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BUSINESS COMBINATION | 9 Months Ended
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Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
BUSINESS COMBINATION | BUSINESS COMBINATION Merger consideration conveyed of $531.8 million was allocated between the Companies based on relative values derived through both the discounted cash flow method within the income approach and the guideline public company method within the market approach. Within the discounted cash flow method, the present values of cash flows reasonably expected to be produced by the Companies from their operations were summed to produce an estimate of the Companies’ business enterprise values on a controlling, marketable basis. The cash flows used in the discounted cash flow analysis were discounted at the weighted average cost of capital of 14.5% for LMA and 16.5% for Abacus. The discounted cash flow method resulted in a business enterprise value range of $380.0 million to $460.0 million for LMA and $180.0 million to $195.0 million for Abacus. Within the market approach, Company applied the guideline public company method, which employs market multiples derived from market prices of stocks of Companies that are engaged in the same or similar lines of business as the Companies and that are actively traded on a free and open market. The guideline public company method resulted in a business enterprise value range of $400.0 million to $440.0 million for LMA and $180.0 million to $190.0 million for Abacus. Management concluded on a business enterprise value of $165.4 million for Abacus and $366.4 million for LMA based upon the relative fair value of the Companies allocated to the consideration transferred. The preliminary purchase price was allocated among the identified assets to be acquired. The primary area of the acquisition accounting that is not yet finalized is our estimate of the impact of acquisition accounting on deferred income taxes. An estimate of deferred income taxes has been recorded in the Company’s books based on information available as of September 30, 2023. As the initial acquisition accounting is based on our preliminary assessments, actual values may differ when final information becomes available. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary values of deferred taxes recorded. We will continue to evaluate this item until it is satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period, as defined by ASC Topic 805, Business Combinations, (“ASC 805”). Transaction costs incurred as a result of the Business Combination were recognized within retained earnings / (accumulated deficit) on the condensed consolidated balance sheet ending September 30, 2023. All valuation procedures related to existing assets as no new assets were identified as a result of procedures performed. Goodwill was recognized as a result of the acquisition, which represents the excess fair value of consideration over the fair value of the underlying net assets, largely arising from the extensive industry expertise that has been established by Abacus. This was considered appropriate based on the determination that the Abacus Merger would be accounted for as a business acquisition under ASC 805.
Net Assets Identified | Fair Value
Intangibles | $ | 32,900,000 |
Goodwill | 140,287,000 |
Current Assets | 1,280,100 |
Non-Current Assets | 901,337 |
Deferred Tax Liabilities | (8,310,966) |
Accrued Expenses | (524,400) |
Other Liabilities | (1,171,739) |
Total Fair Value | $ | 165,361,332 |
Value Conveyed | Amount
Abacus Purchase Consideration | $ | 165,361,332 |
LMA Business Enterprise Value | $ | 366,388,668 |
Total Consideration | $ | 531,750,000 |
Intangible assets were comprised of the following:
Asset Type | Fair Value | Useful Life | Valuation Methodology
Customer Relationships-Agents | $ | 12,600,000 |  | 5 years | Multi-period excess earnings method
Customer Relationships-Financing Entities | 11,000,000 |  | 8 years | Multi-period excess earnings method
Internally Developed and Used Technology-APA | 1,600,000 |  | 2 years | Relief from royalty method
Internally Developed and Used Technology-Marketplace | 100,000 |  | 3 years | Replacement cost method
Trade Name | 900,000 |  | Indefinite | Relief from royalty method
Non-Compete Agreements | 4,000,000 |  | 2 years | With and without method
State Insurance Licenses | 2,700,000 |  | Indefinite | Replacement cost method
Total Fair Value | $ | 32,900,000 |  |  |
Useful lives for customer relationships were developed using attrition data for agents and financing entities which resulted in a useful life of 5 years and 8 years, respectively. Estimates over the useful lives of internally developed and used technology contemplates the period in which the Company expects to utilize the technology and the length of time the technology is expected to maintain recognition and value in the market without significant investment. Non-compete agreements have a useful life commensurate with the executed non-compete agreements in place as a result of the Business Combination. The supplemental pro forma financial information in the table below summarizes the combined results of operations for the Business Combination as if the Companies were combined as of January 1, 2022. The unaudited supplemental pro forma financial information as presented below is for illustrative purposes and does not purport to represent what the results of operations would actually have been if the business combinations occurred as of the date indicated or what the results would be for any future periods.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 | 2022
Proforma revenue | $ | 21,120,930 |  |  | $ | 17,538,734 |  |  | $ | 55,890,580 |  | $ | 48,830,191 |
Proforma net income | 1,050,972 |  |  | 10,232,457 |  |  | 14,424,416 |  | 22,427,585 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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