Quarterly report pursuant to Section 13 or 15(d)

Business Combinations

v2.4.0.8
Business Combinations
 6 Months Ended
Mar. 31, 2014
Business Combinations  
Business Combinations

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).

 

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):

 

 

 

Purchase Price Allocation

 

 

 

Updated through
September 30, 2013

 

Adjustments

 

Updated through
March 31, 2014

 

Cash consideration, net of cash acquired

 

$

71,435

 

$

—

 

$

71,435

 

Stock consideration

 

6,425

 

—

 

6,425

 

Purchase consideration, net of cash acquired

 

$

77,860

 

$

—

 

$

77,860

 

 

 

 

 

 

 

 

 

Accounts receivable and unbilled receivables

 

$

7,671

 

$

—

 

$

7,671

 

Other current assets

 

1,382

 

—

 

1,382

 

Property and equipment

 

2,752

 

—

 

2,752

 

Intangible assets

 

20,542

 

—

 

20,542

 

Total identifiable assets acquired

 

32,347

 

—

 

32,347

 

Accounts payable and other liabilities

 

6,228

 

—

 

6,228

 

Deferred revenue

 

1,149

 

—

 

1,149

 

Current income tax liability

 

612

 

144

 

756

 

Deferred tax liability

 

4,814

 

(113

)

4,701

 

Total liabilities assumed

 

12,803

 

31

 

12,834

 

Net identifiable assets acquired

 

19,544

 

(31

)

19,513

 

Goodwill

 

58,316

 

31

 

58,347

 

Net assets acquired

 

$

77,860

 

$

—

 

$

77,860

 

 

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).

 

 

 

Useful life

 

Fair value

 

Customer relationships

 

20 years

 

$

19,933

 

Technology-based intangible assets

 

2 years

 

609

 

Total intangible assets

 

 

 

$

20,542

 

 

The weighted average amortization period was 19.5 years.

 

Centacare

 

On January 31, 2014, the Company acquired certain businesses trading as Centacare for $2.7 million (3.1 million Australian Dollars) in cash. The operations of these businesses are consistent with the services provided by MAXIMUS in Australia. The Company acquired these businesses in order to expand our operations in Australia.

 

Of the purchase price, MAXIMUS allocated $3.2 million to intangible assets, representing customer relationships, and $0.5 million to deferred revenue. The intangible assets will be amortized over the anticipated lives of the customer relationships, which are approximately four years.

 

The businesses acquired with Centacare were immediately integrated into the existing MAXIMUS business. Accordingly, we are unable to accurately estimate the revenue from this acquisition. However, we believe the acquired revenue from this acquisition would not be material.