Acquisition and Disposition

On March 16, 2015, we completed the acquisition of 3Q Digital. The results of 3Q Digital’s operations have been included in our consolidated financial statements since that date and are reported in the Customer Interaction segment. The initial purchase price was $30.2 million in cash. In addition, the purchase agreement includes a contingent consideration arrangement that requires us to pay the former owners of 3Q Digital an additional cash payment depending on achievement of certain revenue growth goals. The potential undiscounted amount of all future payments that could be required to be paid under the contingent consideration arrangement is between $0 and $35.0 million in cash in 2017.

The intangible assets include customer relationships, trade names and non-compete agreements.

The following table summarizes the consideration paid and the preliminary amounts of estimated fair value of the assets acquired and liabilities assumed at the acquisition date.



(in thousands)
Cash consideration per purchase agreement	$	30,245
Estimated fair value of contingent consideration	17,940
Fair value of total consideration	$	48,185



(in thousands)
Recognized amounts of tangible assets and liabilities:
Current assets	$	4,135
Property and equipment	164
Other assets	389
Current liabilities	(822		)
Other liabilities	—
Total tangible assets and liabilities:	3,866
Identifiable intangible assets	4,773
Goodwill (including deferred tax adjustment of $2,298)	41,845
Total	$	50,484

The fair value of the tangible net assets, identifiable intangible assets and goodwill recognized on acquisition is $48.2 million. The acquired intangible assets, which are being amortized, are as follows: customer relationships of $4.3 million (amortized over seven years), trade names and trademarks of $0.3 million (amortized over two years) and non-compete agreements of $0.2 million (amortized over three years).

A reconciliation of the beginning and ending accrued balances of the contingent consideration using significant unobservable inputs (Level 3) for the nine months ended September 30, 2015 follows:



(in thousands)	Fair Value
Contingent consideration at acquisition date	$	17,940
Accretion of interest	1,599
Accrued earnout liability as of September 30, 2015	$	19,539

The purchase price has been allocated based on the estimated fair values of assets described above and are subject to achievement of revenue goals.

On April 14, 2015, Harte Hanks sold its B2B research business. The B2B research business represented less than 5% of our total 2014 revenues. As a result of the sale, the Company recognized a pre-tax loss of $9.5 million in the second quarter in relation to the disposal or transfer of assets and liabilities to the purchasing organization. The related asset group does not meet the criteria to be classified as a component of an entity. As such, the related loss on sale is included in income before income taxes in the income statement in Other expenses. The assets included both goodwill and intangible assets (see Note D above). Future expenses are possible in future periods based upon certain working capital settlement provisions.