Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v2.4.0.8
Acquisitions
 9 Months Ended
Jun. 30, 2013
Acquisitions  
Acquisitions

2. Acquisitions

 

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 $79.0 million (£51.9 million). The consideration is comprised of $71.4 million (£46.9 million) in cash and 202,972 shares of MAXIMUS stock worth $7.6 million (£5.0 million) of MAXIMUS stock. In addition, the Company incurred $0.9 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 for the three and nine months ended June 30, 2013.

 

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 will be 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 consideration, net of cash acquired

 

$

71,435

 

Stock consideration

 

7,559

 

Purchase consideration, net of cash acquired

 

$

78,994

 

 

 

 

 

Accounts receivable and unbilled receivables

 

$

12,002

 

Other current assets

 

807

 

Property and equipment

 

2,740

 

Total identifiable assets acquired

 

15,549

 

 

 

 

 

Accounts payable and other liabilities

 

10,495

 

Deferred revenue

 

1,295

 

 

 

 

 

Total liabilities assumed

 

11,790

 

 

 

 

 

Net identifiable assets acquired

 

3,759

 

 

 

 

 

Goodwill and intangible assets

 

75,235

 

Net assets acquired

 

$

78,994

 

 

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 acquisition, 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.  As the Company has not completed its valuation of these assets and liabilities, it is not yet able to provide pro forma financial information related to this acquisition.

 

PSI

 

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 June 30, 2013 (below, in thousands):

 

 

 

Purchase Price Allocation

 

 

 

Updated through
September 30, 2012

 

Adjustments

 

Updated through
June 30, 2013

 

Accounts receivable and unbilled receivables

 

$

23,017

 

$

—

 

$

23,017

 

Other current assets

 

9,527

 

—

 

9,527

 

Deferred income taxes

 

1,931

 

198

 

2,129

 

Property and equipment

 

6,411

 

—

 

6,411

 

Other assets

 

1,332

 

—

 

1,332

 

Intangible assets

 

22,183

 

—

 

22,183

 

Total identifiable assets acquired

 

64,401

 

198

 

64,599

 

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

20,666

 

—

 

20,666

 

Deferred revenue

 

19,696

 

79

 

19,775

 

Total liabilities assumed

 

40,362

 

79

 

40,441

 

 

 

 

 

 

 

 

 

Net identifiable assets acquired

 

24,039

 

119

 

24,158

 

Goodwill

 

39,161

 

129

 

39,290

 

Net assets acquired

 

$

63,200

 

$

248

 

$

63,448

 

 

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 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 bringing new capabilities to MAXIMUS and the assembled workforce. Goodwill is not expected to be deductible for tax purposes.