|
20. Acquisition
DeltaWare
On February 10, 2010 (the acquisition date), the Company acquired 100% of the share capital of DeltaWare, Inc. (DeltaWare). DeltaWare is a Canadian company specializing in health administration management systems. MAXIMUS acquired DeltaWare, among other reasons, to broaden its core health services offerings and strengthen its position in the administration of public health programs. The acquired assets and business have been integrated into the Companys Health Services segment.
The estimated acquisition date fair value of consideration transferred, assets acquired and liabilities are presented below and represent managements best estimates (in thousands).
|
Cash, net of cash acquired
|
|
$
|
10,385
|
|
|
Contingent consideration obligations
|
|
3,015
|
|
|
Total fair value of consideration
|
|
$
|
13,400
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
2,010
|
|
|
Other tangible assets
|
|
1,571
|
|
|
Intangible assets
|
|
6,060
|
|
|
Total identifiable assets acquired
|
|
9,641
|
|
|
|
|
|
|
|
Accounts payable and other liabilities
|
|
2,125
|
|
|
Loans payable
|
|
870
|
|
|
Deferred revenue
|
|
723
|
|
|
Total liabilities assumed
|
|
3,718
|
|
|
|
|
|
|
|
Net identifiable assets acquired
|
|
5,923
|
|
|
|
|
|
|
|
Goodwill
|
|
7,477
|
|
|
Net assets acquired
|
|
$
|
13,400
|
|
During fiscal 2010, the Company paid $10.4 million to the previous owners of DeltaWare in return for all of the outstanding ownership interests.
At the acquisition date, the Company was liable for future additional payments (contingent consideration) totaling up to seven million Canadian Dollars in cash over the course of the next seven years. The contingent consideration payments are based upon the achievement of profitability and sales targets over the seven year period. We determined the fair value of the liability based on a probability-weighted approach derived from managements own estimates of profitability and sales targets. At the acquisition date, we recognized an estimated liability of $3.0 million. During the 2011 fiscal year, we recognized an additional expense of $0.2 million and made a payment of $1.0 million. Any change in the estimated liability will be recognized in earnings in the period in which the change of estimate occurs.
The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based upon their estimated fair values. The excess of the acquisition date fair value of consideration over the estimated fair value of the net assets acquired was recorded as goodwill. 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 bringing new capabilities to MAXIMUS in the adjacent markets and opportunities to expand its geographic reach.
The valuation of the intangible assets acquired is summarized below (in thousands).
|
|
|
Useful life
|
|
Fair value
|
|
|
Technology-based intangibles
|
|
8.5 years
|
|
$
|
3,733
|
|
|
Customer contracts and relationships
|
|
8-10 years
|
|
1,474
|
|
|
Non-compete arrangements
|
|
4 years
|
|
239
|
|
|
Trade name
|
|
10 years
|
|
614
|
|
|
Total intangible assets
|
|
|
|
$
|
6,060
|
|
The total weighted average amortization period is 8.6 years.
The fair value of the accounts receivable balance comprises gross receivables of $2.0 million. There was no material valuation allowance against this balance at acquisition.
Of the total fair value of consideration, $7.5 million was allocated to goodwill. Goodwill is not expected to be deductible for income tax purposes.
The results of DeltaWare were not material for any periods shown.
|