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Business Acquisitions | 6 Months Ended
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Jun. 30, 2022
Business Combinations [Abstract] |
Business Acquisitions | 12. Business Acquisitions HBA Group Acquisition On November 1, 2020, the Company acquired 100% of HBA Group and its subsidiaries ("HBA") in Australia. HBA is a legal services provider that will complement the Company’s International Operations segment in Australia. The acquisition was funded primarily through additional borrowings under the Company's credit facility. The purchase price included an initial cash payment of $4,026,000 and a maximum of $3,200,000 payable over four years based on achievement of certain revenue and EBITDA performance goals as set forth in the purchase agreement. The acquisition accounting is based on the fair value of the acquisition consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date. At the acquisition date, the fair value of the contingent consideration payable was estimated to be $2,409,000. At June 30, 2022, there were no material changes in the range of expected outcomes or the fair value of the contingent consideration from the acquisition date. Significant assumptions and estimates used in the valuation of intangible assets and contingent consideration included, but were not limited to future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, and the applicable discount rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. Final acquisition accounting for this acquisition was completed as of March 31, 2022. Adjustments recorded during the first quarter include a reduction in goodwill and deferred tax liability of $827,000. The financial results of certain of the Company’s international subsidiaries, including HBA, are included in the Company’s consolidated financial statements on a two-month delayed basis. Goodwill is attributable to the synergies of the work force in place and business resources as a result of the combination of the companies. The Company does not expect that goodwill attributable to the acquisition will be deductible for tax purposes. edjuster Inc. Acquisition On August 23, 2021, the Company acquired 100% of edjuster Inc. in Canada and its U.S. subsidiary (collectively "edjuster"). edjuster is a technology-enabled, end-to-end contents services provider and platform. This acquisition will enable the Company to expand its capability in the North American claims contents services market. The purchase price included an initial cash payment of $20,875,000, a working capital adjustment of $433,000, and an earn-out potential up to $13,334,000 based on the achievement of certain EBITDA performance goals over two one-year periods, beginning January 2022. The acquisition was funded primarily through additional borrowings under the Company’s credit facility. The results of edjuster are reported in the North America Loss Adjusting segment. Goodwill is attributable to the assembled workforce acquired, and expected revenue and cost synergies as a result of the combination of the companies. The Company does not expect that goodwill attributable to the acquisition will be deductible for tax purposes. The preliminary acquisition accounting is based on the fair value of the acquisition consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date. At the acquisition date, the fair value of the contingent consideration payable was estimated to be $2,437,000. At June 30, 2022, there were no material changes in the range of expected outcomes and the fair value of the contingent consideration from the acquisition date. Significant assumptions and estimates included, but were not limited to future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, royalty rates, and the applicable discount rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. The Company is in the process of reviewing the fair value of the assets acquired and liabilities assumed, including, but not limited to intangible assets, accrued expenses, tax liabilities and goodwill. As additional information becomes available, the Company may further revise its preliminary acquisition accounting during the remainder of the measurement period, which will not exceed 12 months from the date of acquisition. The Company may update certain assumptions and inputs to incorporate additional information obtained subsequent to the closing of the transaction related to facts and circumstances that existed as of the acquisition date. Praxis Consulting Inc. Acquisition On October 1, 2021, the Company acquired 100% of Praxis Consulting Inc. ("Praxis"), an established subrogation claims service provider in the U.S. The acquisition allows the Company to expand its footprint in the U.S. subrogation claims market. The acquisition was funded primarily through additional borrowings under the Company’s credit facility. The purchase price included a cash payment of $21,544,000, a working capital adjustment payable of $735,000, a deferred cash payment of $20,000,000 which was paid in February 2022, and an earn-out potential up to $10,000,000 based on the achievement of certain revenue performance goals over two one-year periods, beginning February 2022. The acquisition accounting is based on the fair value of the acquisition consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date. The fair value of the contingent consideration payable was increased to $6,340,000 at June 30, 2022 from $4,068,000 at the acquisition date based on revised internal revenue forecasts. Accordingly, the Company recognized $2,272,000 from changes in the fair value of contingent consideration related to this acquisition in "Selling, general, and administrative expenses" on the Consolidated Statement of Operations. Significant assumptions and estimates used in the valuation of intangible assets and contingent consideration included, but were not limited to future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, and the applicable discount rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. The Company is in the process of reviewing the fair value of the assets and liabilities assumed, including, but not limited to intangible assets, accrued expenses, tax liabilities and goodwill. As additional information becomes available, the Company may further revise its preliminary acquisition accounting during the remainder of the measurement period, which will not exceed 12 months from the date of acquisition. The Company may update certain assumptions and inputs to incorporate additional information obtained subsequent to the closing of the transaction related to facts and circumstances that existed as of the acquisition date. The results of Praxis Consulting are reported in the Platform Solutions segment. Goodwill is attributable to the synergies of the work force in place and business resources as a result of the combination of the companies. The Company expects that goodwill attributable to the acquisition will be deductible for tax purposes. BosBoon Expertise Group B.V. Acquisition On October 1, 2021, the Company acquired BosBoon Expertise Group B.V. ("BosBoon"), a specialist loss adjusting company based in the Netherlands. The acquisition supports the Company's strategic aim of strengthening its expertise in all key territories in which it operates. BosBoon offers a specialist range of loss adjusting services which will be added to the existing loss adjusting proposition in the Netherlands. The acquisition was funded primarily through additional borrowings under the Company’s credit facility. The purchase price included an initial cash payment of $2,066,000, net of working capital adjustments, and an earn-out potential up to $1,854,000 based on the achievement of EBITDA performance goals and other nonfinancial milestones over two one-year periods, beginning January 2022. The acquisition accounting is based on the fair value of the acquisition consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date. At the acquisition date, the fair value of the contingent consideration payable was estimated to be $568,000. At June 30, 2022, there were no material changes in the range of expected outcomes and the fair value of the contingent consideration from the acquisition date. Significant assumptions and estimates used in the valuation of intangible assets and contingent consideration included, but were not limited to future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, and the applicable discount rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. The Company is in the process of reviewing the fair value of the assets and liabilities assumed, including, but not limited to intangible assets, accrued expenses, tax liabilities and goodwill. As additional information becomes available, the Company may further revise its preliminary acquisition accounting during the remainder of the measurement period, which will not exceed 12 months from the date of acquisition. The Company may update certain assumptions and inputs to incorporate additional information obtained subsequent to the closing of the transaction related to facts and circumstances that existed as of the acquisition date. The financial results of certain of the Company’s international subsidiaries, including BosBoon, are included in the Company’s consolidated financial statements on a two-month delayed basis. The results of BosBoon are reported in the International Operations segment. Goodwill is attributable to the synergies of the work force in place and business resources as a result of the combination of the companies. The Company does not expect that goodwill attributable to the acquisition will be deductible for tax purposes. R.P. van Dijk B.V. Acquisition On April 1, 2022, the Company purchased assets associated with R.P. van Dijk B.V. ("Van Dijk"), a bodily injury loss adjusting company based in the Netherlands. The acquisition was funded primarily through additional borrowings under the Company’s credit facility. The purchase price includes an initial cash consideration of $4,313,000, and an earn-out potential up to $2,200,000 payable over the next two years based on the achievement of revenue performance goal and other nonfinancial milestones over two one-year periods, beginning April 2022. This acquisition will expand the Company's network in the Netherlands and strengthen its bodily injury loss adjusting service offering by adding a highly qualified team of adjusters experienced in managing complex loss events resulting in injury or death, as well as handling medical liability claims. The acquisition supports the Company's strategic aim of strengthening its expertise in all key territories in which it operates. The acquisition accounting is based on the fair value of the acquisition consideration transferred to the sellers, assets acquired and liabilities assumed as of the acquisition date. At the acquisition date, the fair value of the contingent consideration payable was estimated to be $1,342,000. At June 30, 2002, there were no material changes in the range of expected outcomes and the fair value of the contingent consideration from the acquisition date. Significant assumptions and estimates used in the valuation of intangible assets and contingent consideration included, but were not limited to future expected cash flows, including projected revenues and expenses, estimated customer attrition rates, and the applicable discount rates. These assumptions and estimates were level 3 inputs and based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. The Company is in the process of reviewing the fair value of the assets and liabilities assumed, including, but not limited to intangible assets, unbilled receivables, accrued expenses, tax liabilities and goodwill. As additional information becomes available, the Company may further revise its preliminary acquisition accounting during the remainder of the measurement period, which will not exceed 12 months from the date of acquisition. The Company may update certain assumptions and inputs to incorporate additional information obtained subsequent to the closing of the transaction related to facts and circumstances that existed as of the acquisition date. The financial results of certain of the Company’s international subsidiaries, including Van Dijk, are included in the Company’s consolidated financial statements on a two-month delayed basis. The results of Van Dijk are reported in the International Operations segment. Goodwill is attributable to the synergies of the work force in place and business resources as a result of the combination of the companies. The Company expects that goodwill attributable to the acquisition will be deductible for tax purposes. Fair Value of Assets Acquired and Liabilities Assumed Assets acquired and liabilities assumed as of acquisition date, inclusive of subsequent measurement period adjustments, are presented in the following table:
|  | HBA Group |  |  | edjuster Inc. |  |  | Praxis Consulting Inc. |  |  | BosBoon Expertise Group B.V. |  |  | R.P. van Dijk B.V. |
|  | November 1, 2020 |  |  | August 23, 2021 |  |  | October 1, 2021 |  |  | October 1, 2021 |  |  | April 1, 2022 |
|  | (In thousands) |
Tangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 240 |  |  | $ | 1,723 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Accounts receivable |  |  | 1,081 |  |  |  | 1,518 |  |  |  | 119 |  |  |  | 469 |  |  |  | — |
Unbilled revenues |  |  | 598 |  |  |  | 1,531 |  |  |  | — |  |  |  | 597 |  |  |  | 509 |
Right-of-use lease assets |  |  | 1,502 |  |  |  | 418 |  |  |  | 430 |  |  |  | 586 |  |  |  | — |
Other assets |  |  | 205 |  |  |  | 1,520 |  |  |  | 316 |  |  |  | 75 |  |  |  | 231 |
Total tangible assets |  |  | 3,626 |  |  |  | 6,710 |  |  |  | 865 |  |  |  | 1,727 |  |  |  | 740 |
Intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  | 1,574 |  |  |  | 5,346 |  |  |  | 20,000 |  |  |  | 1,384 |  |  |  | 3,215 |
Developed technology |  |  | — |  |  |  | 2,673 |  |  |  | 1,500 |  |  |  | — |  |  |  | — |
Non-compete agreements |  |  | — |  |  |  | 157 |  |  |  | 225 |  |  |  | 346 |  |  |  | 347 |
Tradenames |  |  | — |  |  |  | 1,101 |  |  |  | 2,125 |  |  |  | — |  |  |  | — |
Goodwill |  |  | 5,406 |  |  |  | 12,799 |  |  |  | 26,195 |  |  |  | 1,571 |  |  |  | 1,423 |
Total intangible assets |  |  | 6,980 |  |  |  | 22,076 |  |  |  | 50,045 |  |  |  | 3,301 |  |  |  | 4,985 |
Total assets acquired |  |  | 10,606 |  |  |  | 28,786 |  |  |  | 50,910 |  |  |  | 5,028 |  |  |  | 5,725 |
Liabilities assumed |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  | 2,532 |  |  |  | 2,066 |  |  |  | 4,133 |  |  |  | 1,430 |  |  |  | 70 |
Operating lease liabilities |  |  | 1,502 |  |  |  | 418 |  |  |  | 430 |  |  |  | 586 |  |  |  | — |
Tax liabilities |  |  | 137 |  |  |  | 2,557 |  |  |  | — |  |  |  | 378 |  |  |  | — |
Total liabilities assumed |  |  | 4,171 |  |  |  | 5,041 |  |  |  | 4,563 |  |  |  | 2,394 |  |  |  | 70 |
Net assets acquired |  | $ | 6,435 |  |  | $ | 23,745 |  |  | $ | 46,347 |  |  | $ | 2,634 |  |  | $ | 5,655 |
Purchase price (cash) |  | $ | 4,026 |  |  | $ | 20,875 |  |  | $ | 21,544 |  |  | $ | 2,066 |  |  | $ | 4,313 |
Deferred purchase consideration payable |  |  | — |  |  |  | 433 |  |  |  | 20,735 |  |  |  | — |  |  |  | — |
Fair value of contingent consideration |  |  | 2,409 |  |  |  | 2,437 |  |  |  | 4,068 |  |  |  | 568 |  |  |  | 1,342 |
Fair value of total consideration transferred |  | $ | 6,435 |  |  | $ | 23,745 |  |  | $ | 46,347 |  |  | $ | 2,634 |  |  | $ | 5,655 |
Acquired intangible assets include customer relationships, tradenames and developed technologies. Intangible assets were valued using the multi-period excess earnings or the relief-from-royalty methods, both are forms of the income approach which utilizes a forecast of future cash flows generated from the use of each asset. The following table shows the preliminary fair values assigned to identifiable intangible assets:
|  | Fair Value |  |  | Weighted-Average Amortization Period (Years) |
|  | (In thousands) |  |  |  |
Amortizable intangible assets |  |  |  |  |  |
Customer relationships |  | $ | 31,519 |  |  |  | 14 |
Developed technology |  |  | 4,173 |  |  |  | 9 |
Non-compete agreements |  |  | 1,075 |  |  |  | 5 |
Tradenames |  |  | 3,226 |  |  |  | 10 |
Total amortizable intangible assets |  | $ | 39,993 |  |  |  |

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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