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Acquisitions | 6 Months Ended
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Jun. 30, 2019
Business Combinations [Abstract] |
Acquisitions | Note 2 — Acquisitions The Company accounts for business combinations in accordance with the acquisition method of accounting as prescribed by Accounting Standards Codification (“ASC”) 805, Business Combinations. The acquisition method of accounting requires the Company to record the assets and liabilities acquired based on their estimated fair values as of the acquisition date, with any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable intangible assets, to be recorded to goodwill. GlimpzIt On June 22, 2018, Forrester acquired substantially all of the assets of SocialGlimpz, Inc. (“GlimpzIt”), an artificial intelligence and machine-learning provider based in San Francisco. The acquisition is part of Forrester's plan to build a real-time customer experience or CX cloud solution, integrating a range of inputs to help companies monitor and improve customer experience. Forrester intends to deploy the GlimpzIt technology to extend the analytics engine in Forrester’s planned real-time CX cloud. The acquisition of GlimpzIt was determined to be an acquisition of a business under the provisions of ASC 805. The total purchase price was approximately $1.3 million, which was paid in cash on the acquisition date, and has been allocated as $0.7 million of goodwill and $0.6 million of an intangible asset representing technology, which is being amortized over its estimated useful life of five years. The acquired working capital was insignificant. Forrester may also be required to pay an additional $0.3 million in cash (of which $0.1 million was paid in 2019), contingent on the achievement of certain employment conditions by key employees, which is being recognized as compensation expense over the related service period of two years. Goodwill has been allocated to the Product segment and is deductible for income tax purposes. Goodwill is attributable to the acquired workforce as well as future synergies. FeedbackNow On July 6, 2018, Forrester acquired 100% of the issued and outstanding shares of S.NOW SA, a Switzerland-based business that operates as FeedbackNow. FeedbackNow is a maker of physical buttons and monitoring software that companies deploy to measure, analyze, and improve customer experience. The acquisition is part of Forrester's plan to build a real-time CX cloud solution. FeedbackNow provides a high-volume input source for the real-time CX cloud solution. The Company paid $8.4 million on the closing date. An additional $1.5 million is payable during a two-year period from the closing date and is subject to typical indemnity provisions from the seller. The Company paid additional purchase price based on the acquired working capital of $0.8 million during the six months ended June 30, 2019. In addition, the sellers may earn up to CHF 4.2 million ($4.3 million at June 30, 2019) based on the financial performance of FeedbackNow during the two-year period following the closing date, with up to $1.8 million and $2.5 million payable during 2019 and 2020, respectively, if the financial targets are met. The first-year financial targets are expected to be met and as such $1.8 million is expected to be paid to the sellers by the end of 2019. The range of undiscounted amounts that could be payable under this arrangement, including the presumed achievement of the first-year financial targets, is $1.8 million to $4.3 million. The fair value of this contingent consideration arrangement as of the acquisition date was $3.4 million, which was recognized as purchase price. Measurement period adjustments were insignificant during the six months ended June 30, 2019. SiriusDecisions, Inc. On January 3, 2019, Forrester acquired 100% of the issued and outstanding shares of SiriusDecisions, Inc. (“SiriusDecisions”), a privately-held company based in Wilton, Connecticut with approximately 350 employees globally. Forrester believes that the combination of its expertise in strategy with SiriusDecisions’ focus on operational excellence will create additional market opportunities for the Company, including cross-selling services to the respective client bases, extending SiriusDecisions’ platform, methodologies, data, and best-practices tools into new roles, and accelerating international and industry growth. The acquisition of SiriusDecisions was determined to be an acquisition of a business under the provisions of ASC 805. Pursuant to the terms of the merger agreement, the Company paid $246.8 million at closing after certain transaction expense adjustments, which is subject to a working capital adjustment, and included the purchase price of $245.0 million plus an estimate of cash acquired and reduced by an estimate of certain working capital items. At the time of the merger, each vested SiriusDecisions stock option was converted into the right to receive the excess of the per share merger consideration over the exercise price of such stock option. All unvested SiriusDecisions stock options were cancelled without payment of any consideration. Total Consideration Transferred The following table summarizes the fair value of the aggregate consideration paid or payable for SiriusDecisions (in thousands):
Cash paid at close (1) |  | $ | 246,801 |
Working capital adjustment (2) |  |  | (833 | )
Total |  | $ | 245,968 |
(1) | The cash paid at close represents the gross contractual amount paid. Net cash paid, which accounts for the cash acquired of $7.9 million, was $238.9 million and is reflected as an investing activity in the Consolidated Statements of Cash Flows.
(2) | Amount represents the provisional amount receivable from the sellers based upon working capital as defined. This amount is subject to adjustment and the Company expects to receive the working capital adjustment by the end of 2019.
The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the acquisition of SiriusDecisions (in thousands):
Assets: |  |  |  |
Cash and cash equivalents |  | $ | 7,858 |
Accounts receivable |  |  | 19,237 |
Prepaids and other current assets |  |  | 3,660 |
Fixed assets |  |  | 4,169 |
Goodwill (1) |  |  | 157,161 |
Acquired intangible assets (2) |  |  | 115,000 |
Other assets |  |  | 265 |
Total assets |  |  | 307,350 |
Liabilities: |  |  |  |
Accounts payable and accrued liabilities |  |  | 8,924 |
Deferred revenue |  |  | 26,143 |
Deferred tax liability |  |  | 24,204 |
Long-term deferred revenue |  |  | 1,037 |
Other long-term liabilities |  |  | 1,074 |
Total liabilities |  |  | 61,382 |
Net assets acquired |  | $ | 245,968 |
(1) | Goodwill represents the expected revenue and cost synergies from combining SiriusDecisions with Forrester as well as the value of the acquired workforce.
(2) | All of the acquired intangible assets are finite-lived. The determination of the fair value of the finite-lived intangible assets required management judgment and the consideration of a number of factors. In determining the fair values, management primarily relied on income valuation methodologies, in particular discounted cash flow models. The use of discounted cash flow models required the use of estimates, including projected cash flows related to the particular asset; the useful lives of the particular assets; the selection of royalty and discount rates used in the models; and certain published industry benchmark data. In establishing the estimated useful lives of the acquired intangible assets, the Company relied primarily on the duration of the cash flows utilized in the valuation model. Of the $115.0 million assigned to acquired intangible assets, $13.0 million was assigned to the technology asset class with useful lives of 1 to 8 years (with a weighted average amortization period of 3.2 years), $13.0 million to backlog with a useful life of 2.0 years, $77.0 million to customer relationships with a useful life of 9.25 years, and $12.0 million to trade names with a useful life of 15.5 years. The weighted-average amortization period for the total acquired intangible assets is 8.4 years. Amortization of acquired intangible assets was $4.9 million and $10.9 million for the three and six months ended June 30, 2019, respectively.
The allocation of the purchase price for SiriusDecisions is preliminary with respect to the valuation of acquired intangible assets, working capital and goodwill. The Company expects to obtain the remainder of the information to complete the allocation of purchase price by the end of 2019. The Company’s financial statements include the operating results of SiriusDecisions beginning on January 3, 2019, the date of the acquisition. SiriusDecision’s operating results and the related goodwill are being reported as its own operating segment (refer to Note 12 – Operating Segments). The goodwill is not deductible for income tax purposes. The acquisition of SiriusDecisions added approximately $27.5 million and $42.7 million of additional revenue and $32.0 million and $57.0 million of direct expenses, including intangible amortization, for the three and six months ended June 30, 2019, respectively. Had the Company acquired SiriusDecisions in prior periods, the Company’s operating results would have been materially different, and as a result the following unaudited pro forma financial information is presented as if SiriusDecisions had been acquired by the Company on January 1, 2018 (in thousands):
| Three Months Ended |  |  | Six Months Ended |
| June 30, |  |  | June 30, |
| 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Pro forma total revenue | $ | 133,039 |  |  | $ | 122,875 |  |  | $ | 237,527 |  |  | $ | 216,246 |
Pro forma net income (loss) | $ | 4,823 |  |  | $ | 3,011 |  |  | $ | (4,267 | ) |  | $ | (7,440 | )
The pro forma results have been prepared in accordance with U.S. GAAP and include the following pro forma adjustments for the three and six months ended June 30, 2018: (1) an increase in interest expense and amortization of debt issuance costs related to the financing of the SiriusDecisions acquisition (refer to Note 4 – Debt for further information on the Company’s borrowings related to the acquisition); (2) a decrease in revenue as a result of the fair value adjustment to deferred revenue; (3) an adjustment for depreciation and amortization expenses as a result of the preliminary purchase price allocation for finite-lived intangible assets and property and equipment; and (4) an increase in operating costs to recognize acquisition costs incurred upon the close of the acquisition. The Company recognized $1.7 million of acquisition costs for the three months ended March 31, 2019 and the six months ended June 30, 2019 related to the SiriusDecisions acquisition. The costs primarily consisted of investment banker fees and other professional services costs and are included in acquisition and integration costs within the Consolidated Statements of Operations.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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