Product and Business Acquisitions

6 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Product and Business Acquisitions

Note 4—Product and Business Acquisitions

Fiscal 2015 Acquisitions

Arian

On November 21, 2014, we acquired UK-based Arian Software Limited (Arian) for a cash payment of £2.3 million (approximately $3.5 million based on exchange rates in effect at the acquisition date) and 60,000 shares of our common stock. The common stock component of the purchase consideration was issued to certain equity holders of Arian who are now Bottomline employees. The common stock is subject to a vesting schedule tied to continued employment; as such we will record share-based payment expense over the underlying stock vesting period of four years. Arian a long-term partner, provides technology used in our financial messaging business. In the allocation of the purchase price we recognized $2.4 million of goodwill which is not deductible for income tax purposes. The goodwill arose principally due to anticipated future benefits arising from the acquisition. Identifiable intangible assets of $1.5 million, consisting of acquired technology and certain customer related intangible assets are being amortized over estimated useful lives of twelve years and nine years, respectively. Arian’s operating results have been included in the results of the Hosted Solutions segment from the date of the acquisition forward and did not have a material impact on our revenue or earnings.

Litco

On July 9, 2014, we acquired substantially all of the assets and assumed certain liabilities of Litco Systems Inc. (Litco) for $0.7 million in cash. Litco is a long-time reseller and integration partner of document automation products, principally in the Canadian marketplace. Customer related intangible assets are being amortized over an estimated useful life of six years. Litco’s operating results have been included in the results of the Payments and Transactional Documents segment from the date of the acquisition forward and did not have a material impact on our revenue or earnings.

Acquisition expenses of approximately $0.2 million were expensed during the six months ended December 31, 2014 related to the Arian and Litco acquisitions, principally as a component of general and administrative expense.

Fiscal 2014 Acquisitions

Andera

On April 3, 2014, we acquired Andera, Inc. (Andera) for purchase consideration of $42.8 million in cash. We also issued 102,158 shares of our common stock to certain equity holders of Andera. These shares have vesting conditions tied to continuing employment, and, as such, the shares are compensatory and we will recognize share based payment expense over the underlying vesting period. The accounting purchase price also includes $0.2 million related to unvested Andera stock options that we assumed in the acquisition. This amount reflects the fair value of the underlying awards that relate to pre-acquisition service periods.

At December 31, 2014, we were still finalizing our estimates of fair value for certain assets acquired and liabilities assumed. Accordingly, the purchase price allocation that follows is preliminary and subject to change as we finalize our fair value estimates. The preliminary allocation of the Andera acquisition purchase price as of December 31, 2014 is as follows:

	(in thousands)
Current assets	$	2,157
Property and equipment		1,226
Customer related intangible assets		13,749
Core technology		7,429
Other intangible assets		623
Goodwill		26,417
Current liabilities		(5,327	)
Other liabilities		(3,294	)
Total purchase price	$	42,980

In addition, during fiscal 2014, we completed several other business acquisitions. Please refer to our disclosures included in the Annual Report on Form 10-K as filed with the SEC on August 28, 2014.

The valuation of acquired intangible assets for our acquisitions was estimated by performing projections of discounted cash flow, whereby revenues and costs associated with each intangible asset are forecasted to derive expected cash flow which is discounted to present value at discount rates commensurate with perceived risk. The valuation and projection process is inherently subjective and relies on significant unobservable inputs (Level 3 inputs). The valuation assumptions also take into consideration our estimates of contract renewal, technology attrition and revenue projections.