Note 2. Acquisitions

Qelp Acquisition

On July 2, 2015, the Company’s wholly-owned subsidiaries, Sykes Enterprises Incorporated B.V. and Sykes Enterprises Incorporated Holdings B.V., both Netherlands companies, entered into a definitive Share Sale and Purchase Agreement (the “Purchase Agreement”) with MobileTimes B.V., Yarra B.V., From The Mountain Consultancy B.V. and Sticting Administratiekantoor Qelp (the “Sellers”), all of which are Netherlands companies, to acquire all of the outstanding shares of Qelp B.V. and its wholly owned subsidiary (together, known as “Qelp”.) The strategic acquisition of Qelp (the “Qelp acquisition”) was to further broaden and strengthen the Company’s service portfolio around digital self-service customer support and extend its reach into adjacent, but complementary, markets. Pursuant to Federal income tax regulations, no amount of intangibles or goodwill from this acquisition will be deductible for tax purposes. The results of Qelp’s operations have been included in the Company’s consolidated financial statements since its acquisition on July 2, 2015 (the “acquisition date”).

The consideration consists of an initial purchase price and a contingent purchase price. The initial purchase price of $9.8 million, including certain post-closing adjustments relating to Qelp’s working capital, was funded through cash on hand upon the closing of the transaction on July 2, 2015. The contingent purchase price to be paid over a three-year period is based on achieving targets tied to revenues and earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the years ended December 31, 2016, 2017 and 2018, not to exceed EUR 10.0 million.

As of the acquisition date, the total consideration paid or to be paid by the Company for the Qelp acquisition is summarized below (in thousands):


	Total
Cash	$	9,885
Contingent consideration		6,000
Working capital adjustment		(65	)

	$	15,820

The fair value of the contingent consideration was estimated using the discounted cash flow method, and was included in “Other long-term liabilities” in the accompanying Consolidated Balance Sheet (see Note 4, Fair Value, for further information). As part of the discounted cash flow method, the Company calculated an adjusted weighted average cost of capital (“WACC”) specifically attributable to the future payments of the contingent consideration. Based on the forecasted revenue and profitability scenarios and their respective probabilities of occurrence, the Company estimated the present value of the probability-adjusted future payments utilizing an adjusted WACC for the potential future payments. The Company believes that its estimates and assumptions are reasonable, but there is significant judgment involved. Changes in the fair value of the contingent consideration liabilities subsequent to the acquisition will be recorded in the Company’s Consolidated Statements of Operations.

The Company accounted for the Qelp acquisition in accordance with ASC 805 (“ASC 805”) “Business Combinations,” whereby the fair value of the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed from Qelp based on their estimated fair values as of the closing date. The Company completed its analysis of the purchase price allocation during the fourth quarter of 2015.

The following table summarizes the estimated acquisition date fair values of the assets acquired and liabilities assumed, all included in the EMEA segment (in thousands):


	July 2, 2015 (As Initially Reported)			Measurement Period Adjustments			July 2, 2015 (As Adjusted)
Cash and cash equivalents	$	450		$	—		$	450
Receivables ⁽¹⁾		1,541			(70	)		1,471
Prepaid expenses		24			—			24

Total current assets		2,015			(70	)		1,945
Property and equipment		2,168			—			2,168
Goodwill		9,574			480			10,054
Intangibles		6,000			—			6,000
Deferred charges and other assets		55			—			55

Short-term debt		(323	)		—			(323	)
Accrued employee compensation and benefits		(207	)		—			(207	)
Income taxes payable		(62	)		(32	)		(94	)
Deferred revenue		(967	)		—			(967	)
Other accrued expenses and current liabilities		(1,030	)		—			(1,030	)

Total current liabilities		(2,589	)		(32	)		(2,621	)
Other long-term liabilities ⁽²⁾		(1,403	)		(378	)		(1,781	)

	$	15,820		$	—		$	15,820

⁽¹⁾	The fair value equals the gross contractual value of the receivables.

⁽²⁾	Primarily includes long-term deferred tax liabilities.

Fair values are based on management’s estimates and assumptions including variations of the income approach, the cost approach and the market approach.

The following table presents the Company’s purchased intangibles assets as of July 2, 2015, the acquisition date (in thousands):


	Amount Assigned		Weighted Average Amortization Period (years)
Customer relationships	$	5,400		7
Trade name and trademarks		100		3
Content library		500		2

	$	6,000		7

The amount of Qelp’s revenues and net (loss) since the July 2, 2015 acquisition date, included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2015 were as follows (in thousands):


	From July 2, 2015 Through December 31, 2015
Revenues	$	2,661

Net (loss)	$	(162	)

Merger and integration costs associated with Qelp included in “General and administrative” costs in the accompanying Consolidated Statement of Operations in the Other segment for the year ended December 31, 2015 were as follows (none in 2014 and 2013) (in thousands):


	Year Ended December 31, 2015
Transaction costs	$	455

Alpine Acquisition

The Company acquired 100% of the outstanding common shares and voting interest of Alpine Access, Inc. (“Alpine”) in August 2012.

Merger and integration costs associated with Alpine were as follows (none in 2015 and 2014) (in thousands):


	Year Ended December 31, 2013
Severance costs included in “Direct salaries and related costs”: ⁽¹⁾
Americas	$	526

		526

Severance costs included in “General and administrative”: ⁽¹⁾
Americas		985
Other		159

		1,144

Transaction and integration costs included in “General and administrative”: ⁽¹⁾
Other		444

		444


Total merger and integration costs	$	2,114

⁽¹⁾	In the accompanying Consolidated Statements of Operations.