(5) Business Combinations, Goodwill and Other Intangible Assets

2011 Business Combinations Activity

In the first nine months of 2011, we paid $234.0 million in total for (1) new acquisitions, (2) contingent earn-out consideration for acquisitions completed in prior years, and (3) an increase in ownership in our Indian operation from 80% to 90%. We also paid $162.6 million to satisfy deferred business acquisition obligations, including $150.0 million related to the 2008 Staubach acquisition.

In the first quarter of 2011, we completed two acquisitions in the Americas and one acquisition in EMEA. In the United States, we acquired Keystone Partners, a North Carolina-based integrated real estate services firm whose services include agency leasing, investment sales, project management, tenant representation, consulting and property management. We also acquired certain assets of Atlanta-based Primary Capital™ Advisors. This acquisition gives us the ability to operate as a Freddie Mac Program Plus® Seller/Servicer and allows us to originate, sell and service commercial mortgages. In Switzerland, we acquired a Zurich-based business that focuses on capital market transactions and valuations and serves many of our existing clients.

In the second quarter of 2011, we completed two acquisitions in EMEA and we increased the ownership of our Indian operation from 80% to 90%. In April, we completed the acquisition of Bradford McCormack & Associates, one of South Africa's leading corporate property service providers, increasing our capabilities across service lines in South Africa and neighboring countries. Effective May 31, 2011, we completed the acquisition of United Kingdom-based international property consultancy King Sturge. The King Sturge acquisition greatly enhances the strength and depth of our service capabilities in the United Kingdom and in continental Europe, adding approximately 1,400 employees and 43 offices across Europe, including 24 in the United Kingdom.

In the third quarter of 2011, we completed two acquisitions. In August 2011, our Investment Management segment acquired Trinity Funds Management, an Australian property fund management business based in Brisbane, Australia, with approximately $690 million of assets under management. Also in August, we acquired Procon, an Indonesian real estate services firm. The combination of Procon's operations with our Indonesian operations creates the largest real estate services company in Indonesia, with over 300 employees and offices in Jakarta, Bali and Surabaya.

Terms for the acquisitions completed in the first nine months of 2011 included (1) cash paid at closing of approximately $221.9 million, (2) consideration subject only to the passage of time, which we recorded as deferred business acquisition obligations on our consolidated balance sheet at a current fair value of $143.5 million, and (3) additional consideration subject to earn-out provisions that will be paid only if certain conditions are achieved, which we recorded in other short-term and long-term liabilities at their current estimated fair value of $14.7 million. These acquisitions resulted in goodwill of $305.7 million and identifiable intangible assets of $44.9 million.

The initial purchase price allocation for the King Sturge acquisition is not yet complete. Terms of the acquisition agreement include a provision to make adjustments to the cash paid at closing for working capital and other assets based on a final agreed-upon set of accounts, which is still in process. We determined the fair value of deferred payments in the King Sturge acquisition based on a discount rate of 3.75%, an estimate of our borrowing rate over the five year deferred payment period. Also, a current estimate of $32 million for identifiable intangible assets is based on a preliminary valuation, the details of which primarily include trade name, customer relationships and acquired backlog. We anticipate that we will amortize these intangibles over periods ranging from seven months to ten years, with a weighted average life of six years. We anticipate that we will finalize our valuation of assets acquired and liabilities assumed by the end of 2011.

Earn-out payments

At September 30, 2011, we had the potential to make earn-out payments on 14 acquisitions that are subject to the achievement of certain future financial performance conditions. The maximum amount of the potential earn-out payments for these acquisitions was $165.2 million at September 30, 2011. These amounts could come due at various times over the next four years assuming the achievement of the applicable performance conditions.

Approximately $145.5 million of these potential earn-out payments are the result of acquisitions completed prior to the adoption of the fair value requirements for contingent consideration under ASC 805, “Business Combinations,” and thus will be recorded as additional purchase consideration if and when paid. Changes in the estimated fair value of the remaining $19.7 million of potential earn-out payments will result in increases or decreases in Operating, administration and other expenses in our results of operations.

Goodwill and Other Intangible Assets

We have $1.8 billion of unamortized intangibles and goodwill as of September 30, 2011. A significant portion of these unamortized intangibles and goodwill are denominated in currencies other than U.S. dollars, which means that a portion of the movements in the reported book value of these balances are attributable to movements in foreign currency exchange rates. The tables below detail the foreign exchange impact on intangible and goodwill balances. Of the $1.8 billion of unamortized intangibles and goodwill, we will amortize $50.1 million of identifiable intangibles over their remaining finite useful lives, and the remaining balance represents goodwill and identifiable intangibles with indefinite useful lives, which we do not amortize.

The following table sets forth, by reporting segment, the current year movements in goodwill with indefinite useful lives ($ in thousands):

	Real Estate Services
							Asia			Investment
	Americas			EMEA			Pacific			Management		Consolidated
Gross Carrying Amount
Balance as of January 1, 2011	$	897,299			336,099			193,142			18,168		1,444,708
Additions, net of adjustments		13,134			279,353			22,319			661		315,467
Impact of exchange rate movements		(332	)		(5,250	)		(2,643	)		144		(8,081	)
Balance as of September 30, 2011	$	910,101			610,202			212,818			18,973		1,752,094

The following table details, by reporting segment, the current year movements in the gross carrying amount and accumulated amortization of our identifiable intangibles ($ in thousands):

	Real Estate Services
							Asia			Investment
	Americas			EMEA			Pacific			Management			Consolidated
Gross Carrying Amount
Balance as of January 1, 2011	$	83,478			15,340			11,739			142			110,699
Additions		2,516			32,373			591			9,429			44,909
Impact of exchange rate movements		(11	)		(867	)		(118	)		(1,049	)		(2,045	)
Balance as of September 30, 2011	$	85,983			46,846			12,212			8,522			153,563
											-
Accumulated Amortization
Balance as of January 1, 2011	$	(57,200	)		(14,948	)		(9,384	)		(142	)		(81,674	)
Amortization expense		(5,622	)		(6,995	)		(1,130	)		-			(13,747	)
Impact of exchange rate movements		33			144			119			(10	)		286
Balance as of September 30, 2011	$	(62,789	)		(21,799	)		(10,395	)		(152	)		(95,135	)

Net book value as of September 30, 2011	$	23,194			25,047			1,817			8,370			58,428

Remaining estimated future amortization expense for our identifiable intangibles with finite useful lives ($ in millions):

2011	$	7.6
2012		10.9
2013		7.9
2014		6.9
2015		5.8
2016		2.5
Thereafter		8.5
Total	$	50.1