Note 6 - Business Combinations

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE

6

—BUSINESS COMBINATIONS

Trade NTE

In

November

2016,

the Company acquired Trade NTE, LLC. (“Trade NTE”), a Georgia-based company specializing in strategic marketing and branding services. The acquisition enhanced the Company’s branding services through effective engagements between clients and customers. The acquisition was immaterial to the Company’s financial statements taken as a whole.

Olson

I

n

November

2014,

the Company completed the acquisition of OCO Holdings, Inc. and its various subsidiaries, including Olson + Co., Inc. (collectively, “Olson”), a leading provider of marketing technology and digital services based in Minneapolis, Minnesota. As a result of the acquisition, Olson became a wholly owned subsidiary of the Company. The aggregate purchase price of approximately

$298.2

million in cash was funded by the Company’s Credit Facility (as defined in “Note

9

– Long-Term Debt” below). The acquisition expanded the Company’s existing digital technology and strategic communications work and strengthened its ability to bring more integrated solutions to an expanded client base, including multi-channel marketing initiatives across web, mobile, email, social, print, broadcast and off-premise platforms.

The

acquisition was accounted for under the acquisition method. The allocation of the total purchase price to the tangible and intangible assets and liabilities of Olson was based on management’s estimate of fair value as of the acquisition date and was completed in the

fourth

quarter of

2015.

The Company engaged an independent valuation firm to assist management in the allocation of the purchase price to goodwill and to other acquired intangible assets. The excess of the purchase price over the estimated fair value of the net tangible assets acquired was approximately

$293.4

million. The Company has allocated approximately

$228.5

million to goodwill and

$64.9

million to other intangible assets. The goodwill recorded as part of the acquisition primarily reflects the value of providing an established platform to leverage the Company’s existing digital interactive technologies and domain expertise, synergies expected to arise from providing end-to-end customer solutions to a combined client-base across all channels, as well as any intangible assets that do not qualify for separate recognition. The weighted average amortization period for the amount allocated to other intangible assets in total is

9.6

years from the acquisition date. The intangible assets consist of approximately

$60.3

million of customer-related intangibles that are being amortized over

10.2

years from the acquisition date,

$4.0

million of marketing-related intangibles that were amortized over

1.2

years from the acquisition date, and

$0.6

million of developed technology intangibles that are being amortized over

6.2

years from the acquisition date. Olson was a stock purchase for tax purposes; therefore, goodwill and amortization of other intangibles created via this acquisition are not deductible for income tax purposes.

During the year ended

December

31,

2015,

the Company recorded an increase to goodwill of $

3.4

million related to measurement-period adjustments to the preliminary purchase price allocation. The measurement-period adjustments were primarily related to reductions of

$7.3

million and

$5.9

million to the valuation of fixed assets and accrued expenses and other liabilities, as well as a

$1.8

million holdback adjustment that increased the purchase price to

$298.2

million. Goodwill adjustments were not significant to our previously reported operating results or financial position.

The results of operations of the Olson acquisition are included in the Company

’s consolidated statements of comprehensive income for the year ended

December

31,

2016

and

2015.

For the year ended

December

31,

2014,

Olson contributed net revenues of

$23.0

million and net earnings of

$2.2

million since the acquisition date of

November

5,

2014

,

excluding transaction-related acquisition costs of

$1.6

million, as well as interest expense, amortization of intangible assets resulting from the acquisition, stock-based compensation expense, corporate allocations and integration costs.

The following unaudited condensed pro forma information presents combined financial information as if the acquisition of

Olson had been effective at the beginning of fiscal year

2013.

As a result, fiscal year

2014

represents the pro forma results for year

two

of the acquisition. The pro forma information includes adjustments reflecting changes in the amortization of intangibles, stock-based compensation expense,

and interest expense, an adjustment to eliminate

$2.6

million of operating income related to the reduction of an Olson contingent liability that was settled as a result of the acquisition and records income tax effects as if Olson had been included in the Company’s results of operations.

Pro forma Information for the

Year Ended

December

 

31

,

(Unaudited)

	2014
Revenue	$	1,167,787
Operating income		78,518
Net income		42,461
Earnings per share:
Basic earnings per share	$	2.17
Diluted earnings per share	$	2.12

CityTech

In

March

2014,

the Company acquired CityTech, Inc. (“CityTech”), a Chicago-based digital interactive consultancy specializing in enterprise applications development, web experience management, mobile application development, cloud enablement, managed services, and customer experience management solutions. The acquisition added expertise to the Company

’s content management capabilities and complemented its digital and interactive business. During the

first

quarter of

2015,

the Company finalized its valuation of the assets acquired and liabilities assumed as a result of the acquisition. The purchase was immaterial to the Company’s financial statements taken as a whole.

Mostra

In

February

2014,

the Company completed its acquisition of Mostra SA (“Mostra”), a strategic communications consulting company based in Brussels, Belgium. Mostra

offered end-to-end, multichannel communications solutions to assist government and commercial clients, in particular the European Commission. The acquisition extended the Company’s strategic communications capabilities globally to complement its policy work and enhanced its strategy of providing a full suite of services that leverages its research and advisory services. During the

first

quarter of

2015,

the Company finalized its valuation of the assets acquired and liabilities assumed as a result of the acquisition. The purchase was immaterial to the Company’s financial statements taken as a whole.