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Acquisitions and Dispositions | 9 Months Ended
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Sep. 30, 2023
Business Combinations [Abstract] |
Acquisitions and Dispositions | 2. Acquisitions 2022 Acquisitions Acquisition of Brand New Galaxy On April 19, 2022, the Company acquired Brand New Galaxy (“BNG”), for approximately $20.9 million of cash consideration, as well as contingent consideration up to a maximum value of $50.0 million. The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67% payable in cash and 33% payable in shares of Class A Common Stock. The consideration has been allocated to the assets acquired and assumed liabilities of BNG based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Cash and cash equivalents |  | $ | 2,766 |
Accounts receivable |  | 10,147 |
Other current assets |  | 671 |
Fixed assets |  | 1,587 |
Identifiable intangible assets |  | 12,740 |
Other assets |  | 1,583 |
Accounts payable |  | (4,771) |
Accruals and other liabilities |  | (6,880) |
Advance billings |  | (1,159) |
Other liabilities |  | (3,642) |
Net assets assumed |  | 13,042 |
Goodwill |  | 24,643 |
Purchase price consideration |  | $ | 37,685 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of BNG. Goodwill of $24.6 million was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes. Intangible assets consist of trade names, customer relationships and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years. The following table presents the details of identifiable intangible assets acquired:
|  | Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Customer relationships |  | $ | 6,150 |  |  | 10
Trade names |  | 5,500 |  |  | 10
Developed technology |  | 1,090 |  |  | 7
Total acquired intangible assets |  | $ | 12,740 |  |  |
Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time.
|  |  |  | Nine Months Ended September 30, 2022
|  |  | (dollars in thousands)
Revenue |  |  |  | $ | 1,989,833 |
Net income |  |  |  | $ | 92,670 |
Revenue attributable to BNG, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $7.7 million and $21.8 million, respectively, and Net loss was $0.7 million and $0.2 million, respectively. Revenue attributable to BNG, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2022 was $5.9 million and $11.2 million, respectively, and Net loss was $2.5 million and $2.6 million, respectively. Acquisition of TMA Direct, Inc. On May 31, 2022, the Company acquired approximately 87% of TMA Direct, Inc. (“TMA Direct”) for approximately $17.2 million of cash consideration and approximately $0.5 million of deferred acquisition payments. The Company was also granted an option to purchase the remaining 13% minority interest in TMA Direct for up to approximately $13.3 million. The consideration has been allocated to the assets acquired and assumed liabilities of TMA Direct based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Accounts receivable |  | $ | 582 |
Other current assets |  | 669 |
Identifiable intangible assets |  | 13,200 |
Accounts payable |  | (379) |
Other liabilities |  | (270) |
Noncontrolling interests |  | (2,667) |
Net assets assumed |  | 11,135 |
Goodwill |  | 6,569 |
Purchase price consideration |  | $ | 17,704 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of TMA Direct. Goodwill of $6.6 million was assigned to the Communications Network reportable segment. The majority of the goodwill is deductible for income tax purposes. Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired:
|  | Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Customer relationships |  | $ | 11,400 |  |  | 10
Trade names |  | 1,800 |  |  | 10
Total acquired intangible assets |  | $ | 13,200 |  |  |
Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time.
|  |  |  | Nine Months Ended September 30, 2022
|  |  |  | (dollars in thousands)
Revenue |  |  |  | $ | 1,983,437 |
Net income |  |  |  | $ | 94,768 |
Revenue attributable to TMA Direct, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $2.1 million and $8.7 million, respectively and Net income was $0.3 million and $0.7 million, respectively. Revenue attributable to TMA Direct, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2022 was $3.8 million and $5.0 million, respectively, and Net income was $1.4 million and $1.6 million, respectively. Acquisition of Maru Group Limited Ltd. On October 3, 2022, the Company acquired Maru Group Limited Ltd. (“Maru”) for approximately £23.0 million (approximately $25.8 million) in cash consideration. The consideration has been allocated to the assets acquired and assumed liabilities of Maru based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Cash and cash equivalents |  | $ | 1,033 |
Accounts receivable |  | 7,374 |
Other current assets |  | 899 |
Fixed assets |  | 157 |
Identifiable intangible assets |  | 14,300 |
Other assets |  | 1,920 |
Accounts payable |  | (4,087) |
Accruals and other liabilities |  | (9,154) |
Advance billings |  | (6,462) |
Deferred tax liability |  | (3,328) |
Other liabilities |  | (2,891) |
Net assets assumed |  | (239) |
Goodwill |  | 26,033 |
Purchase price consideration |  | $ | 25,794 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Maru and expected growth related to new customer relationships and geographic expansion. Goodwill of $26.0 million was assigned to the All Other reportable segment. The goodwill is partially deductible for income tax purposes. Intangible assets consist of trade names, customer relationships, and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately eight years. The following table presents the details of identifiable intangible assets acquired:
|  | Fair Value |  | Estimated Useful Life in Years
|  | (dollars in thousands)
Customer relationships |  | $ | 4,900 |  |  | 10
Trade names |  | 4,000 |  |  | 10
Developed technology |  | 5,400 |  |  | 2-7
Total acquired intangible assets |  | $ | 14,300 |  |  |
Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time.
|  | Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
|  | (dollars in thousands)
Revenue |  | $ | 672,435 |  |  | $ | 2,009,482 |
Net income |  | $ | 30,113 |  |  | $ | 79,414 |
Revenue attributable to Maru, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $7.7 million and $25.5 million, respectively and Net loss was $3.2 million and $7.6 million, respectively. Acquisition of Wolfgang, LLC. On October 3, 2022, the Company acquired the remaining 80% interest that it did not already own in Wolfgang, LLC., (“Wolfgang”) for approximately $3.8 million in cash consideration and 175 thousand shares of Class A Common Stock with a fair value of $1.2 million. The consideration has been allocated to the assets acquired and assumed liabilities of Wolfgang based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Cash and cash equivalents |  | $ | 1,606 |
Accounts receivable |  | 1,180 |
Other current assets |  | 100 |
Identifiable intangible assets |  | 1,055 |
Other assets |  | 46 |
Current liabilities |  | (278) |
Net assets assumed |  | 3,709 |
Goodwill |  | 2,451 |
Purchase price consideration including fair value of previously owned interest |  | $ | 6,160 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Wolfgang. Goodwill of $2.5 million was assigned to the Integrated Agencies Network reportable segment. The majority of the goodwill is deductible for income tax purposes. Intangible assets consist of customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately five years. Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time.
|  | Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
|  | (dollars in thousands)
Revenue |  | $ | 665,615 |  |  | $ | 1,988,548 |
Net income |  | $ | 35,114 |  |  | $ | 94,769 |
Revenue attributable to Wolfgang, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $1.5 million and $3.6 million, respectively, and Net income was $0.1 million and $0.4 million, respectively. Acquisition of Epicenter Experience LLC. On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC., (“Epicenter”) for approximately $9.9 million in cash consideration, as well as contingent consideration up to a maximum value of $5.0 million. The contingent consideration is subject to meeting certain future earnings targets through 2024 and can be paid up to 25% in shares of Class A Common Stock. The consideration has been allocated to the assets acquired and assumed liabilities of Epicenter based upon fair values. The purchase price allocation is as follows:
|  | Amount
|  | (dollars in thousands)
Accounts receivable |  | $ | 901 |
Other current assets |  | 45 |
Identifiable intangible assets |  | 7,300 |
Accounts payable |  | (148) |
Other current liabilities |  | (650) |
Net assets assumed |  | 7,448 |
Goodwill |  | 4,416 |
Purchase price consideration |  | $ | 11,864 |
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Epicenter. Goodwill of $4.4 million was assigned to the All Other reportable segment. The majority of the goodwill is deductible for income tax purposes. The intangible asset acquired was developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately five years. Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time.
|  | Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
|  | (dollars in thousands)
Revenue |  | $ | 664,882 |  |  | $ | 1,982,784 |
Net income |  | $ | 35,147 |  |  | $ | 93,023 |
Revenue attributable to Epicenter, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $1.1 million and $3.3 million, respectively, and Net loss was $0.1 million and less than $0.1 million, respectively. Other Acquisitions On July 3, 2023, the Company acquired Tinsel Experiential Design LLC (“Tinsel”) for approximately $2.5 million in cash consideration, subject to post-closing adjustments. In connection with the agreement, the previous owners are entitled to contingent consideration, subject to continued employment, and meeting certain future earnings targets. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Tinsel and expected growth related to new customer relationships. Goodwill of $1.6 million was assigned to the Integrated Agencies Network reportable segment. The majority of goodwill is deductible for income tax purposes. On April 25, 2023, the Company acquired Huskies, Ltd. (“Huskies”) for approximately €5.2 million (approximately $5.6 million) of cash consideration, of which €0.9 million (approximately $1.0 million) is deferred, subject to post-closing adjustments. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Huskies and expected growth related to new customer relationships and geographic expansion. Goodwill of $2.6 million was assigned to the Brand Performance Network reportable segment. The majority of goodwill is non-deductible for income tax purposes. On July 12, 2022, the Company acquired PEP Group Holdings B.V., an omnichannel content creation and adaption production company for approximately $0.5 million in cash consideration, as well as contingent consideration up to a maximum value of €2.6 million. The contingent consideration is subject to meeting certain future earnings targets through 2025. On July 15, 2022, the Company acquired Apollo Program II Inc., a real-time artificial intelligence-powered software-as-a-service platform, for approximately $2.3 million in cash consideration, as well as guaranteed deferred payments of $1.0 million and $1.5 million on or prior to July 1, 2023 and July 1, 2024, respectively. 2022 Purchases of Noncontrolling Interests On April 1, 2022, the Company acquired the remaining interest in Hello Design, LLC (“Hello Design”) that it did not already own for an aggregate purchase price of $4.6 million, comprised of a closing cash payment of $3.6 million and a contingent deferred acquisition payment of $1.0 million. The contingent deferred payment of $1.0 million was paid in the second quarter of 2023. 5. Deferred Acquisition Consideration Deferred acquisition consideration on the Unaudited Consolidated Balance Sheets consists of deferred obligations related to contingent and fixed purchase price payments, and contingent and fixed retention payments tied to continued employment of specific personnel. Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period within Office and general expenses on the Unaudited Consolidated Statements of Operations. The following table presents changes in deferred acquisition consideration, measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the Unaudited Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022:
| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
Beginning balance | $ | 161,323 |  |  | $ | 222,369 |
Payments (1) | (60,806) |  |  | (74,963) |
Adjustments to deferred acquisition consideration (2) | 10,881 |  |  | (12,779) |
Additions (3) | 22,172 |  |  | 26,594 |
Currency translation adjustment | 140 |  |  | (758) |
Other | 27 |  |  | 860 |
Ending balance (4) | $ | 133,737 |  |  | $ | 161,323 |
(1) Includes deferred acquisition consideration payments settled in the shares of Class A Common Stock of $20.1 million and $1.0 million, respectively, for the period ended September 30, 2023 and December 31, 2022. (2) Adjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments. (3) In 2021, the Company entered into an agreement to purchase the remaining 26.7% interest in Targeted Victory it did not previously own. The agreement provided for the purchase of 50% of the interest on October 1, 2021 (payable in October 2023) and 50% on July 31, 2023 (payable in October 2025 with a seller’s right to defer until October 2027). In connection with the purchase, the estimated amount payable in October 2025, was reclassified from redeemable noncontrolling interest to deferred acquisition consideration. (4) The contingent and fixed deferred acquisition consideration obligation was $90.9 million and $42.8 million, respectively, as of September 30, 2023 and $69.9 million and $91.4 million, respectively, as of December 31, 2022. The deferred acquisition consideration as of September 30, 2023, includes $42.6 million expected to be settled in shares of Class A Common Stock.

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