Quarterly report pursuant to Section 13 or 15(d)

Business combinations

v3.4.0.3
Business combinations
 6 Months Ended
Mar. 31, 2016
Business Combinations [Abstract]  
Business combinations
Business combinations
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"), 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. The consideration is comprised of $39.3 million in cash and contingent consideration of $5.0 million, which will be earned if specific existing contracts are retained by MAXIMUS prior to December 31, 2017. 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 will be 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 $16.4 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 and the fair value of the contingent consideration.

We incurred approximately $0.4 million in acquisition related expenses to Ascend. Ascend contributed approximately $2.1 million of revenue and $0.2 million operating income for the three and six months ended March 31, 2016.

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 contracts with a specific government agency are won by MAXIMUS prior to December 2017. 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 $2.6 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 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.
    
Our provisional allocation of fair value for both the Ascend and Assessments Australia acquisitions, updated through March 31, 2016, are shown below.
 
 
Assets acquired as of respective acquisition dates
(dollars in thousands)
 
Ascend
 
Assessments Australia
Cash, net of cash acquired
 
$
39,273

 
$
2,569

Contingent consideration obligations
 
2,915

 
110

Fair value of consideration
 
$
42,188

 
$
2,679

 
 
 
 
 
Billed and unbilled receivables
 
$
4,069

 
$
507

Other assets
 
251

 
184

Property and equipment
 
660

 
206

Intangible assets
 
22,300

 
365

Total identifiable assets acquired
 
27,280

 
1,262

Accounts payable and other liabilities
 
1,502

 
674

Deferred revenue
 
—

 
479

Total liabilities assumed
 
1,502

 
1,153

Net identifiable assets acquired
 
25,778

 
109

Goodwill
 
16,410

 
2,570

Net assets acquired
 
$
42,188

 
$
2,679


The valuation of the intangible assets acquired is summarized below:
 
 
Ascend
 
Assessments Australia
(dollars in thousands)
 
Useful life
 
Fair value
 
Useful life
 
Fair value
Customer relationships
 
19 years
 
$
20,400

 
6 years
 
$
365

Trade name
 
1 year
 
1,700

 
 
 
—

Technology-based intangible assets
 
8 years
 
200

 
 
 
—

Total intangible assets
 
 
 
$
22,300

 
 
 
$
365


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 have completed our identification of tax assets and liabilities as of the acquisition date.
(dollars in thousands)
 
Updated through September 30, 2015
 
Adjustments
 
Updated through March 31, 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.