Acquisitions

YouTrain

On August 31, 2017, we acquired the entire share capital of YouTrain Limited ("YouTrain"), an independent training company delivering IT, digital and life sciences skills training in Scotland and North West England. The upfront purchase price was $4.9 million which was paid in cash at closing. In addition, the purchase price is subject to a completion accounts adjustment which is expected to be settled during the fourth quarter of 2017. The preliminary purchase price allocation is subject to change and is expected to be finalized in the fourth quarter of 2017. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. None of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired YouTrain business is included in the Learning Solutions segment and the results of its operations have been included in the consolidated financial statements beginning September 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations. The acquired YouTrain business is included in our United Kingdom subsidiary and its functional currency is the British Pound Sterling. The purchase price allocation below was translated into U.S. dollars based on the exchange rate in effect on the date of acquisition.

The following table summarizes the fair value of the purchase price and purchase price allocation for the acquisition (dollars in thousands).



Cash purchase price	$	4,898
Estimated completion accounts payment	180
Total purchase price	$	5,078
			Amortization
Purchase price allocation:			Period
Cash	$	673
Accounts receivable and other current assets	248
Fixed assets	215
Customer-related intangible assets	1,313		5 years
Goodwill	3,228
Total assets	5,677

Accounts payable and accrued expenses	322
Billings in excess of costs and estimated earnings on uncompleted contracts	28
Deferred tax liability	249
Total liabilities	599

Net assets acquired	$	5,078

CLS Performance Solutions Limited

On August 31, 2017, we acquired the business and certain assets of CLS Performance Solutions Limited ("CLS"), an independent provider of Enterprise Resource Planning (ERP) end user adoption and training services in the United Kingdom. The upfront purchase price was $0.4 million which was paid in cash at closing. In addition, the purchase agreement requires up to an additional $2.1 million of consideration contingent upon the achievement of certain earnings targets during the twelve-month period following the completion of the acquisition. The total estimated fair value of the purchase consideration was $1.3 million which consists primarily of intangible assets of $0.3 million being amortized over three years from the acquisition date and goodwill of $1.0 million. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. None of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired CLS business is included in the Performance Readiness Solutions segment, and the results of its operations have been included in the consolidated financial statements beginning September 1, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

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 $3.3 million in cash. In addition, the purchase agreement requires up to an additional $18.0 million of consideration, $6.0 million of which was contingent upon the achievement of certain earnings targets during the five-month period ended 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. In July 2017, we paid the seller $1.0 million in respect of the contingent consideration for the five-month period ended April 30, 2017. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. We expect that all of the goodwill recorded for financial statement purposes will be deductible for tax purposes, except that the contingent consideration is only deductible when paid. If the actual contingent consideration payments are less than the estimated fair value as of the acquisition date, a portion of goodwill will not be deductible for tax purposes. 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.

The following table summarizes the fair value of the purchase price and purchase price allocation for the acquisition (dollars in thousands).



Cash purchase price	$	3,259
Fair value of contingent consideration	4,505
Total purchase price	$	7,764
			Amortization
Purchase price allocation:			Period
Technology-related intangible assets	$	2,704	5 years
Customer-related intangible assets	653		5 years
Marketing-related intangible assets (tradename)	121		3 years
Goodwill	5,196
Total assets	8,674

Accrued expenses	44
Billings in excess of costs and estimated earnings on uncompleted contracts	866
Total liabilities	910

Net assets acquired	$	7,764

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 goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. We expect that all of the goodwill recorded for financial statement purposes will be deductible for tax purposes, except that the contingent consideration is only deductible when paid. If the actual contingent consideration payments are less than the estimated fair value as of the acquisition date, a portion of goodwill will not be deductible for tax purposes. The acquired Emantras 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, 2017. The pro-forma impact of the acquisition is not material to our results of operations.

The following table summarizes the fair value of the purchase price and purchase price allocation for the acquisition (dollars in thousands).



Cash purchase price	$	3,191
Fair value of contingent consideration	220
Total purchase price	$	3,411
			Amortization
Purchase price allocation:			Period
Fixed assets	$	50
Customer-related intangible assets	818		4 years
Goodwill	3,156
Total assets	4,024

Accrued expenses	558
Billings in excess of costs and estimated earnings on uncompleted contracts	55
Total liabilities	613

Net assets acquired	$	3,411

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 condensed 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 condensed 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 September 30, 2017 (dollars in thousands):



Acquisition:	Original range of potential undiscounted payments	As of September 30, 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	967		4,000		8,000		12,967
Emantras		—		*		—		—
CLS	$0 - $2,132	—		2,132		—		2,132
		$	5,967	$	11,132	$	8,000	$	25,099

* There is no maximum contingent consideration payable to the seller.

Below is a summary of the changes in the recorded amount of contingent consideration liabilities from December 31, 2016 to September 30, 2017 (dollars in thousands):



	Liability as of December 31,							Change in Fair Value of Contingent			Foreign Currency		Liability as of September 30,
Acquisition:	2016		Additions		Payments			Consideration			Translation		2017
Maverick	$	5,258	$	—	—			$	775		$	—	$	6,033
McKinney Rogers	—		4,505		(967		)	(1,156		)	—		2,382
Emantras	—		220		—			5			—		225
CLS	—		888		—			7			33		928
Total	$	5,258	$	5,613	$	(967	)	$	(369	)	$	33	$	9,568

As of September 30, 2017 and December 31, 2016, contingent consideration considered a current liability and included in accounts payable totaled $5.3 million and $3.6 million, respectively. As of September 30, 2017 and December 31, 2016 we also had accrued contingent consideration totaling $4.3 million and $1.7 million respectively, related to acquisitions which are included in other long-term liabilities on the condensed consolidated balance sheets and represent the portion of contingent consideration estimated to be payable greater than twelve months from the balance sheet date.