Acquisitions

9 Months Ended

Jan. 31, 2020

Note 3 — Acquisitions

Fiscal Year 2020

For all the acquisitions in fiscal year 2020, the allocation of the total consideration transferred to the assets acquired and the liabilities assumed is preliminary, and could be revised as a result of additional information obtained due to the finalization of the third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables, but such amounts will be finalized within the measurement period, which will not exceed one year from the acquisition dates.

Pro forma financial information related to these acquisitions has not been provided as it is not material to our consolidated results of operations.

mthree

On January 1, 2020, we completed the acquisition of 100% of the outstanding stock of mthree. mthree is a rapidly growing education services provider that addresses the IT skills gap by finding, training and placing job-ready technology talent in roles with leading corporations worldwide. Its results of operations are included in our Education Services segment.

The preliminary fair value of the consideration transferred at the acquisition date was $128.6 million (£97.5 million) which included $122.2 million of cash and $6.4 million of additional consideration to be paid after the acquisition date. We financed the payment of the cash consideration primarily through borrowings under our Amended and Restated RCA (as defined below in Note 15, “Debt and Available Credit Facilities”) and using cash on hand. The fair value of the cash consideration transferred including those amounts paid after the acquisition date, net of $2.3 million of cash acquired was approximately $126.3 million.

At the time of the acquisition, Wiley entered into agreements with certain employees of mthree who will remain employees after the acquisition. Cash payments will be made based on reaching certain revenue and Adjusted EBITDA targets in each year over a four-year period. Such payments are subject to continuing employment and would therefore be considered compensation expense for services provided subsequent to the acquisition. Such expense would be recognized when it becomes probable that the targets will be achieved.

We recorded the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date, which included a preliminary allocation of $80.3 million of goodwill and $57.4 million of intangible assets, consisting of customer relationships, trademarks and content. None of the goodwill will be deductible for tax purposes. The acquisition related costs to acquire mthree were expensed when incurred and were approximately $0.8 million. Such costs were allocated to the Education Services segment and are reflected in Operating and Administrative Expenses on the Unaudited Condensed Consolidated Statements of Income in the three and nine months ended January 31, 2020.

mthree’s revenue and operating loss included in our Education Services segment results for the three and nine months ended January 31, 2020 was $4.5 million and $1.2 million, respectively.

Zyante Inc.

On July 1, 2019, we completed the acquisition of Zyante Inc. (“zyBooks”), a leading provider of computer science and STEM education courseware. The results of operations of zyBooks is included in our Academic & Professional Learning segment results. The fair value of the consideration transferred at the acquisition date was $57.1 million which included $55.9 million of cash and $1.2 million of additional consideration to be paid after the acquisition date, inclusive of purchase price adjustments which were finalized in the three months ended January 31, 2020. The fair value of the cash consideration transferred including those amounts paid after the acquisition date, net of $1.8 million of cash acquired was approximately $54.5 million. None of the goodwill will be deductible for tax purposes. zyBooks revenue included in our Academic & Professional Learning segment results for the three and nine months ended January 31, 2020 was $3.9 million and $8.8 million, respectively.

The following table summarizes the consideration transferred to acquire zyBooks and the preliminary allocation of the purchase price among the assets acquired and liabilities assumed.

	Preliminary Allocation as of July 1, 2019
Total cash consideration transferred at the acquisition date	$	55,939

Assets:
Current Assets		2,280
Technology, Property and Equipment, net		28
Intangible Assets, net		24,500
Goodwill		37,301
Total Assets	$	64,109

Liabilities:
Current Liabilities		2,581
Deferred Income Tax Liabilities		5,589
Total Liabilities	$	8,170

The following table summarizes the identifiable intangible assets acquired and their weighted-average useful life at the date of acquisition.

	Estimated Fair Value		Weighted-Average Useful Life (in Years)
Developed Technology	$	10,400		7
Customer Relationships		6,800		10
Content		4,400		10
Trademarks		2,900		10
Total	$	24,500

Other Acquisitions

On May 31, 2019, we completed the acquisition of certain assets of Knewton, Inc. (“Knewton”). Knewton is a provider of affordable courseware and adaptive learning technology. The results of Knewton are included in our Academic & Professional Learning segment results. In addition, in the three months ended July 31, 2019 we also completed the acquisition of two immaterial businesses, which are included in our Research Publishing & Platforms segment and in the three months ended October 31, 2019 one immaterial business included in our Academic & Professional Learning segment results.

The preliminary fair value of cash consideration transferred during the nine months ended January 31, 2020 was approximately $19.9 million. We recorded the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date, which included a preliminary allocation of $9.4 million of goodwill and $16.2 million of intangible assets.

Fiscal Year 2019

The Learning House, Inc.

On November 1, 2018, we completed the acquisition of 100% of the outstanding stock of The Learning House, Inc. (“Learning House”) a diversified education services provider. The results of operations of Learning House are included in our Education Services segment.

The fair value of the consideration transferred was $201.3 million which included $200.7 million of cash and $0.6 million of warrants, inclusive of purchase price adjustments which were finalized in the three months ended April 30, 2019. We financed the payment of the cash consideration through borrowings under our RCA (as defined below in Note 15, “Debt and Available Credit Facilities”). The warrants were classified as equity and allow the holder to purchase 400,000 shares of our Class A Common Stock at an exercise price of $90.00, subject to adjustments. The term of the warrants is three years, expiring on November 1, 2021. The fair value of the warrants was determined using the Black-Scholes option pricing model. The final fair value of the cash consideration transferred, net of $10.3 million of cash acquired was $190.4 million.

The allocation of the consideration transferred to the assets acquired and the liabilities assumed is final.