4.	Consolidated Core Companies

Acquisitions

During the year ended December 31, 2012, ICG and its consolidated subsidiaries completed several acquisitions:

(1) On March 30, 2012, ICG acquired 96% of the equity of MSDSonline; the acquisition was accounted for under the acquisition method. Accordingly, ICG allocated the purchase price to the acquired tangible and identifiable intangible assets and liabilities based upon their respective fair values at the date of acquisition.

(2) On June 29, 2012, Procurian acquired Media IQ, LLC (“Media IQ”), a media audit and benchmarking services provider, for consideration consisting of (a) $11.5 million in cash paid at closing, (b) Procurian common stock valued at $4.0 million, which is classified as a liability and included in the line items “Accrued Expenses” and “Other Liabilities” in ICG’s Consolidated Balance Sheets as of December 31, 2012, and (c) a $2.0 million deferred cash payment that is due in $1.0 million increments on the one- and two-year anniversaries of the closing date of the acquisition. Accordingly, Procurian allocated the purchase price to the acquired tangible and identifiable intangible assets and liabilities based upon their respective fair values at the date of acquisition.

(3) On July 31, 2012, Procurian, acquired Utilities Analyses, Incorporated (“UAI”), an energy procurement specialist, for $6.7 million in cash. Procurian allocated the purchase price to the acquired tangible and identifiable intangible assets and liabilities based upon their respective fair values at the date of acquisition.

(4) On December 27, 2012, ICG acquired additional equity ownership interests in SeaPass (a former equity method company) for consideration of $13.2 million, increasing ICG’s ownership interest in that company from 37.8% to 52.7%. ICG consolidated the financial position of SeaPass as of that date and accounted for the transaction as a business combination. Accordingly, ICG allocated the enterprise value of SeaPass to its tangible and identifiable intangible assets and liabilities based upon their respective estimated fair values at the date of acquisition. Additionally, ICG recorded a gain on the transaction of $25.5 million, representing the excess of ICG’s portion of the enterprise value of SeaPass over its carrying value for its prior equity interest in SeaPass as an equity method company. The primary valuation technique used to measure the acquisition date fair value of SeaPass immediately before the business combination was the backsolve option-pricing method. That gain is included in the line item “Other income (loss), net” in ICG’s Consolidated Statements of Operations for the year ended December 31, 2012. As mentioned above, ICG has estimated the allocation of the enterprise value to the acquired tangible and identifiable intangible assets and liabilities based on their respective estimated fair values at the date of acquisition. The acquisition accounting related to the SeaPass acquisition is expected to be complete by March 31, 2013.

All other acquisitions were not significant to ICG’s consolidated results.

The allocation of the purchase price for each of the above acquisitions (including allocations that are not yet finalized as of December 31, 2012) and the allocation of the enterprise value of SeaPass is as follows (in thousands):


	SeaPass			MSDSonline			Media IQ		UAI
Net assets acquired:
Goodwill	$	57,996		$	15,847		$	9,491	$	2,922
Customer lists (8-11 year life)		15,902			20,440			6,200		3,100
Technology (5-10 year life)		3,348			1,900			900		1,050
Trademarks, trade names and domain names (11-15 year life)		6,696			6,800			600		—
Non-compete agreements (3-5 year life)		2,511			3,580			268		160
Other net assets (liabilities)		(5,850	)		1,170			316		(505	)

		80,603			49,737			17,775		6,727
Noncontrolling interest ⁽¹⁾		(31,824	)		(1,355	)		—		—

	$	48,779		$	48,382		$	17,775	$	6,727

(1)

ICG estimated the fair value of the noncontrolling interest of MSDSonline with consideration of discounts for lack of control and lack or marketability. See Note 16, “Redeemable Noncontrolling Interest” with respect to MSDSonline. The amount of noncontrolling interest for SeaPass is reflected in the line item “Impact of consolidated subsidiaries transactions” on ICG’s Consolidated Statements of Changes in Equity during the year ended December 31, 2012.

Discontinued Operations

On July 11, 2012, ICG acquired additional equity ownership interests in Channel Intelligence for aggregate consideration of $2.0 million, increasing ICG’s ownership interest in that company to greater than 50%. ICG began consolidating the financial results of Channel Intelligence as of that date and accounted for the transaction as a business combination. Accordingly, ICG allocated the enterprise value of Channel Intelligence to its tangible and identifiable intangible assets and liabilities based upon their respective fair values at the date of acquisition. From July 11, 2012 to December 31, 2012, the period that Channel Intelligence was consolidated in 2012, ICG recorded $10.5 million of revenue and ICG’s share of Channel Intelligence’s net loss was $1.2 million which is included in “Income (loss) from discontinued operations” on ICG’s Consolidated Statements of Operations. The net loss included amortization expense related to intangible assets of $1.5 million that were recorded in connection with the acquisition accounting upon the consolidation of Channel Intelligence.

On February 20, 2013, the sale of Channel Intelligence to Google was consummated. Under the terms of the purchase agreement, Google acquired Channel Intelligence for $125 million in cash subject to adjustment for working capital and other items. In connection with the sale, ICG realized $60.5 million in cash, with a portion being held in escrow. The Company expects to record a gain on this transaction of approximately $17 million in the three months ended March 31, 2013. As the Company owned 52% of Channel Intelligence at December 31, 2012, a noncontrolling interest balance for minority shareholders was recorded. That non controlling interest balance of $33.9 million is included in the line item “Noncontrolling interests” on ICG’s Consolidated Balance Sheets. The Company’s Board of Directors approved the sale of Channel Intelligence in the fourth quarter of 2012. Base on this and other relevant factors, the criteria for assets held for sale/discontinued operations presentation was met prior to December 31, 2012. As such, Channel Intelligence’s results have been presented as discontinued operations for all periods presented in ICG’s Consolidated Statements of Operations. In addition, the assets and liabilities of Channel Intelligence are $7.1 million and 6.5 million, respectively, at December 31, 2012, and are presented on ICG’s Consolidated Balance Sheets as “Assets of discontinued operations” and “Liabilities of discontinued operations,” respectively. The “Assets of discontinued operations” at December 31, 2012 include $48.9 million of ICG’s goodwill and $22.4 million of ICG’s intangible assets (customer relationships of $9.5 million, trademarks/tradenames/domain names of $6.7 million, licensing and servicing agreements of $3.5 million and developed technology of $2.7 million) related to ICG’s acquisition accounting related to Channel Intelligence.

On January 29, 2013, the sale of InvestorForce to MSCI was consummated. Under the terms of the purchase agreement, MSCI acquired InvestorForce for $23.5 million in cash subject to customary closing conditions. ICG’s proceeds from the sale were approximately $20.7 million, a portion of which is being held in escrow. The Company expects to record a gain of approximately $15 million in the three months ended March 31, 2013. The Company’s Board of Directors approved the sale of InvestorForce in the fourth quarter of 2012. Based on this and other relevant factors, the criteria for assets held for sale/discontinued operations presentation was met prior to December 31, 2012. As such, InvestorForce’s results have been presented as discontinued operations for all periods presented in ICG’s Consolidated Statements of Operations. Investor Force’s revenues were $8.6 million, $7.1 million and $6.5 million for 2012, 2011 and 2010, respectively. ICG’s share of InvestorForce’s net loss was $1.4 million, $2.5 million and $2.3 million for 2012, 2011 and 2010, respectively. In addition, the assets and liabilities of InvestorForce are $3.4 million and $3.9 million, respectively, at December 31, 2012, and are presented on ICG’s Consolidated Balance Sheets as “Assets of discontinued operations” and “Liabilities of discontinued operations,” respectively.” The “Assets of discontinued operations” at December 31, 2012 and 2011 include $0.7 million of ICG’s goodwill related to InvestorForce.

On August 31, 2010, GovDelivery completed the sale of its GovDocs subsidiary for aggregate consideration of $1.8 million, which consisted of a combination of cash ($0.7 million), the redemption of shares of GovDelivery’s Series AA Preferred Stock held by the purchaser (valued at $0.8 million) and a secured promissory note (for $0.3 million, which was repaid during the year ended December 31, 2011). As a result of GovDelivery’s redemption of shares of its Series AA Preferred Stock in connection with the sale of GovDocs, ICG’s equity ownership interest in GovDelivery increased from 89% to 93% as of August 31, 2010 and resulted in a decrease to “Additional paid-in capital” on ICG’s Consolidated Balance Sheets for the year ended December 31, 2010. This decrease is included in the line item “Impact of subsidiary equity transactions” on ICG’s Consolidated Statements of Changes in Equity for the year ended December 31, 2010.

Pro Forma Information

Periodically, ICG acquires additional equity ownership interests in its consolidated companies. Equity ownership interests purchased from a consolidated company’s existing shareholders results in an increase in ICG’s controlling interest in that company and a corresponding decrease in noncontrolling interest ownership. Those transactions are accounted for as a decrease to “Noncontrolling Interest” in ICG’s Consolidated Balance Sheets and a decrease to “Additional paid-in capital” in ICG’s Consolidated Balance Sheets for the relevant period. ICG may also acquire additional equity ownership interests in its consolidated companies as a result of share issuances by those companies. An issuance of equity securities by a consolidated company that results in a decrease in ICG’s equity ownership interests is accounted for in accordance with the policy for “Principles of Accounting for Ownership Interests and Equity Method Companies” described in Note 2, “Significant Accounting Policies.”

For the year ended December 31, 2012, as reflected on the line item “Impact of Consolidated Subsidiaries Transactions” on ICG’s Consolidated Statements of Changes in Equity, non-controlling interests increased by $64.7 million primarily driven by the ownership increase and consolidation of SeaPass as described above in subsection “Acquisitions” and Channel Intelligence as described above in subsection “Discontinued Operations.” Additionally, for the year ended December 31, 2012, the “Impact of Consolidated Subsidiaries Transactions” on ICG’s Consolidated Statements of Changes in Equity is partially offset due to ICG’s acquisition of additional equity ownership interests in Procurian through ICG’s tender offer for Procurian’s shares, the purchase of Procurian common stock from former Procurian employees, the Media IQ acquisition, pursuant to which Procurian issued additional shares of common stock to both Media IQ and ICG that, together, resulted in a net reduction to ICG’s equity ownership interest percentage in Procurian, and other changes in ICG’s equity ownership interests of its consolidated core companies as a result of equity related activity at those companies. These transactions also resulted in a decrease of $0.7 million to Additional Paid-in Capital during the period.

For the year ended December 31, 2011, the “Impact of incremental acquisition of Procurian” on ICG’s Consolidated Statements of Changes in Equity is due to ICG’s acquisition of additional equity ownership interest in Procurian through the purchase of Procurian common stock from former Procurian stockholders which resulted in a decrease of $1.0 million to Additional Paid-in Capital and a decrease of $0.3 million to non-controlling interest.

The information in the following table represents revenue, net income (loss) attributable to ICG Group, Inc. and net income (loss) per diluted share attributable to ICG Group, Inc. for the relative periods, had ICG made the acquisitions noted above and owned 85%, 96%, 92%, 52% and 53% of Procurian (including its MediaIQ and UAI acquisitions), MSDSonline, GovDelivery (excluding GovDocs), CIML and SeaPass, respectively, and included their respective results in ICG’s consolidated results for the years ended December 31, 2012 and 2011, respectively.


	Year Ended December 31,
	2012		2011
	(in thousands, except for share data)

Revenue	$	183,995	$	165,551

Net income (loss) attributable to ICG Group, Inc.	$	21,511	$	27,860

Net income (loss) per diluted share attributable to ICG Group, Inc.	$	0.59	$	0.74

Dividends

On August 4, 2010, Procurian paid a cash dividend in the aggregate amount of $27.0 million on its Series E and E-1 Preferred Stock. The minority stockholders received $1.6 million, its share of the dividend based on its ownership of Procurian’s Series E and E-1 Preferred Stock. The dividend, including the equity adjustment to realign the minority stockholders ownership that resulted from the disproportionate amount received by the non-controlling interest, resulted in an increase of $3.5 million to ICG’s additional paid-in capital and a decrease of $5.1 million to the minority stockholders. Those amounts are included in the line item “Impact of subsidiary equity transactions” on ICG’s Consolidated Statements of Changes in Equity for the year ended December 31, 2010. Subsequent to the payment of the dividend, Procurian completed an equity recapitalization whereby all of Procurian’s preferred stock was converted into common stock. Following this recapitalization, ICG is entitled to receive a ratable portion of any future dividends paid to Procurian stockholders.

On December 24, 2010, Procurian paid a cash dividend in the aggregate amount of $8.0 million on its common stock. The noncontrolling interest received $1.6 million, its share of the dividend based on the 20% of Procurian’s common stock held by the noncontrolling interest at the time the dividend was declared. This payment resulted in a decrease to the noncontrolling interest of $1.6 million, which is included in the line item “Impact of subsidiary equity transactions” on ICG’s Consolidated Statements of Changes in Equity for the year ended December 31, 2010.