Note 12. Acquisitions

2017

During the nine months ended September 30, 2017, we acquired substantially all of the assets of three businesses; CMF Associates, LLC (“CMF”), Slaton Insurance (“Slaton”) and Pacific Coastal Pension and Insurance Services, Inc. (“Pacific Coastal”). Aggregate consideration for these acquisitions consisted of approximately $23.7 million in cash consideration, $2.0 million in CBIZ common stock and $17.5 million in contingent consideration.

Under the terms of these acquisition agreements, a portion of the purchase price is contingent on future performance of each of the businesses acquired. We have preliminarily determined that the fair value of the contingent consideration arrangements for these acquisitions was $17.5 million, of which $5.9 million was recorded in “Contingent purchase price liability – current” and $11.6 million was recorded in “Contingent purchase price liability – non-current” in the accompanying Consolidated Balance Sheets at September 30, 2017.

Annualized revenue attributable to CMF, Slaton and Pacific Coastal is estimated to be approximately $19.2 million, $2.6 million, and $1.4 million, respectively. Pro forma results of operations for these acquisitions have not been presented because the effects of the acquisitions were not significant to our results.

The acquisition of CMF, located in Philadelphia, Pennsylvania, was effective June 1, 2017. CMF provides various financial consulting, executive search and deal origination services. Operating results of CMF are reported in the Financial Services practice group. The acquisition of Slaton, located in West Palm Beach, Florida, was effective June 1, 2017. Slaton is a full service insurance brokerage firm offering clients a complete line of services including commercial lines, risk management and employee benefits. The acquisition of Pacific Coastal, located in Morgan Hill, California, was effective February 1, 2017. Pacific Coastal provides defined contribution third party administrative and consulting services. Operating results for both Slaton and Pacific Coastal are reported in the Benefits and Insurance practice group.

The preliminary estimated fair values of the assets acquired and the liabilities assumed during the nine months ended September 30, 2017 are as follows (in thousands):

	Nine Months Ended
	September 30, 2017
Cash	$	843
Accounts receivable, net		4,338
Property and equipment, net		24
Other assets		151
Identifiable intangible assets		3,115
Current liabilities		(4,716	)
Total identifiable net assets	$	3,755
Goodwill		39,460
Aggregate purchase price	$	43,215

The goodwill of $39.5 million arising from the acquisitions in the first nine months of 2017 primarily results from expected future earnings and cash flows from the existing management team, as well as the synergies created by the integration of the new business within the CBIZ organization, including cross-selling opportunities expected with our Financial Services and Benefits and Insurance practice groups, to help strengthen our existing service offerings and expand our market position.

2016

During the nine months ended September 30, 2016, we acquired substantially all of the non-attest assets of four businesses; Flex-Pay Business Services, Inc., (“Flex-Pay”), The Savitz Organization (“Savitz”), Millimaki Eggert, L.L.P., (“Millimaki”) and Ed Jacobs & Associates, Inc. (“EJ&A”). Aggregate consideration for these acquisitions consisted of approximately $36.7 million in cash consideration, $1.6 million in CBIZ common stock and $17.8 million in contingent consideration.

Under the terms of these acquisition agreements, a portion of the purchase price is contingent on future performance of each of the businesses acquired. Utilizing a probability weighted income approach, we determined that the fair value of the contingent consideration arrangement for these acquisitions was $17.8 million, of which $5.3 million was recorded in “Contingent purchase price liability – current” and $12.5 million was recorded in “Contingent purchase price liability – non-current” in the Consolidated Balance Sheets at September 30, 2016.

Annualized revenue attributable to Flex-Pay, Savitz, Millimaki and EJ&A is estimated to be approximately $10.0 million, $20.0 million, $2.4 million and $2.1 million, respectively. Pro forma results of operations for these acquisitions have not been presented because the effects of the acquisitions were not significant to our results.

The acquisition of Flex-Pay, located in Winston-Salem, North Carolina, was effective June 1, 2016. Flex-Pay provides payroll processing, Affordable Care Act fulfillment and human resource solutions to more than 3,600 clients primarily in the Southeast. The acquisition of Savitz, headquartered in Philadelphia, Pennsylvania, with offices in Atlanta, Georgia, and Newton, Massachusetts, was effective April 1, 2016. Savitz is an employee retirement and health and welfare benefits firm that provides actuarial, consulting and administration outsourcing services. The acquisition of Millimaki, located in San Diego, California, was effective January 1, 2016. Millimaki provides professional tax, accounting, and financial services, with a specialty niche practice in the real estate sector, to closely held businesses, their owners, and mid-to-high net worth individuals. The acquisition of EJ&A was effective July 1, 2016. EJ&A is an employee benefits consulting business located in Cleveland, Tennessee. Operating results of Millimaki are reported in the Financial Services practice group and operating results for Flex-Pay, Savitz and EJ&A are all reported in the Benefits and Insurance practice group.

The estimated fair values of the assets acquired and the liabilities assumed during the nine months ended September 30, 2016 are as follows (in thousands):

	Nine Months Ended
	September 30, 2016
Cash	$	6
Accounts receivable, net		5,436
Funds held for clients		37,230
Property and equipment, net		379
Other assets		172
Identifiable intangible assets		19,557
Current liabilities		(415	)
Client fund obligations		(37,230	)
Total identifiable net assets	$	25,135
Goodwill		30,927
Aggregate purchase price	$	56,062

The goodwill of $30.9 million arising from the acquisitions in the first nine months of 2016 primarily results from the same reasons as discussed above in the 2017 section.

Client Lists

During the nine months ended September 30, 2017, we purchased two client lists, one of which is reported in the Benefits and Insurance practice group for $0.7 million of contingent consideration and one of which is reported in the Financial Services practice group for $0.7 million of contingent considerations. During the same period in 2016, we purchased six clients lists, five of which are reported in the Benefits and Insurance practice group, and one in the Financial Services practice group. Total consideration for these client lists was $0.8 million in cash consideration, $1.2 million of guaranteed future consideration and $0.7 million of contingent consideration.

Change in Contingent Purchase Price Liability for Previous Acquisitions

During the first nine months of 2017 and 2016, we decreased the fair value of the contingent purchase price liability related to prior acquisitions by $0.2 million and $0.9 million, respectively. These changes in fair value are attributable to subsequent measurement adjustments based on projected future results of the acquired businesses, net present value adjustments and changes in the CBIZ common stock price. These adjustments are included in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income.

Contingent Payments for Previous Acquisitions and Client Lists

We paid $9.2 million in cash and issued approximately 177,000 shares of CBIZ common stock during the nine months ended September 30, 2017 for previous acquisitions. For the first nine months of 2017, we also paid approximately $1.0 million in cash for previous client list purchases. For the same period in 2016, we paid $5.7 million in cash and issued approximately 220,000 shares of CBIZ common for previous acquisitions.