Quarterly report pursuant to Section 13 or 15(d)

Business combinations and disposals

v3.5.0.2
Business combinations and disposals
 9 Months Ended
Jun. 30, 2016
Business Combinations [Abstract]  
Business combinations
Business combinations and disposals
K-12 Education
On May 9, 2016, MAXIMUS, Inc. sold its K-12 Education business, which was previously part of the Company’s Human Services Segment. As a result of this transaction, we recorded a gain of approximately $6.5 million in the quarter ending June 30, 2016. The sale is still subject to a working capital adjustment. The K-12 Education business contributed revenue of $2.3 million and $3.5 million for the nine months ended June 30, 2016 and 2015, respectively. Our operating profit related to the business was not material. Included within our September 30, 2015 balance sheet are total assets of $1.5 million and total liabilities of $2.7 million related to the K-12 Education business.

Ascend Management Innovations, LLC
On February 29, 2016, MAXIMUS Health Services, Inc., a wholly-owned subsidiary of MAXIMUS, Inc. acquired 100% of the share capital of Ascend Management Innovations, LLC ("Ascend") for cash consideration of $44.0 million. Ascend is a provider of independent, specialized health assessments and data management tools to government agencies in the United States. We acquired Ascend to broaden our ability to help our existing government clients deal with the rising demand for long-term care services. This business has been integrated into our Health Services Segment. Management has estimated the fair value of intangible assets acquired as $22.3 million, with an average weighted life of 18 years, and the fair value of goodwill as $18.5 million, which is expected to be deductible for tax purposes. We believe that this goodwill represents the value of the assembled workforce of Ascend, as well as the enhanced knowledge and capabilities resulting from this business combination. At this time, the purchase price is still subject to a working capital evaluation, which may result in a change to the purchase price. We have not yet completed our evaluation of the fair value of all of the assets and liabilities acquired. We anticipate concluding our evaluation, excluding taxation balances, by September 30, 2016.

    
Our updated allocation of fair value for the Ascend acquisition, updated through June 30, 2016, is shown below.
(Amounts in thousands)
 
Purchase price allocation
Cash consideration, net of cash acquired
 
$
44,010

 
 
 
Billed and unbilled receivables
 
$
4,069

Other assets
 
407

Property and equipment and other assets
 
707

Intangible assets
 
22,300

Total identifiable assets acquired
 
27,483

Accounts payable and other liabilities
 
1,414

Deferred revenue
 
554

Total liabilities assumed
 
1,968

Net identifiable assets acquired
 
25,515

Goodwill
 
18,495

Net assets acquired
 
$
44,010



The valuation of the intangible assets acquired is summarized below:

(Amounts in thousands)
 
Useful life
 
Fair value
Customer relationships
 
19 years
 
$
20,400

Trade name
 
1 year
 
1,700

Technology-based intangible assets
 
8 years
 
200

Total intangible assets
 
 
 
$
22,300



Assessments Australia

On December 15, 2015, MAXIMUS acquired 100% of the share capital of three companies doing business as "Assessments Australia." We acquired Assessments Australia to expand our service offerings within Australia. The consideration is comprised of $2.6 million in cash and contingent consideration of $0.6 million to the sellers of Assessments Australia if sufficient contracts with a specific government agency are won by MAXIMUS prior to December 2022. We have performed a probability weighted assessment of this payment. Future changes in our assessment of this liability will be recorded through the Statement of Operations. This business has been integrated into our Human Services Segment. Management has estimated goodwill and intangible assets acquired as $2.9 million and $0.4 million, respectively, but the allocation of the fair value of the consideration has not been completed at this time and the purchase price is still subject to adjustments related to working capital and the finalization of our estimate of the fair value of contingent consideration. We anticipate concluding our evaluation, excluding taxation balances, by September 30, 2016. We believe that the goodwill represents the value of the assembled workforce of Assessments Australia, as well as the enhanced capabilities which the business will provide us.
The intangible assets acquired represent customer relationships. These are being amortized on a straight-line basis over 6 years.
Acentia
On April 1, 2015 (the “acquisition date”), we acquired 100% of the ownership interests of Acentia, LLC (“Acentia”) for cash consideration of $293.5 million.
Acentia provides system modernization, software development, program management and other information technology services and solutions to the U.S. Federal Government. We acquired Acentia, among other reasons, to expand our ability to provide complementary business services and offerings across government markets. The acquired assets and liabilities have been integrated into our U.S. Federal Services Segment.
We have completed the process of allocating the acquisition price to the fair value of the assets and liabilities of Acentia at the acquisition date. During fiscal year 2016, we completed our identification of tax assets and liabilities as of the acquisition date.
(dollars in thousands)
 
Updated through September 30, 2015
 
Adjustments
 
Updated through June 30, 2016
Estimated purchase consideration, net of cash acquired
 
$
293,504

 
$
—

 
$
293,504

Billed and unbilled receivables
 
$
35,333

 
$
—

 
$
35,333

Other assets
 
5,050

 
(1,959
)
 
3,091

Property and equipment
 
2,140

 
—

 
2,140

Intangible assets — customer relationships
 
69,900

 
—

 
69,900

Total identifiable assets acquired
 
112,423

 
(1,959
)
 
110,464

Accounts payable and other liabilities
 
32,426

 
(1,076
)
 
31,350

Deferred revenue
 
251

 
—

 
251

Capital lease obligations
 
567

 
—

 
567

Deferred tax liabilities
 
—

 
6,741

 
6,741

Total liabilities assumed
 
33,244

 
5,665

 
38,909

Net identifiable assets acquired
 
79,179

 
(7,624
)
 
71,555

Goodwill
 
214,325

 
7,624

 
221,949

Net assets acquired
 
$
293,504

 
$
—

 
$
293,504


The excess of the acquisition date consideration over the fair value of the net assets acquired was recorded as goodwill. We consider the goodwill to represent the value of the assembled workforce of Acentia, as well as the enhanced knowledge and capabilities resulting from this business combination. Approximately $175.0 million of the goodwill balance is anticipated to be deductible for tax purposes.
The intangible assets acquired represent customer relationships. These are being amortized on a straight-line basis over 14 years.