4. Business combinations

• Health Management Limited

        On July 1, 2013 (the acquisition date), the Company acquired 100% of the share capital of Health Management Limited (HML) for total consideration of $77.9 million (£51.1 million). The consideration was comprised of $71.4 million (£46.9 million) in cash and 202,972 shares of MAXIMUS stock worth $6.4 million (£4.2 million). In addition, the Company incurred $1.2 million of expenses directly related to the transaction, including legal fees, due diligence expenses and duty related to the transfer of assets. These fees have been recorded as acquisition-related expenses.

        HML provides independent health assessments within the United Kingdom. MAXIMUS acquired HML, among other reasons, to expand the Company's independent medical assessment business and to establish a strong presence in the United Kingdom health services market. The acquired assets and business have been integrated into the Company's Health Services Segment.

        The assets and liabilities of HML were recorded in the Company's financial statements at their fair values at the acquisition date as follows (in thousands):

        Management is still in the process of completing certain assessments of fair value of these assets and liabilities, including the assessment of the fair value of intangible assets acquired. The excess of the acquisition date fair value of consideration over the estimated fair value of the net assets acquired will be recorded as goodwill. The Company considers the goodwill to represent benefits that are expected to be realized as a result of the business combination, including, but not limited to, the assembled workforce and the benefit of the enhanced knowledge and capabilities of HML. Goodwill is not expected to be deductible for tax purposes.

        The valuation of the intangible assets acquired is summarized below (in thousands).

        The weighted average amortization period is 19.5 years.

        Our consolidated statement of operations includes $14.1 million of revenue and $0.5 million of income from continuing operations for the year ended September 30, 2013 generated by the acquired HML business.

        The following table presents certain results for the Company for the year ended September 30, 2013 as though the acquisition of HML had occurred on October 1, 2011. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of the Company if the acquisition had taken place at this time. The pro forma results presented include amortization charges for acquired intangible assets, adjustments to interest income foregone, the effect of calculating the fair value of acquired deferred revenue and related tax effects, as well as excluding the related acquisition expenses for fiscal year 2013 (in thousands).

Policy Studies, Inc.

        On April 30, 2012 (the PSI acquisition date), the Company acquired 100% of the share capital of PSI Services Holding, Inc. and its wholly-owned subsidiary, Policy Studies, Inc. (PSI) for cash consideration of $63.4 million.

        PSI supports government clients in the administration of a number of health and human services programs exclusively within the United States. MAXIMUS acquired PSI, among other reasons, to strengthen its leadership in the administration of public health and human services programs. The acquired assets and business have been integrated into the Company's Health Services and Human Services Segments.

        The assets and liabilities of PSI are recorded in the Company's financial statements at their fair values as of the PSI acquisition date. An initial valuation was performed at September 30, 2012 and this valuation has been updated through September 30, 2013 (below, in thousands):

        The Company has completed its valuation of the assets and liabilities acquired. The identifiable assets acquired and liabilities assumed were recognized and measured as of the PSI acquisition date based upon their estimated fair values. The excess of the acquisition date fair value of the consideration over the estimated fair value of the net assets acquired was recorded as goodwill and allocated to the Company's two segments, Health Services and Human Services, based upon the respective valuations of the businesses. The Company considers the goodwill to represent a number of potential strategic and financial benefits that are expected to be realized as a result of the acquisition, including, but not limited to, the assembled workforce and the addition of new capabilities within MAXIMUS' existing business. Goodwill is not expected to be deductible for tax purposes.

DeltaWare Systems, Inc.

        On February 10, 2010 (the DeltaWare acquisition date), the Company acquired 100% of the share capital of DeltaWare Systems, Inc. (DeltaWare).

        As part of the acquisition agreement, the Company must pay the former owners of DeltaWare up to four million Canadian Dollars ($3.9 million). These payments, considered contingent consideration, will be made based upon the Company making sales of DeltaWare's products in particular geographic markets prior to December 2016. The Company has recorded a long-term liability of $0.4 million which represents the payment that management assesses will likely be paid. In the event that such sales are anticipated by the Company, this could result in an increase to this liability based upon the size and location of the sales. No such sales have been made to date and the likelihood of future sales between this time and December 2016 is considered low. Management reviews the likelihood of future sales on a quarterly basis and, to the extent that sales opportunities are identified, proposals submitted or contracts won, the Company updates its probability weighted assessment of payment. Changes in this assessment will result in an expense or credit to earnings. The contingent consideration payable for any single contract signed would be based upon the population of the area served but would be capped at one million Canadian Dollars per sale. As the inputs required for the valuation of this liability require significant judgment, they are considered to be Level 3 inputs under the Financial Accounting Standards Board's classification of assets and liabilities subject to fair value measurement.

        The effect on the financial statements is summarized below (in thousands):