Acquisitions

McKinney Rogers

On February 1, 2017, we acquired the business and certain assets of McKinney Rogers, a provider of strategic consulting services with offices in New York and London. This acquisition will expand our solutions offerings, giving us the ability to leverage McKinney Rogers' intellectual property and consulting methodologies to help our global client base meet strategic business goals. The upfront purchase price was $3.2 million in cash. In addition, the purchase agreement requires up to an additional $18.0 million of consideration, $6.0 million of which is contingent upon the achievement of certain earnings targets during the five-month period ending April 30, 2017 and $12.0 million of which is contingent upon the achievement of certain earnings targets during the three twelve-month periods following completion of the acquisition. We recorded a preliminary purchase price allocation for the acquisition in the first quarter of 2017 which we expect to finalize in the second quarter of 2017 as we have not fully completed the valuation of intangible assets and contingent consideration. The acquired McKinney Rogers business is included in the Performance Readiness Solutions segment, and the results of its operations have been included in the consolidated financial statements beginning February 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

Emantras

Effective April 1, 2017, we acquired the business and certain assets of Emantras, a digital education company that provides engaging learning experiences and effective knowledge delivery through award-winning digital and mobile solutions with offices in Fremont, California and Chennai, India. This acquisition strengthens our eLearning development capabilities, allowing us to better serve our customer base with the latest digital learning solutions. The upfront purchase price was $3.2 million in cash. In addition, the purchase agreement requires up to an additional $0.3 million of consideration, contingent upon the achievement of an earnings target during the twelve-month period following completion of the acquisition, plus a percentage of any earnings in excess of the specified earnings target. The acquired Emantras business will be included in the Learning Solutions segment effective April 1, 2017.

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 using an appropriate valuation methodology, typically either an income-based approach or a simulation model, such as the Monte Carlo model, depending on the structure of the contingent consideration arrangement. 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 and rates and changes in the timing and amount of revenue and/or earnings projections.

Below is a summary of the potential maximum contingent consideration we may be required to pay in connection with completed acquisitions as of March 31, 2017 (dollars in thousands):



Acquisition:	Original range of potential undiscounted payments	As of March 31, 2017 Maximum contingent consideration due in
		2017		2018		2019-2020		Total
Maverick	$0 - $10,000	$	5,000	$	5,000	$	—	$	10,000
McKinney Rogers	$0 - $18,000	6,000		4,000		8,000		18,000
		$	11,000	$	9,000	$	8,000	$	28,000

Below is a summary of the changes in the recorded amount of contingent consideration liabilities from December 31, 2016 to March 31, 2017 (dollars in thousands):



	Liability as of December 31,		Additions		Change in Fair Value of Contingent			Foreign Currency		Liability as of March 31,
Acquisition:	2016		(Payments)		Consideration			Translation		2017
Maverick	$	5,258	$	—	$	(197	)	$	—	$	5,061
McKinney Rogers	—		2,063		—			—		2,063
Total	$	5,258	$	2,063	$	(197	)	$	—	$	7,124

As of March 31, 2017 and December 31, 2016, contingent consideration considered a current liability and included in accounts payable totaled $4.5 million and $3.6 million, respectively. As of March 31, 2017 and December 31, 2016 we also had accrued contingent consideration totaling $2.6 million and $1.7 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.