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Acquisitions
9 Months Ended
Sep. 30, 2011
Acquisitions [Abstract] 
Acquisitions
12. Acquisitions

On August 1, 2011, CBIZ acquired two companies: Thompson Dunavant PLC and Multiple Benefit Services, Inc. (“MBS”). Thompson Dunavant, a full-service accounting and financial services company located in Memphis, Tennessee, provides tax and financial consulting services to clients of various sizes and in a variety of industries. The operating results of Thompson Dunavant are reported in the Financial Services practice group. MBS, an employee benefits company located in Atlanta, Georgia, provides employee benefit consulting and support services to clients in a wide variety of industries. The operating results of MBS are reported in the Employee Services practice group.

Aggregate consideration for these acquisitions is expected to be approximately $27.2 million, which consists of $11.1 million in cash and $3.3 million in CBIZ common stock that was paid at closing, $1.1 million in guaranteed future consideration, and $11.7 million in contingent consideration to be settled primarily in cash and a portion in common stock, subject to the acquired operations achieving certain performance targets.

The preliminary aggregate purchase price for these acquisitions was allocated as follows (in thousands):

 

         

Recognized amounts of identifiable assets acquired and liabilities assumed:

        

Cash

   $ 273  

Accounts receivable

     1,761  

Unbilled revenue

     1,771  

Prepaid expenses and other current assets

     212  

Fixed assets

     225  

Identifiable intangible assets

     9,781  

Deferred income taxes – non-current

     (1,775 ) 

Accrued liabilities

     (923 ) 
   

 

 

  

Total identifiable net assets

   $ 11,325  

Goodwill

     15,879  
   

 

 

  

Aggregate purchase price

   $ 27,204  
   

 

 

  

Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired. The potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is between $0 and $13.4 million. CBIZ is required to record the fair value of these obligations at the acquisition date. CBIZ determined, utilizing a probability weighted income approach, that the fair value of the contingent consideration arrangements was $11.7 million, of which $3.6 million was recorded in “Other current liabilities” and $8.1 million was recorded in “Other non-current liabilities” in the consolidated balance sheets at September 30, 2011.

The goodwill of $15.9 million arising from the acquisitions in the current year consists largely of expected future earnings and cash flow from the existing management team, as well as the synergies created by the integration of the new businesses within the CBIZ organization, including cross-selling opportunities expected with the Company’s Financial Services group and the Employee Services group, to help strengthen the Company’s existing service offerings and expand the Company’s market position. Goodwill recognized in the amount of $10.8 million is deductible for income tax purposes.

During the nine months ended September 30, 2011, CBIZ paid $15.4 million in cash and issued approximately 265,000 shares of common stock as contingent earnouts for previous acquisitions. In addition, CBIZ reduced the fair value of the contingent purchase price liability related to CBZ’s prior acquisitions by $1.2 million due to lower than originally projected future results of the acquired businesses. This reduction of $1.2 million is included in “Other (expense) income, net” in the consolidated statements of operations. See Note 8 for further discussion of contingent purchase price liabilities.

 

During the nine months ended September 30, 2010, CBIZ acquired substantially all of the assets of three companies: Goldstein Lewin & Company, National Benefit Alliance and South Winds, Inc. (dba Benexx). Goldstein Lewin & Company, an accounting and financial services company located in Boca Raton, Florida, was acquired on January 1, 2010 and is included in the operating results of the Financial Services practice group. National Benefit Alliance, an employee benefits company located in Midvale, Utah, was also acquired on January 1, 2010 and Benexx, a retirement plan consulting firm located in Baltimore, Maryland, was acquired on August 1, 2010. National Benefit Alliance and Benexx are included in the operating results of the Employee Services practice group. Aggregate consideration for these acquisitions consisted of approximately $15.3 million in cash, $2.0 million in CBIZ common stock, $0.4 million in guaranteed future consideration, and $11.5 million in contingent consideration, subject to the acquired operations achieving certain performance targets. During 2010, CBIZ adjusted the fair value of the contingent consideration arrangements related to CBIZ’s prior acquisitions from $5.6 million to $4.2 million due to lower than originally projected future results of the acquired businesses.

The operating results of these businesses are included in the accompanying consolidated financial statements since the dates of acquisition. Client lists and non-compete agreements are recorded at fair value at the time of acquisition. The excess of purchase price over the fair value of net assets acquired, (including client lists and non-compete agreements) is allocated to goodwill.

Additions to goodwill, client lists and other intangible assets resulting from acquisitions and contingent consideration earned on prior period acquisitions during the nine months ended September 30, 2011 and 2010 were as follows (in thousands):

 

                 
    2011     2010  

Goodwill

   $ 19,920     $ 25,946  
   

 

 

    

 

 

  

Client lists

   $ 9,418     $ 6,390  
   

 

 

    

 

 

  

Other intangible assets

   $ 471     $ 345