Business Acquisitions

9 Months Ended

Sep. 30, 2020

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology, and acquire skilled personnel.

The Company completed the following acquisitions during the first nine months of fiscal 2020, paying the purchase price in cash in each transaction: (a) an asset purchase of EDC Systems Inc. (operating under the name “SRFax”), acquired on February 18, 2020, a Canadian-based provider of fax solutions; and (b) other immaterial acquisitions of Digital Media and Martech businesses.

The Condensed Consolidated Statement of Operations since the date of each acquisition and balance sheet as of September 30, 2020, reflect the results of operations of all 2020 acquisitions. For the nine months ended September 30, 2020, these acquisitions contributed $5.9 million to the Company’s revenues. Net income contributed by these acquisitions was not separately identifiable due to J2 Global’s integration activities and is impracticable to provide. Total consideration for these transactions was $39.1 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the allocation of the purchase consideration for these acquisitions (in thousands):


Assets and Liabilities		Valuation
Accounts receivable	$	875
Prepaid expenses and other current assets		91
Property and equipment		53
Operating lease right of use asset		113
Trade names		1,527
Customer relationships		10,681
Goodwill		23,817

Other intangibles		5,272


Accounts payable and accrued expenses		(373)
Deferred revenue		(2,390)
Operating lease liabilities, current		(95)


Operating lease liabilities, non-current		(19)


Deferred tax liability		(405)


Total	$	39,147

During the nine months ended September 30, 2020, the purchase price accounting has been finalized for Highwinds Capital, Inc. and Cloak Holdings, LLC, OffsiteDataSync, Inc., BabyCenter LLC, Spiceworks, Inc., and immaterial digital media and consumer privacy and protection businesses. The initial accounting for all 2020 acquisitions is incomplete and subject to change, which may be significant. J2 Global has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.

During the nine months ended September 30, 2020, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Voice, Backup, Security and CPP businesses which resulted in a net decrease in goodwill of $2.1 million. In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net increase in goodwill of $9.7 million (see Note 8 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2020.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2020 is $23.8 million, of which $22.6 million is expected to be deductible for income tax purposes.