XML 53 R10.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Acquisitions and Divestitures | 6 Months Ended
--- | ---
Jun. 30, 2017
Business Combinations [Abstract] |
Acquisitions and Divestitures | Acquisitions and Divestitures Acquisitions 2017 Transactions Intralinks On January 19, 2017, the Company purchased all outstanding shares of Intralinks Holdings, Inc. (“Intralinks”). In connection with the acquisition, the Company entered into a $900.0 million senior secured term loan (the “2017 Term Facility”), as of the date of acquisition. Intralinks is a global technology provider of Software as a service (“SaaS”) solutions for secure enterprise content collaboration within and among organizations. Intralinks’ cloud-based solutions enable organizations to securely manage, control, track, search, exchange and collaborate on sensitive information inside and outside the firewall. The total purchase price consideration consisted of the repayment of existing Intralinks indebtedness, and non-cash consideration for services rendered on unvested Intralinks equity awards that were converted into the Company equity awards on the acquisition date. The acquisition was primarily funded from the proceeds of the $900.0 million credit agreement as of the date of acquisition (See Note 7 - Debt for further discussion regarding the credit agreement). The following is a summary of the components of the consideration transferred as part of the acquisition:
Cash consideration for outstanding Intralinks' common shares | $ | 746,071 |
Cash consideration for accelerated equity awards to Intralinks' employees upon change in control | 7,873 |
Cash consideration for vested unexercised Intralinks' stock options | 19,838 |
Cash consideration for existing Intralinks' debt | 77,800 |
Cash consideration for shareholders purchase price settlement | 2,794 |
Total cash consideration transferred | 854,376 |
Fair value of replacement awards | 4,702 |
Total consideration transferred | $ | 859,078 |
The purchase price allocation as of the date of the acquisition was as follows:
| Weighted Average Life in Years |  | Purchase Price Allocation
Cash |  |  | $ | 39,370 |
Accounts receivable |  |  | 46,182 |
Prepaid expenses and other assets |  |  | 9,775 |
Property and equipment, net | 4 |  | 14,075 |
Goodwill |  |  | 482,822 |
Intangible Assets: |  |  |
Developed technology | 6 |  | 79,400 |
Capitalized software costs | 1 |  | 277 |
Trade name | 18 |  | 47,800 |
Customer relationships | 10 |  | 284,100 |
|  |  | 411,577 |
Other assets, long-term |  |  | 3,865 |
Investment in unconsolidated affiliate |  |  | 5,800 |
Total assets acquired |  |  | 1,013,466 |
Accounts payable |  |  | 4,853 |
Accrued expenses |  |  | 21,421 |
Deferred revenues, short-term |  |  | 12,449 |
Deferred tax liability |  |  | 110,044 |
Deferred revenues, long-term |  |  | 1,051 |
Other liabilities, long-term |  |  | 4,570 |
Total liabilities |  |  | 154,388 |
Net assets acquired |  |  | $ | 859,078 |
The goodwill recorded in connection with this acquisition was primarily attributed to operating synergies and other benefits expected to result from the combined operations and the assembled workforce acquired. The goodwill acquired is not deductible for tax purposes. Assets Held For Sale Classification In the second quarter of 2017, the Company received a non-binding indication of interest from Siris to acquire the Company and the Company’s Board of Directors decided to explore a broad range of strategic alternatives to a sale of the Company, which included the sale of Intralinks. With the closing of the Intralinks Transaction on November 14, 2017, and as a result of this plan of disposal, the assets and liabilities of Intralinks have been classified as held for sale in our Condensed Consolidated Balance Sheet at June 30, 2017. The Company has also presented the operations of the business as discontinued operations in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2017 to provide consistent presentation with our recently filed Form 10-K for the year ended December 31, 2017 and with our subsequent filings of all of the Company’s quarterly reports on Form 10-Q in 2017. The Company’s election to disclose such amounts as held for sale are due to continued reporting delays of this Form 10-Q as part of the Company’s restatement process. 2016 Transactions Openwave Messaging, Inc. (“Openwave”) On March 1, 2016, the Company acquired all outstanding shares of Openwave for $114.5 million, net of working capital adjustments and liabilities assumed, comprised of $92.5 million paid in cash and $22.0 million paid in shares of the Company’s common stock, based upon the average market value of the common stock for the ten trading days prior to the acquisition date. Openwave’s product portfolio includes its core complete messaging platform optimized for today’s most complex messaging requirements worldwide with a particular geographic strength in Asia-Pacific. With this acquisition and combined with Synchronoss’ current global footprint, Synchronoss will have increased direct access to subscribers around the world for the Synchronoss Personal Cloud™ platform and bolster the Company’s go-to-market efforts internationally. In connection with the acquisition of Openwave, the Company entered into $10.0 million patent settlement agreement. The Company determined that the transaction was negotiated in the overall consideration paid for the purchase of Openwave, and as result, the proceeds were reflected as a reduction in the Company’s purchase price. The following is a summary of the components of the consideration transferred as part of the acquisition:
| (Restated)
Cash consideration for outstanding common shares | $ | 102,538 |
Issuance of Common Stock | 22,000 |
Intellectual Property Settlement | (10,000 | )
Total consideration transferred | 114,538 |
Issuance of Common Stock | (22,000 | )
Cash Consideration Transferred | $ | 92,538 |
The Company determined the fair value of the net assets acquired as follows:
(Restated) | Purchase Price Allocation |
Cash | $ | 4,110 |  |
Prepaid expenses and other assets | 3,005 |  |
Property, Plant & Equipment | 2,882 |  |
Long term assets | 1,870 |  |
Intangible assets: |  | Wtd. Avg.
Trade name | 1,000 |  | 1 year
Technology | 32,100 |  | 7 years
Customer relationships | 29,000 |  | 10 years
Goodwill | 81,015 |  |
Total assets acquired | 154,982 |  |
Accounts payable and accrued liabilities | 17,622 |  |
Deferred revenues | 7,331 |  |
Long term liabilities | 15,491 |  |
Net assets acquired | $ | 114,538 |  |
The goodwill recorded in connection with this acquisition was based on operating synergies and other benefits expected to result from the combined operations and the assembled workforce acquired. The goodwill acquired is not deductible for tax purposes. Acquisition-Related Costs Total acquisition-related costs recognized during the six months ended June 30, 2017 and 2016 including transaction costs such as legal, accounting, valuation and other professional services, were $13.0 million and $2.0 million, respectively, and are included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations. Divestitures 2017 Transactions SpeechCycle On February 1, 2017 the Company completed a divestiture of its SpeechCycle business, to an unrelated third party, for consideration of $13.5 million. As part of the divestiture, the Company entered into a one year transition services agreement with the acquiring company to support various indirect activities such as customer software support, technical support services, maintenance and general administrative support services. The Company recorded a pre-tax gain of $4.9 million as a result of the divestiture which is included in other income (expense), net in the Condensed Consolidated Statement of Operations. 2016 Transactions Sequential Technology International, LLC (“STIN”) On December 16, 2016, Synchronoss completed a divestiture of a portion of its business process outsourcing (“BPO”) carrier activation business to a newly formed entity named STIN which had a total value of $140.8 million. As part of the sales arrangement, Synchronoss will retain a 30% investment in STIN. Sequential Technology International Holdings, LLC (“STIH”), an unrelated third party that was formerly named Omniglobe International LLC, will own the remaining 70% of STIN. STIH financed the purchase of these assets through cash of $27.3 million (including $10.0 million of license), a new term loan with Goldman Sachs Bank (“Goldman”), and a related party subordinated seller’s note receivable with a par value of $83.0 million issued by Synchronoss, which is secured by STIH’s interest in STIN. The sellers note was issued at a discount, with a transaction value of $69.8 million. The sellers note earns interest at a rate of LIBO R plus 1100 bps per annum and matures on June 16, 2022. On December 22, 2016, the Company entered into a non-exclusive perpetual license agreement with STIH, for the consideration of $10.0 million. The Company determined that the license agreement was negotiated with the sale, and in the overall consideration paid for the purchase of STIN, and as result, the proceeds from sale of the perpetual license were reflected as additional consideration received from the sale of its BPO business, resulting in additional gain recognized on the sale. Additionally, as part of its divestiture, the Company provided a guarantee to Goldman for $30.0 million of the $40.0 million in senior debt extended by Goldman to STIH which is referenced as the Third Party Note in Note 6 - Investments in Affiliates and Related Transactions. The Company recognized the guarantee on the date of transaction as a reduction in the gain on sale in the amount of $0.6 million. The Company and STIH agreed to a put and call option in regards to the Company’s equity interest in STIN. The Company will have the right to exercise a put option at any time to sell its interest in STIN, at the fair market value determined at the date of exercise. Additionally, STIH will have the right to exercise a call option at any time to purchase the interest in STIN at the fair market value determined at the date of exercise. The Company determined that the put and call options are embedded within the host contract and do not require bifurcation and separate accounting treatment. STIN has been determined to be a VIE of which the Company is not the primary beneficiary. As part of the divestiture, Synchronoss entered into a three-year MSA with STIN to provide for access to certain platforms, and assets necessary to perform certain tasks, as part of the exception handling process. See Note 6 - Investments in Affiliates and Related Transactions. The following is a summary of the operating results of BPO which have been reflected within income from discontinued operations, net of tax:
| Three Months Ended June 30, 2016 (Restated) |  | Six Months Ended June 30, 2016 (Restated)
Net revenues | $ | 38,108 |  |  | $ | 74,464 |
Costs and expenses: |  |  |
Cost of services | 23,001 |  |  | 44,859 |
Selling, general and administrative | 718 |  |  | 1,437 |
Total costs and expenses | 23,719 |  |  | 46,296 |
Income from discontinued operations before taxes | 14,389 |  |  | 28,168 |
Benefit (provision) for income taxes | 4,596 |  |  | (10,369 | )
Discontinued operations, net of taxes | $ | 18,985 |  |  | $ | 17,799 |
The financial results reflected above may not represent the BPO’s stand-alone operating results, as the results reported within income from discontinued operations, net of tax only include certain costs that are directly attributable to the BPO and exclude certain overhead costs that were previously allocated to the BPO for each period. Mirapoint On December 29, 2016, the Company completed the divestiture of the Company’s Mirapoint business to an unrelated third party and recorded a gain of $1.4 million on the sale, which is included in other income (expense), net in the Condensed Consolidated Statements of Operations. Subsequent Events - Divestiture of Intralinks On June 23, 2017, the Company received a non-binding indication of interest from Siris Capital Group, LLC (“Siris”) to acquire the Company. In light of the indication of interest, the Company’s Board of Directors decided to explore a broad range of strategic alternatives that would have the potential to unlock shareholder value. In October 2017, the Company concluded its review of strategic alternatives and determined that the best approach for the Company to achieve its goal of maximizing shareholder value was to focus on its core Telecommunication, Media and Technology (“TMT”) business, divest non-core assets and improve the Company’s balance sheet strength, cash position and potential profitability. Under the terms of certain definitive agreements, investment funds affiliated with Siris acquired all of the stock of the Company’s wholly-owned subsidiary, Intralinks for consideration of cash and an option for investment in convertible preferred equity of the Company. Subject to the terms and conditions set forth in the Share Purchase Agreement, dated as of October 17, 2017 (the “Share Purchase Agreement”), among Synchronoss, Intralinks and Impala Private Holdings II, LLC, an affiliate of Siris (“Impala”), a related party, due to its significant interest in common stock. Impala agreed to acquire from the Company the issued and outstanding shares of common stock of Intralinks for approximately $977.3 million in cash plus a potential contingent payment of up to $25.0 million, subject to an adjustment for cash, debt and working capital (the “Intralinks Transaction”). The total amount of funds used to complete the Intralinks Transaction and related transactions and pay related fees and expenses was approximately $1.0 billion, which was funded through a combination of equity and debt financing obtained by Impala. Under the terms of the Share Purchase Agreement, the Company also provided Siris with a Siris Put Right (“Siris Put Right”), which would allow Silver to put shares held at the time, to Synchronoss at price of $14.56 per share, or $87.3 million in the aggregate. The Company determined that the Call option on the issuance of preferred and the Siris Put Right, together, represented one mandatorily redeemable financial instrument with a fair value of $33.6 million, which reduced the gain on sale of Intralinks. At the closing of the Intralinks Transaction on November 14, 2017, Impala acquired all of the issued and outstanding shares of Intralinks for approximately $991.0 million in cash, subject to post-closing adjustments for changes in cash, debt and working capital. If, in the future, Impala receives net cash proceeds in excess of $440.0 million from any sale of equity or assets of Intralinks, or a dividend or distribution in respect of the shares of Intralinks, then Impala is required to pay the Company up to an additional $25.0 million in cash or publicly traded securities. Immediately following the consummation of the Intralinks Transaction, the Company paid to Impala $5.0 million as partial reimbursement of the out-of-pocket fees and expenses incurred by Impala, Siris and their respective affiliates in connection with the execution of the Share Purchase Agreement and the Intralinks Transaction. Amounts reimbursed were recorded as a reduction to the gain on sale. In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, we issued to Silver 185,000 shares of our newly issued Series A Convertible Participating Perpetual Preferred Stock (the “Series A Preferred Stock”), par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in exchange for $97.7 million in cash and the transfer from Silver to us of the 5,994,667 shares of our common stock held by Silver (the “Preferred Transaction”). In connection with the issuance of the Series A Preferred Stock, we (i) filed a Certificate of Designation with the State of Delaware setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series A Preferred Stock (the “Series A Certificate”) and (ii) entered into an Investor Rights Agreement with Silver setting forth certain registration, governance and preemptive rights of Silver with respect to us (the “Investor Rights Agreement”). See Note 9 - Stockholder’s Equity for further discussion. The following is a summary of the operating results of Intralinks during the three and six months ended June 30, 2017, which have been reflected within income from discontinued operations, net of tax:
| Three Months Ended June 30, 2017 |  | Six Months Ended June 30, 2017
Net revenues | $ | 64,952 |  |  | $ | 104,211 |
Costs and expenses: |  |  |
Cost of services | 12,040 |  |  | 20,796 |
Research and development | 7,029 |  |  | 12,452 |
Selling, general and administrative | 40,050 |  |  | 69,518 |
Net change in contingent consideration obligation | — |  |  | — |
Restructuring charges | 7,407 |  |  | 15,433 |
Depreciation and amortization | 12,552 |  |  | 22,690 |
Total costs and expenses | 79,078 |  |  | 140,889 |
Loss from discontinued operations | (14,126 | ) |  | (36,678 | )
Other income, net | 657 |  |  | 927 |
Loss from discontinued operations, before taxes | (13,469 | ) |  | (35,751 | )
Benefit for income taxes | 6,694 |  |  | 12,842 |
Discontinued operations, net of taxes | $ | (6,775 | ) |  | $ | (22,909 | )
Subsequent Events - SNCR, LLC During the fourth quarter of 2017, the Company entered into a termination agreement with Goldman to terminate the venture with Goldman, referred to as SNCR, LLC, and provide a perpetual, irrevocable license of the venture’s intellectual property for use in Goldman’s back-office. As part of the agreement, the Company was relieved of any future obligations to support Goldman’s use of the software. As a result, the Company recognized impairment charges of $1.0 million during the fourth quarter of 2017 upon the venture’s termination. The venture formally ended in the first quarter of 2018 resulting in the elimination of the associated redeemable noncontrolling interest balance of the first quarter of 2018, and an increase to Additional Paid In Capital balance of $12.8 million.

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration