NOTE 3—ACQUISITION

Alsbridge Acquisition

On December 1, 2016 (the “Alsbridge Acquisition Date”), a wholly-owned subsidiary of Information Services Group, Inc. (“ISG” or the “Company”) executed an Agreement and Plan of Merger (the “Alsbridge Agreement”), by and among Alsbridge Holdings, Inc., a Delaware corporation (“Alsbridge”), ISG Information Services Group Americas, Inc., a Texas corporation (“Parent”), Gala Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“Acquisition Sub”), and LLR Equity Partners III, L.P., solely in its capacity as representative of the equity holders of Alsbridge, pursuant to which Acquisition Sub merged with and into Alsbridge with Alsbridge becoming an indirect wholly-owned subsidiary of ISG (the “Merger”).

Under the terms of the Alsbridge Agreement, Parent paid to the former security holders of Alsbridge merger consideration with an aggregate value equal to approximately $74.0 million, consisting of $56.0 million in cash, an aggregate of $7.0 million in unsecured subordinated promissory notes and 3.2 million shares of ISG’s common stock, par value $0.001 per share (“ISG Stock”) (collectively, the “Merger Consideration”). The stockholders of Alsbridge also could receive contingent consideration in an aggregate amount up to approximately $2.5 million based upon the collection of certain accounts receivable. The fair value of this contingent consideration has been determined to be $1.5 million. Pursuant to the terms of the Alsbridge Agreement, Alsbridge will indemnify the Company for uncertain tax positions and tax liabilities that were incurred by Alsbridge. The Company has recorded these tax liabilities and related indemnification asset in the amount of $2.0 million as of the acquisition date. This was a complementary acquisition which combines ISG research, digital, sourcing and managed services with Alsbridge’s network carrier services, robotic process automation and incremental sourcing advisory capabilities. The combined firm will offer a broader range of services, deeper proprietary data and market intelligence, and more extensive expertise to help enterprise, government, and service and technology provider clients leverage digital technologies to achieve operational excellence.

The purchase price has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the Alsbridge Acquisition Date. The purchase price allocation was based upon a valuation completed by third-party valuation specialists using an income approach and estimates and assumptions provided by management. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. The $45.0 million allocated to goodwill is not deductible for tax purposes.

The following table summarizes the consideration transferred to acquire Alsbridge and the amounts of identified assets acquired and liabilities assumed as of the Alsbridge Acquisition Date:

The final allocable price consists of the following:


Cash	$	56,000
Contingent consideration		1,456
Note payable(1)		6,810
Common stock(2)		10,944
Total allocable purchase price	$	75,210

(1)Note discounted at market rate

(2)3,200,000 shares issued at $3.42 per share as part of the Merger.

Recognized amounts of identifiable assets acquired and liabilities assumed as of the Alsbridge Acquisition Date:


Cash	$	2,674
Accounts and other receivable		16,767
Other assets		5,856
Intangible assets		25,246
Accounts payable		(733)
Deferred income tax liability of acquired intangible assets		(9,593)
Accrued expenses and other		(9,352)
Net assets acquired	$	30,865

Goodwill	$	44,345

Acquisition-related costs associated with this Merger are included in the selling, general and administrative expenses in the Consolidated Statement of Comprehensive Income and totaled $3.5 million for the year ended December 31, 2016. This business combination was accounted for under the acquisition method of accounting, and as such, the aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities assumed based on estimated fair values as of the closing date. During 2017, the Company recorded a $0.6 million adjustment to the purchase price allocation, which was the result of a correction of an error in the pre-acquisition deferred tax calculation. The impact was not material to the Consolidated Statement of Comprehensive Income and the Company did not consider the amount material to prior periods. As such, the correction for this error was made during the year ended December 31, 2017. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:


	Purchase Price
	Allocation		Asset Life
Amortizable intangible assets:
Customer relationships	$	17,316	15	years
Non-compete		239	5	years
Databases		7,691	15	years
Total intangible assets	$	25,246

The Condensed Consolidated Statements of Comprehensive Income includes the results of the Alsbridge acquisition subsequent to the closing. Alsbridge contributed revenues of $5.5 million and net income of $0.1 million for the year ended December 31, 2016. The following unaudited pro forma financial information for the years ended December 31, 2016 and 2015, assumes that the acquisitions of Alsbridge occurred at the beginning of the periods presented. The unaudited proforma financial information is presented for information purposes only. Such information is based upon the stand alone historical results of each company and does not reflect the actual results that would have been reported had the acquisitions been completed when assumed, nor is it indicative of the future results of operations for the combined enterprise.


	Year Ended
	December 31,
	2016		2015
	(unaudited)
Revenue	$	269,161	$	279,108
Net (loss) income	$	(5,528)	$	6,780