18. Acquisitions

2015

During the year ended December 31, 2015, CBIZ acquired substantially all of the assets of three businesses:

First Quarter 2015

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Model Consulting, Inc. (“Model”), located in Trevose, Pennsylvania, effective March 1, 2015. Model provides employee benefit consulting services to mid-sized companies in the Philadelphia and Southern New Jersey markets. Annualized revenue attributable to Model is estimated to be approximately $4.2 million. Operating results attributable to Model are reported in the Employee Services practice group.

Fourth Quarter 2015

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Pension Resource Group, Inc. (“PRG”), located in Woodstock, Georgia, effective October 1, 2015. PRG provides pension administration solutions including defined benefit administration, data warehousing, benefit communication, compensation statement and human capital services to clients ranging in size from 500 to over 60,000 participants. Annualized revenue attributable to PRG is estimated to be approximately $4.8 million. Operating results attributable to PRG are reported in the Employees Services practice group.

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Cottonwood Group, Inc. (“Cottonwood”), located in Overland Park, Kansas, effective December 1, 2015. Cottonwood provides pension plan consulting, actuarial and investment services for institutional pension plans, retirement funds, endowment funds and foundations. Annualized revenue attributable to Cottonwood is estimated to be $3.1 million. Operating results attributable to Cottonwood are reported in the Employees Services practice group.

Aggregate consideration for these acquisitions consisted of approximately $10.5 million in cash, $1.4 million in CBIZ common stock, and $8.5 million in contingent consideration.

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


Recognized amounts of identifiable assets acquired and liabilities assumed:
Accounts receivable, net	$	1,501
Other assets		52
Identifiable intangible assets		7,037
Accounts payable		(62	)
Accrued liabilities		(1,552	)

Total identifiable net assets	$	6,976
Goodwill		13,471

Aggregate purchase price	$	20,447

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Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired.

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The maximum potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is $8.7 million.

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CBIZ is required to record the fair value of this obligation at the acquisition date.

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Utilizing a probability weighted income approach, CBIZ determined that the fair value of the contingent consideration arrangement was $8.5 million, of which $2.9 million was recorded in “Contingent purchase price liability — current” and $5.6 million was recorded in “Contingent purchase price liability — non-current” in the accompanying Consolidated Balance Sheets at December 31, 2015.

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The goodwill of $13.5 million arising from the acquisitions in 2015 consists largely of expected future earnings and cash flows 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. All of the goodwill is deductible for income tax purposes.

Client Lists

During the year ended December 31, 2015, CBIZ purchased six client lists, all of which are reported in the Employee Services practice group. Total consideration for these client lists was $2.8 million cash paid at closing and an additional $0.8 million in guaranteed future consideration, and $0.1 million which is contingent upon future financial performance of the client list.

Contingent Earnouts for Previous Acquisitions

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CBIZ paid $12.0 million in cash and issued approximately 0.3 million shares of common stock during the year ended December 31, 2015 as contingent earnouts for previous acquisitions.

Change in Contingent Purchase Price Liability for Previous Acquisitions

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During the year ended December 31, 2015, CBIZ also decreased the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $2.9 million due to lower than originally projected future results of the acquired businesses. This decrease of $2.9 million is included in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income.

Refer to Note 6 to the accompanying consolidated financial statements for a further discussion of contingent purchase price liabilities.

2014

During the year ended December 31, 2014, CBIZ acquired substantially all of the assets of six businesses:

First Quarter 2014

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Centric Insurance Agency (“Centric”), located in New Providence, New Jersey, is an insurance broker providing property and casualty insurance, with a specialty in education and public schools.

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Clearview National Partners, LLC (“Clearview”), located in Waltham, Massachusetts, is a specialized employee benefits broker focused on providing employee benefit solutions to clients with more than 100 employees.

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Lewis Birch & Richardo, LLC (“LBR”), located in Tampa Bay, Florida, is a professional tax, accounting and consulting service provider with significant experience and expertise in matrimonial and family law litigation support, not-for-profit entities and health care provider services.

Second Quarter 2014

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Tegrit Group (“Tegrit”), based in Akron, Ohio, is a national provider of actuarial consulting and retirement plan administration.

Third Quarter 2014

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Rognstad’s Inc. d.b.a. Sattler Insurance Agency (“Sattler”), based in Lewiston, Idaho, provides property and casualty, personal, and life insurance services, with a specialty in outdoor recreation insurance, to businesses across the United States.

Fourth Quarter 2014

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Weekes & Callaway (“W&C”), located in Delray Beach, Florida, is a full service insurance brokerage firm offering clients a complete line of services including commercial lines, personal lines, risk management, and employee benefits.

Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in aggregate, were not material to our income from continuing operations before income taxes. The operating results of Centric, Clearview, Tegrit, Sattler, and W&C are reported in the Employee Services practice group and the operating results of LBR are reported in the Financial Services practice group.

Aggregate consideration for these acquisitions consisted of approximately $43.9 million in cash, $2.9 million in CBIZ common stock, and $19.4 million in contingent consideration.

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


Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	1,381
Accounts receivable, net		4,204
Other assets		464
Identifiable intangible assets		17,952
Accounts payable		(3,319	)
Accrued liabilities		(3,513	)
Income taxes payable		(1,058	)
Deferred taxes		(1,834	)

Total identifiable net assets	$	14,277
Goodwill		51,873

Aggregate purchase price	$	66,150

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Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired.

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The maximum potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is $20.9 million.

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CBIZ is required to record the fair value of this obligation at the acquisition date.

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Utilizing a probability weighted income approach, CBIZ determined that the fair value of the contingent consideration arrangement was $19.4 million, of which $5.0 million was recorded in “Contingent purchase price liability — current” and $14.4 million was recorded in “Contingent purchase price liability — non-current” in the accompanying Consolidated Balance Sheets at December 31, 2014.

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The goodwill of $51.9 million arising from the acquisitions in 2014 consists largely of expected future earnings and cash flows 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. Substantially all of the goodwill is deductible for income tax purposes.

Client Lists

During the year ended December 31, 2014, CBIZ purchased four client lists, three of which are reported in the Financial Services practice group and one of which is recorded in the Employee Services practice group. Total consideration for these client lists was $1.0 million cash paid at closing and an additional $0.2 million in cash, which is contingent upon future financial performance of the client list.

Contingent Earnouts for Previous Acquisitions

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CBIZ paid $4.6 million in cash and issued approximately 0.1 million shares of common stock during the year ended December 31, 2014 as contingent earnouts for previous acquisitions.

Change in Contingent Purchase Price Liability for Previous Acquisitions

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During the year ended December 31, 2014, CBIZ also decreased the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $3.9 million due to lower than originally projected future results of the acquired businesses. This decrease of $3.9 million is included in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income.

Refer to Note 6 to the accompanying consolidated financial statements for further discussion of contingent purchase price liabilities.

2013

During the year ended December 31, 2013, CBIZ acquired substantially all of the assets of two companies:

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Associated Insurance Agents (“AIA”), an insurance brokerage agency specializing in property and casualty insurance, located in Minneapolis, Minnesota.

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Knight Field Fabry LLP (“Knight”), an accounting and financial services company located in Denver, Colorado.

Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in aggregate, were not material to our income from continuing operations before income taxes. The operating results of AIA are reported in the Employee Services practice group and the operating results of Knight are reported in the Financial Services practice group.

Aggregate consideration for these acquisitions consisted of $4.9 million in cash paid at closing, $0.4 million in guaranteed future consideration, and $5.5 million net present value in contingent consideration to be settled in cash, subject to the acquired operations achieving certain performance targets.

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


Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	202
Accounts receivable, net		578
Other assets		137
Identifiable intangible assets		3,002
Accounts payable		(835	)
Accrued liabilities		(416	)
Deferred taxes		(1,165	)

Total identifiable net assets	$	1,503
Goodwill		9,278

Aggregate purchase price	$	10,781

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Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired.

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The maximum potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is $6.1 million.

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CBIZ is required to record the fair value of this obligation at the acquisition date.

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Utilizing a probability weighted income approach, CBIZ determined that the fair value of the contingent consideration arrangement was $5.5 million, of which $1.2 million was recorded in “Contingent purchase price liability — current” and $4.3 million was recorded in “Contingent purchase price liability — non-current” in the accompanying Consolidated Balance Sheets at December 31, 2013.

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The goodwill of $9.3 million arising from the acquisitions in 2013 consists largely of expected future earnings and cash flows 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 totaling $1.4 million is expected to be deductible for income tax purposes.

Client Lists

During the year ended December 31, 2013, CBIZ purchased three client lists, two of which are reported in the Employee Services practice group and one reported in the Financial Services practice group. Total consideration for these client lists was $0.3 million cash paid at closing and an additional $0.3 million in cash, which is contingent upon future financial performance of the client list.

Contingent Earnouts for Previous Acquisitions

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CBIZ paid $10.1 million in cash and issued approximately 0.2 million shares of common stock during the year ended December 31, 2013 as contingent earnouts for previous acquisitions.

Change in Contingent Purchase Price Liability for Previous Acquisitions

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During the year ended December 31, 2013, CBIZ also increased the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $1.1 million due to higher than originally projected future results of the acquired businesses. This increase of $1.1 million is included in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income.

Refer to Note 6 to the accompanying consolidated financial statements for further discussion of contingent purchase price liabilities.