Acquisitions

IC Axon

On May 1, 2018, we acquired the entire share capital of IC Acquisition Corporation, a Delaware corporation, and its subsidiary, IC Axon Inc., a Canadian corporation (IC Axon). IC Axon develops science-driven custom learning solutions for pharmaceutical and life science customers. The upfront purchase price was $30.5 million in cash, subject to a working capital adjustment to be calculated within 90 days following the closing of the acquisition. In addition, the purchase agreement requires up to an additional $3.5 million of consideration, contingent upon the achievement of an earnings target during a twelve-month period subsequent to the closing of the acquisition. The preliminary purchase price allocation is subject to change and is expected to be finalized in the third quarter of 2018.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 IC Axon business is included in the Workforce Excellence segment and the results of its operations have been included in the condensed consolidated financial statements beginning May 1, 2018. The pro-forma impact of the acquisition is not material to our results of operations.

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



Cash purchase price	$	30,493
Fair value of contingent consideration	905
Total purchase price	$	31,398
			Amortization
Purchase price allocation:			Period
Cash	$	536
Accounts receivable and other current assets	3,104
Fixed assets	368
Customer-related intangible assets	10,365		8 years
Marketing-related intangible assets	239		3 years
Goodwill	21,494
Total assets	36,106

Accounts payable and accrued expenses	898
Deferred revenue	979
Deferred tax liability	2,831
Total liabilities	4,708

Net assets acquired	$	31,398

Hula Partners

On January 2, 2018 we acquired the business and certain assets of Hula Partners, a provider of SAP Success Factors Human Capital Management (HCM) implementation services. The purchase price was $10.0 million which was paid in cash at closing. The goodwill recognized is due to the expected synergies from combining the operations of the acquiree with the Company. All of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired Hula Partners business is included in the Business Transformation Services segment and the results of its operations have been included in the condensed consolidated financial statements beginning January 2, 2018. The pro-forma impact of the acquisition is not material to our results of operations.

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



		Amortization
Purchase price allocation:		Period
Customer-related intangible assets	1,367	4 years
Marketing-related intangible assets	106	2 years
Goodwill	8,527
Total assets	10,000

Contingent Consideration

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 June 30, 2018 (dollars in thousands):



Acquisition:	Original range of potential undiscounted payments	As of June 30, 2018 Maximum contingent consideration due in
		2018		2019		2020		Total
IC Axon	$0 - $3,500	$	—	$	3,500	$	—	$	3,500
Maverick	$0 - $10,000	5,902		—		—		5,902
McKinney Rogers	$0 - $18,000	—		4,000		4,000		8,000
CLS	$0 - $2,179	2,179		—		—		2,179
		$	8,081	$	7,500	$	4,000	$	19,581

Below is a summary of the changes in the recorded amount of contingent consideration liabilities from December 31, 2017 to June 30, 2018 (dollars in thousands):



	Liability as of December 31,						Change in Fair Value of Contingent			Foreign Currency			Liability as of June 30,
Acquisition:	2017		Additions		Payments		Consideration			Translation			2018
IC Axon	$	—	$	905	—		$	—		$	—		$	905
Maverick	1,979		—		—		(1,704		)	—			275
McKinney Rogers	1,501		—		—		(1,244		)	—			257
Emantras	76		—		—		(76		)	—			—
CLS	669		—		—		(422		)	(12		)	235
Total	$	4,225	$	905	$	—	$	(3,446	)	$	(12	)	$	1,672

As of June 30, 2018 and December 31, 2017, contingent consideration considered a current liability and included in accounts payable totaled $1.5 million and $2.7 million, respectively. As of June 30, 2018 and December 31, 2017 we also had accrued contingent consideration totaling $0.2 million and $1.5 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.