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BUSINESS COMBINATIONS (Tables)

9 Months Ended

Sep. 30, 2019

Schedule of Business Acquisitions, by Acquisition

A summary of the final composition of the stated Purchase Price and fair value of the stated Purchase Price is as follows (in thousands):



Purchase Price	$	1,220,800
Working capital adjustment	(630		)
Shareholder payable adjustment	880
Subtotal	1,221,050
Fair value adjustments:
Restricted stock marketability discount	(30,000		)
Total fair value purchase price	$	1,191,050

The final composition of the fair value of the consideration transferred is as follows (in thousands):



Cash	$	1,107,220
Issuance of Class A common stock	70,000
Contingent consideration	14,460
Working capital adjustment	(630		)
Total fair value purchase price	$	1,191,050

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table summarizes the net assets acquired and liabilities assumed (in thousands):



	Fair Value
Cash and cash equivalents	$	23,850
Accounts receivable	16,739
Income tax receivable⁽²⁾	688
Prepaid expenses and other current assets	3,025
Property and equipment	3,095
Goodwill⁽¹⁾⁽²⁾	770,949
Intangible assets⁽¹⁾	490,000
Other assets	1,252
Accounts payable and accrued expenses	(6,863		)
Deferred revenue	(7,000		)
Other current liabilities	(507		)
Other liabilities	(5,291		)
Deferred tax liabilities⁽²⁾	(98,887		)
Total consideration transferred	$	1,191,050

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(1)	The Company allocated a portion of the goodwill associated with the ABILITY Acquisition to the Inovalon reporting unit based on expected revenue synergies. As a result, the fair value of the customer relationships intangible asset was adjusted by $23.0 million.

(2)

The Company recognized a net purchase accounting adjustment of $1.8 million resulting in a decrease to goodwill. This adjustment was driven by a $7.5 million decrease to deferred tax liabilities primarily attributable to the tax impact related to the reduction to the fair value of the customer relationships intangible assets and an adjustment to income tax receivable of $0.2 million. These reductions to goodwill were partially offset by a $5.0 million increase in deferred tax liabilities related to tax basis goodwill and provision-to-tax adjustments from ABILITY’s 2017 tax return filings and an adjustment of $0.9 million to the shareholder payable attributable to the ABILITY Acquisition.

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination

The amounts attributed to identified intangible assets are summarized in the table below (in thousands):



	Estimated Useful Life	Fair Value		Measurement Period Adjustments			Adjusted Fair Value
Customer relationships	12-14 years	$	408,000	$	(23,000	)	$	385,000
Technology	12-14 years	86,000		—			86,000
Trade names	16-18 years	19,000		—			19,000
Total intangible assets		$	513,000	$	(23,000	)	$	490,000

Business Acquisition, Pro Forma Information

The following consolidated pro forma financial information is unaudited and gives effect to the transactions as if they had occurred on January 1, 2018 (in thousands):



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Revenue	$	145,809		$	428,726
Loss before taxes	$	(19	)	$	(43,638	)

The following table presents revenue and income before taxes of ABILITY, included in the consolidated statements of operations (in thousands):



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Revenue	$	37,922		$	75,442
Income before taxes	$	(7,547	)	$	(1,749	)