(2) Acquisitions and Divestitures

Sunwin Services Group Acquisition

On November 3, 2014, the Company completed the acquisition of Sunwin Services Group, (“Sunwin”) in the U.K., a subsidiary of the Co-operative Group, for aggregate cash consideration of £41.5 million, or $66.4 million. Sunwin’s primary business is providing secure cash logistics and ATM maintenance services to ATMs and other services to retail locations. The Company also acquired approximately 2,000 ATMs from Co-op Bank and secured an exclusive ATM placement agreement to operate ATMs at Co-operative Food locations. The Company has accounted for these transactions as if they were all related due to the timing of the transactions being completed and the dependency of the transactions on each other. The Company completed the purchase accounting for Sunwin in June 2015. On July 1, 2015, the Company completed the divestiture of its retail cash-in-transit operation in the U.K. This business was primarily engaged in the collection of cash from retail locations and was originally acquired through the Sunwin acquisition completed in November 2014. The Company recognized divestiture proceeds at their estimated fair value of $39 million in 2015. The net pre-tax gain recognized on this transaction was $1.8 million and $16.6 million in the years ended December 31, 2016 and 2015, respectively. The Company completed the purchase accounting in the fourth quarter of 2016, recognizing no additional adjustments to the preliminary opening balance sheet.

Columbus Data Services, L.L.C. Acquisition

On July 1, 2015, the Company completed the acquisition of Columbus Data Services, L.L.C. (“CDS”) for total purchase consideration of $80.6 million. CDS is a leading independent transaction processor for ATM deployers and payment card issuers, providing leading-edge solutions to ATM sales and service organizations and financial institutions. CDS operates as a separate division of the Company. The total purchase consideration for CDS was allocated to the assets acquired and liabilities assumed, including identifiable tangible and intangible assets, based on their respective fair values estimated at the date of acquisition. The estimated fair values of the intangible assets included the acquired customer relationships’ valued at $16.5 million, technology valued at $7.8 million, and other intangible assets valued at $1.7 million. Intangible values were estimated utilizing primarily a discounted cash flow approach, with the assistance of an independent appraisal firm. The tangible assets acquired included property and equipment, and were recorded at their estimated fair value of $4.6 million, utilizing the market and cost approaches. The purchase consideration allocation resulted in goodwill of $52.7 million. The Company completed the purchase accounting for CDS in the first quarter of 2016, recognizing no additional adjustments to the preliminary opening balance sheet. All of the goodwill and intangible asset amounts are expected to be deductible for income tax purposes.

On April 13, 2016, the Company completed the acquisition of a 2,600 location ATM portfolio in the U.S. from a major financial institution. This acquisition was affected through multiple closings taking place primarily in April 2016. The total purchase consideration of approximately $13.8 million was paid in installments corresponding to each close. In conjunction with this transaction, the Company recognized property and equipment of $8.3 million, contract intangibles and prepaid merchant commissions of $7.1 million, and asset retirement obligations of $1.6 million. The Company completed the purchase accounting in the fourth quarter of 2016, recognizing no additional adjustments to the preliminary opening balance sheet.

DirectCash Payments Inc. Acquisition

On January 6, 2017, the Company completed the acquisition of DCPayments, whereby DCPayments became a wholly-owned indirect subsidiary of the Company. In connection with the closing of the acquisition, each DCPayments common share was acquired for Canadian Dollars $19.00 in cash per common share, and the Company also repaid the outstanding third-party indebtedness of DCPayments, the combined aggregate of which represented a total transaction value of approximately $658 million Canadian Dollars (approximately $495 million U.S. dollars). The total amount paid for the acquisition at closing was financed with cash on hand and borrowings under the Company’s revolving credit facility.

As a result of the DCPayments acquisition, the Company significantly increased the size of its Canada, Mexico, and U.K. operations and entered into the Australia and New Zealand markets. With this acquisition, the Company added approximately 25,000 ATMs to its global ATM count.

On September 22, 2017, the U.K. Competition and Markets Authority (the “CMA”) completed its regulatory review and approved the merger of the DCPayments U.K. business with the Company’s existing U.K. operations. Prior to the CMA approval, the DCPayments U.K. business operated separately from the Company’s existing U.K. operations with the DCPayments pre-acquisition management running the business independently from the Company’s management. The Company is in the process of integrating its existing U.K. operations with the DCPayments U.K. operations.

The results of DCPayments operations have been included in the accompanying Consolidated Statements of Operations subsequent to the January 6, 2017 acquisition date and disclosure of the associated 2017 revenue and earnings is impracticable given the level of integration achieved during 2017. The income from operations includes $17.8 million and $4.0 million of acquisition-related expenses in the years ended December 31, 2017 and 2016.

The DCPayments acquisition was accounted for as a business combination using the purchase method of accounting under the provisions of Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). In accordance with ASC 805, all assets acquired and liabilities assumed have been recorded at their estimated fair value as of the acquisition date and any excess of the purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed has been recognized as goodwill. The Company completed its fair value purchase allocation and purchase accounting in December 2017, which resulted in a goodwill allocation of approximately $300.3 million, of which $107.4 million, $51.3 million, and $141.6 million has been assigned to the Company’s North America, Europe & Africa, and Australia & New Zealand reporting segments, respectively. The recognized goodwill was primarily attributable to expected revenue and cost synergies from the acquisition. None of the goodwill or intangible asset amounts are expected to be deductible for income tax purposes; however, the Company acquired certain tax assets in the form of accumulated net operating loss carryforwards and capital allowances, which at the date of acquisition the Company expected to utilize.

The following table summarizes the final estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:


	(In thousands)
Cash and cash equivalents	$	28,227
Accounts and notes receivable		14,841
Inventory		977
Restricted cash		2,475
Prepaid expenses, deferred costs, and other current assets		3,157
Property and equipment		68,842
Intangible assets		182,075
Goodwill		300,266
Prepaid expenses, deferred costs, and other noncurrent assets		674
Total assets acquired	$	601,534

Current portion of other long-term liabilities	$	10,852
Accounts payable and other current liabilities		51,453
Asset retirement obligations		8,906
Deferred tax liability		23,213
Other long-term liabilities		11,631
Total liabilities assumed	$	106,055

Net assets acquired	$	495,479

The fair values of intangible assets acquired were estimated utilizing an income approach, with the assistance of an independent appraisal firm. The acquired intangible assets are being amortized on a straight-line basis, over the estimated lives. At the date of the acquisition the estimated fair values consisted of the following:


	Fair Values		Estimated Useful Lives
	(In thousands)
Merchant contracts/relationships	$	171,382		8 years
Trade names: definite-lived		10,693		3 years
Total intangible assets acquired	$	182,075

Pro Forma Results of Operations - unaudited

The following table presents certain unaudited pro forma combined results of operations of the Company and the acquired DCPayments operations for the year ended December 31, 2016, after giving effect to certain pro forma and conforming accounting adjustments including: (i) amortization of acquired intangible assets, (ii) the impact of certain fair value adjustments such as depreciation on the acquired property and equipment, (iii) an interest expense adjustment for the net impact of the removal of the interest expense on the historical long-term debt of DCPayments that was repaid and the new interest expense on additional borrowings incurred by the Company to fund the acquisition, and (iv) a conforming adjustment to recognize certain DCPayments surcharge revenues on a gross basis (not reduced by merchant commission payments), consistent with the Company policy and practice, and other less significant conforming accounting adjustments.


	Year Ended
	December 31, 2016
	As Reported		Pro Forma
			(Unaudited)
	(In thousands, excluding per share amounts)
Total revenues	$	1,265,364	$	1,530,072
Net income attributable to controlling interests and available to common shareholders		87,991		80,945

Net income per common share – basic	$	1.95	$	1.79
Net income per common share – diluted	$	1.92	$	1.77

The unaudited pro forma combined results of operations for the year ended December 31, 2016, reflected in the table above, do not include the impact of other acquisitions completed since December 31, 2016, as these transactions did not have a material impact on the overall consolidated financial statements. This unaudited pro forma combined results of operations do not reflect the impact of any potential operating efficiencies, savings from expected synergies, or costs to integrate the operations. The unaudited pro forma combined results of operations are not necessarily indicative of the future results to be expected for the Company’s consolidated results of operations. As discussed in Note 1. Basis of Presentation and Summary of Significant Accounting Policies — (m) Goodwill, the Company recognized significant impairment charges related to the acquired Australia operations during the year ended December 31, 2017.

Other Acquisitions

On January 31, 2017, the Company completed the acquisition of Spark ATM Systems Pty Ltd. (“Spark”), an independent ATM deployer in South Africa, with a growing network of approximately 2,300 ATMs. The initial purchase consideration of approximately $19.5 million was paid in cash. In addition to the initial consideration, the total purchase price also includes potential additional contingent consideration of up to approximately $59.6 million at the January 31, 2017 foreign currency exchange rate. The contingent consideration will vary based upon performance relative to certain agreed upon earnings targets in 2019 and 2020 and would be payable to the previous investors in the business. The estimated acquisition date fair value of the contingent consideration was approximately $34.8 million, at the January 31, 2017 foreign currency exchange rate, as determined with the assistance of an independent appraisal firm using forecasted future financial projections and other Level 3 inputs (for additional information related to the Company’s fair value estimates see Note 16. Fair Value Measurements). During the year ended December 31, 2017, the Company recorded expenses of $3.9 million, in the Other expense line item in the accompanying Consolidated Statements of Operations related to changes in the estimated fair value of the contingent consideration arrangement. In future periods, the Company may record additional expense or may reduce its expense to account for revisions to the amount expected to be paid related to the contingent payment element, which will vary based on actual and expected performance. In conjunction with the transaction, the Company recognized property and equipment of approximately $5.3 million, intangible assets of $2.8 million, Asset Retirement Obligations (“ARO”) of approximately $0.4 million, other net liabilities of approximately $1.5 million, and goodwill of approximately $48.2 million. The Company completed the purchase accounting for this acquisition during the fourth quarter of 2017.