Acquisitions

9 Months Ended

Jun. 30, 2021

4.	Acquisitions

The results of operations of acquisitions are included in the accompanying unaudited condensed consolidated financial statements from the acquisition date. The purchase price of acquisitions was allocated to identifiable tangible assets and intangible assets acquired based on their estimated fair values at the acquisition date, with the excess being allocated to goodwill. Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on information currently available.

Tom George Yacht Group Acquisition

On December 1, 2020, we acquired substantially all of the assets of Tom George Yacht Group (“TGYG”) with two locations in Florida. TGYG enhances the Company’s presence on the west coast of Florida and expands new and pre-owned boat sales, as well as yacht brokerage, service and parts. The purchase price was $10.2 million with $8.2 million paid at closing and $2.1 million financed through a note payable to the seller bearing interest at a rate of 5.5% per year. The note is payable in one lump sum three years from the closing date, with interest payments due quarterly.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill recorded as a result of the transaction:

Summary of Assets Acquired and Liabilities Assumed	($ in thousands)
Accounts receivable	$	109
Inventories		5,326
Prepaid expenses		18
Property and equipment		341
Identifiable intangible assets		2,940
Goodwill		6,854
Accrued expenses		(3	)
Customer deposits		(1,322	)
Notes payable – floor plan		(4,016	)
Total purchase price	$	10,247

Walker Marine Group Acquisition

On December 31, 2020, we acquired substantially all of the assets of Walker Marine Group (“Walker”) with five locations in Florida. The acquisition enhances the Company’s presence on the southwest coast of Florida and expands new and pre-owned boat sales, as well as finance and insurance services, service and parts. The purchase price was $35.2 million with $29.7 million paid at closing and an estimated payment of contingent consideration of $5.5 million. The estimated contingent consideration is part of an earnout subject to achievement of certain post-acquisition increases in adjusted EBITDA. The acquisition contingent consideration was determined using weighted average projections for the estimated post-acquisition adjusted EBITDA and was based on the Company’s historical experience with acquisitions as well as current forecasts for the industry. The minimum payout due on the acquisition contingent consideration is $0.2 million. The maximum amount of the earnout is unlimited.

The table below summarizes the fair values of the assets acquired at the acquisition date, including the goodwill recorded as a result of the transactions:

Summary of Assets Acquired	($ in thousands)
Accounts receivable	$	129
Inventories		8,481
Prepaid expenses		39
Property and equipment		503
Identifiable intangible assets		8,230
Goodwill		28,658
Accounts payable		(213	)
Customer deposits		(3,033	)
Notes payable – floor plan		(7,563	)
Total purchase price	$	35,231

After the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 was filed, the Company finalized the post-closing working capital adjustments for the acquisition of Walker Marine Group which increased both our assets acquired and liabilities assumed.

Roscioli Yachting Center Acquisition

On December 31, 2020, we acquired substantially all of the assets of Roscioli Yachting Center (“Roscioli”) with one location in southeast Florida. The acquisition expands the Company’s presence in the yacht category and amplifies the Company’s service and repair offerings. As part of the acquisition, we acquired the related real estate and in-water slips. The purchase price was $45.5 million, paid at closing.

The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill recorded as a result of the transactions:

Summary of Assets Acquired and Liabilities Assumed	($ in thousands)
Inventories	$	87
Prepaid expenses		1
Property and equipment		41,300
Identifiable intangible assets		1,530
Goodwill		2,993
Accounts payable		(180	)
Accrued expenses		(185	)
Total purchase price	$	45,546

Included in our results for the three and nine months ended June 30, 2021, the acquisitions contributed $42.7 and $75.5 million to our consolidated revenue and $6.8 and $10.3 million to our income before income tax expense, respectively. Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, valuation and other fees, which are charged directly to operations in the accompanying consolidated statements of operations as incurred in the amount of $0.1 and $0.6 million for the three and nine months ended June 30, 2021, respectively.

The following unaudited pro forma summary presents consolidated information for the three and nine months ended June 30, 2020 and the nine months ended June 30, 2021, as if all acquisitions had occurred on October 1, 2019:

	Three Months Ended June 30, 2020
	($ in thousands)
	(Unaudited)
Pro forma revenue	$	440,359
Pro forma net income	$	43,670

	Nine Months Ended June 30, 2021		Nine Months Ended June 30, 2020
	($ in thousands)
	(Unaudited)
Pro forma revenue	$	990,150	$	844,878
Pro forma net income	$	99,099	$	48,336

Fair values of trade names are estimated using Level 3 inputs by discounting expected future cash flows of the dealer group. The forecasted cash flows contain certain inherent uncertainties, including significant estimates and assumptions, which include revenue growth rates and future operating margins used to calculate projected cash flows, capital expenditures, weighted average costs of capital, future economic and market conditions, and other marketplace data the Company believes to be reasonable.

We expect substantially all of the goodwill related to completed acquisitions to be deductible for federal income tax purposes.