Quarterly report pursuant to Section 13 or 15(d)

Business combinations

v2.4.0.8
Business combinations
 9 Months Ended
Jun. 30, 2014
Business combinations  
Business combinations

5. 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 Company allocated the acquisition price to the fair value of the assets and liabilities of HML at the acquisition date. The Company provided estimates of these balances at September 30, 2013 and has updated these estimates as more information became available. The Company has completed this exercise and no additional changes to the acquisition date balance sheet are expected. The assets and liabilities of HML recorded in the Company’s financial statements at the acquisition date are summarized below (in thousands):

 

 

 

Purchase Price Allocation

 

 

 

Updated through
September 30, 2013

 

Adjustments

 

Updated through
June 30, 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) 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 within our Human Services segment. The results of the acquired business would not be material for any periods shown.