
	Acquisitions

Effective Companies

On April 1, 2014, we completed the acquisitions of Effective People and Effective Learning (the “Effective Companies”), providers of human capital management (HCM) solutions, including sales and support of the full SAP SuccessFactors Business Education (BizX) Platform, eLearning and blended learning solutions, as well as recruitment and employee development services. The Effective Companies are headquartered in Copenhagen, Denmark. The upfront purchase price was $9.0 million which was paid in cash at closing and is subject to a working capital adjustment which we expect will be finalized in the fourth quarter of 2014. In addition, the purchase agreement requires up to an additional $5.9 million of consideration, contingent upon the achievement of certain earnings targets during the two twelve-month periods following completion of the acquisition. The purchase price allocation for the acquisition included $1.6 million of customer-related intangible assets which are being amortized over four years from the acquisition date. None of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired Effective Companies business is included in the Learning Solutions segment and the results of its operations have been included in the consolidated financial statements beginning April 1, 2014. The pro-forma impact of the acquisition is not material to our results of operations. The acquired Effective Companies business is included in our Denmark subsidiary and its local currency is the Danish Kroner. The purchase price allocation below was translated into U.S. dollars based on the exchange rate in effect on the date of acquisition.

The estimated fair value of the purchase price recorded by us consisted of the following (in thousands):



Cash purchase price	$	9,000
Fair value of contingent consideration	5,345
Estimated working capital adjustment	(91		)
Total purchase price	$	14,254

The preliminary purchase price allocation for the net assets acquired is as follows (in thousands):



Cash	$	334
Accounts receivable	1,283
Prepaid expenses and other assets	496
Property and equipment	80
Amortizable intangible assets	1,613
Goodwill	12,338
Total assets acquired	$	16,144

Accounts payable, accrued expenses and other liabilities	$	582
Billings in excess of costs and estimated earnings on uncompleted contracts	940
Deferred tax liability	368
Total liabilities assumed	1,890
Net assets acquired	$	14,254

Contingent Consideration

Accounting Standards Codification (“ASC”) Topic 805 requires that contingent consideration be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the consolidated statement of operations. We estimate the fair value of contingent consideration liabilities based on financial projections of the acquired companies and estimated probabilities of achievement and discount the liabilities to present value using a weighted-average cost of capital. Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. We believe our estimates and assumptions are reasonable; however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the consolidated statements of operations, and could cause a material impact to, and volatility in, our operating results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods, changes in the timing and amount of revenue and/or earnings estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria.

Below is a summary of the potential contingent consideration we may be required to pay in connection with completed acquisitions as of September 30, 2014 (dollars in thousands):



	Original range
	of potential undiscounted	As of September 30, 2014 Maximum contingent consideration due in
Acquisition:	payments	2014		2015		2016		Total
Prospero	$0 - $4,482	$	—	$	1,793	$	—	$	1,793
Effective Companies	$0 - $5,920	—		2,960		2,960		5,920
Total		$	—	$	4,753	$	2,960	$	7,713

Below is a summary of the changes in the recorded amount of contingent consideration liabilities from December 31, 2013 to September 30, 2014 for each acquisition (dollars in thousands):



	Liability as of December 31,		Additions			Change in Fair Value of Contingent			Foreign Currency			Liability as of September 30,
Acquisition:	2013		(Payments)			Consideration			Translation			2014
Bath Consulting	$	997	$	(1,005	)	$	—		$	8		$	—
Prospero	1,841		—			(1,796		)	(45		)	—
Lorien	959		(1,015		)	31			25			—
Effective Companies	—		5,345			252			(412		)	5,185
Total	$	3,797	$	3,325		$	(1,513	)	$	(424	)	$	5,185

As of September 30, 2014 and December 31, 2013, contingent consideration considered a current liability and included in accounts payable totaled $2.7 million and $2.4 million, respectively. As of September 30, 2014 and December 31, 2013, we also had accrued contingent consideration totaling $2.5 million and $1.4 million, respectively, related to acquisitions which are included in other long-term liabilities on the consolidated balance sheet and represent the portion of contingent consideration estimated to be payable greater than twelve months from the balance sheet date.