subsequent to the acquisition. The contracts were valued at fair value at the acquisition date, causing no margin guarantee estimate or adjustments for fair value. Unfavorable changes in contract estimates, such as modified costs to complete or change order recognition, will result in changes to these margin guarantee estimates. Changes in margin guarantee adjustments on contracts, subsequent to the acquisition, were recorded in other income and were not significant for the three months ended March 31, 2022. Future margin guarantee adjustments, if any, are expected to be recognized through 2022 and possibly in early 2023.

The following table summarizes the allocation of the opening balance sheet as of the date of the Powerline Plus Companies acquisition:


(in thousands)	(as of acquisition date) January 4, 2022
Cash paid	$	114,429
Contingent consideration - fair value at acquisition date	10,608
Preliminary estimated net asset adjustments	563
Total consideration, net of estimated net asset adjustments	125,600
Less: Acquired cash	(3,853)
Total consideration less cash acquired, net of estimated net asset adjustments	$	121,747

Cash and cash equivalents	$	3,853
Accounts receivable, net	12,131
Contract assets, net	12,443
Refundable income taxes	394
Prepaid expenses and other current assets	1,233
Property and equipment	10,366
Operating lease right-of-use assets	6,631
Accounts payable	(8,095)
Contract liabilities	(1,597)
Accrued income taxes	(686)
Current portion of operating lease obligations	(1,224)
Current portion of finance lease obligations	(1,492)
Deferred income tax liabilities	(672)
Operating lease obligations, net of current maturities	(4,897)
Finance lease obligations, net of current maturities	(3,243)
Net identifiable assets and liabilities	25,145
Unallocated intangible assets	56,650
Total acquired assets and liabilities	81,795
Goodwill	$	43,805

The Company has developed preliminary estimates of fair value of the assets acquired and liabilities assumed for the purposes of allocating the purchase price. The goodwill to be recognized, which represents the excess of the purchase price over the net amount of the fair values assigned to assets acquired and liabilities assumed, is primarily attributable to the value of an assembled workforce and other non-identifiable assets. No synergies were anticipated in the acquisition as the Powerline Plus Companies will function as an individual business within the Company’s operating structure. Further adjustments are expected to the allocation as third party valuations of contingent earn-out consideration, acquired right-of-use assets and lease liabilities and identifiable intangible assets, including backlog, customer relationships, trade name and off-market component, are determined, and as net asset adjustments are finalized. Additionally, the Company is currently performing an analysis of the purchase price allocation and will make appropriate adjustments based on the analysis. A portion of the goodwill and identifiable intangible assets are expected to be tax deductible per applicable Canadian Revenue Authority regulations.