Annual report pursuant to Section 13 and 15(d)

Acquisition

v2.3.0.15
Acquisition
12 Months Ended
Sep. 30, 2011
Acquisition  
Acquisition

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 Company’s Health Services segment.

 

The estimated acquisition date fair value of consideration transferred, assets acquired and liabilities are presented below and represent management’s 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 management’s 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.