Acquisitions Acquisitions (Notes)

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

The Company completed three acquisitions in the year ended December 31, 2014 (the "2014 Acquisitions") and one acquisition in 2012, which are discussed below.

2014

In March 2014, the Company acquired Software Advice, Inc., (“Software Advice”), a privately-owned company based in Austin, Texas with 120 employees. Software Advice assists customers with software purchases. At closing, the Company paid $103.2 million in cash for 100% of the outstanding shares of Software Advice. The Company is also obligated to pay up to an additional $31.9 million in cash related to the acquisition. This includes $13.5 million placed in escrow as security for potential losses. Release of the escrowed funds is also subject to the achievement of certain employment conditions. The escrow amount is considered restricted cash and is recorded in Other Assets in the Consolidated Balance Sheets. An additional $18.4 million is payable contingent on the achievement of certain employment conditions. This amount is also subject to any indemnified losses in excess of the escrowed funds. The $31.9 million obligation (adjusted for any indemnified losses) is being recognized as compensation expense over the two-year service period of the relevant employees in Acquisition and integration charges in the Consolidated Statements of Operations. If the employment conditions are not met, any expense previously accrued will be reversed in the period employment terminates.

In May 2014, the Company acquired 100% of the outstanding shares of Market-Visio Oy ("Market-Visio"), a privately-owned Finnish company with 68 employees, now named Gartner Finland Oy. Market-Visio was previously an independent sales agent of Gartner research products, as well as locally-created research content, in Finland and Russia. Gartner Finland Oy conducts its operations in Russia through a wholly-owned operating subsidiary, now named Gartner RUS LLC. The Company paid a total of $6.5 million in cash for Market-Visio, which included $4.1 million paid at close in May and $2.4 million paid in October for working capital adjustments.

In June 2014, the Company acquired 100% of the outstanding shares of SircleIT Inc., a developer of cloud-based knowledge automation software, for $5.7 million in cash. SircleIT Inc. is a domestic company that conducts its operations principally through Senexx Israel Ltd., its wholly-owned subsidiary in Israel with 2 employees. Gartner paid $4.9 million in cash at close and an additional $0.8 million was placed in escrow as security for certain indemnity claims, which is payable 18 months from the date of close.

The Company's financial statements include the operating results of these businesses beginning from their respective dates of acquisition. The operating results of these businesses were not material to the Company's consolidated and segment operating results for the fiscal year ended December 31, 2014. In addition, had the Company acquired these businesses in prior periods the impact to the Company's operating results for prior periods would not have been material, and as a result pro forma financial information for prior periods has not been presented. The Company recorded $21.9 million of pre-tax acquisition and integration charges in the fiscal year ended December 31, 2014 related to these acquisitions, which are classified in Acquisition and integration charges in the Condensed Consolidated Statements of Operations. Acquisition and integration charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions, legal, consulting, and severance costs.

The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed in the 2014 Acquisitions (in thousands):

	Software Advice		Other Acquisitions (1)		Total
Assets:
Cash	$	1,450	$	3,203	$	4,653
Fees receivable and other current assets	3,606		3,694		7,300
Property, equipment, and leasehold improvements	235		170		405
Amortizable intangible assets (2)	26,928		5,047		31,975
Goodwill (3)	73,663		4,710		78,373
Total assets	$	105,882	$	16,824	$	122,706
Liabilities:
Accounts payable and accrued liabilities	$	2,657	$	4,484	$	7,141
Total liabilities	$	2,657	$	4,484	$	7,141
Net assets acquired (4)	$	103,225	$	12,340	$	115,565

(1) Includes the SircleIT Inc. and Market-Visio acquisitions.

(2) See Note 1 - Business and Significant Accounting Policies for additional information regarding the types and amounts of amortizable intangibles recorded from the 2014 Acquisitions.

(3) During 2014, and subsequent to the 2014 Acquisitions, the Company recorded certain working capital, tax, and other minor adjustments which decreased the recorded goodwill resulting from the Market-Visio and SircleIT Inc. acquisitions by approximately $0.1 million and $0.2 million, respectively. In addition, the recorded amount of an amortizable intangible asset resulting from the Software Advice acquisition was reduced by $2.7 million and goodwill was increased by the same amount due to a change in the underlying assumptions used to value the amortizable intangible asset based on the consideration of additional information that became available.

(4) The Company paid $114.6 million in cash on a gross basis for the net assets acquired through December 31, 2014. On a net basis, and for cash flow reporting, the Company paid $109.9 million in cash through December 31, 2014, which represents the $114.6 million in cash paid on a gross basis minus the $4.7 million of cash acquired from the purchased companies.

The determination of the fair value of the amortizable intangibles required management judgment and the consideration of a number of factors, significant among them the historical financial performance of the acquired businesses and projected performance, estimates surrounding customer turnover, as well as assumptions regarding the level of competition and the cost to reproduce certain assets. In determining the fair value of the intangibles, management primarily relied on income methodologies, in particular the discounted cash flow approach. Establishing the useful lives of the amortizable intangibles also required management judgment and the evaluation of a number of factors, among them projected cash flows and the likelihood of competition.

The Company considers the allocation of the purchase price for the 2014 Acquisitions to be preliminary with respect to certain tax contingencies. The majority of the recorded goodwill and intangibles from these transactions will be deductible for tax purposes over 15 years. All of the recorded goodwill from the 2014 Acquisitions was included in the Company’s Research segment. The Company believes the recorded goodwill is supported by the anticipated revenue synergies, customer retention, and cost savings resulting from the combined operations.

2012

In 2012 the Company acquired 100% of the outstanding shares of Ideas International Limited (“Ideas International”), a publicly-owned Australian corporation for aggregate cash consideration of $18.8 million. The operating results of Ideas International were not material to the Company’s 2012 results. The Company recorded $7.5 million of goodwill and $8.5 million of amortizable intangible assets as a result of the acquisition. The Company also recorded $0.3 million and $2.4 million of pre-tax charges in 2013 and 2012, respectively, related to the acquisition, which are classified in Acquisition and integration charges in the Consolidated Statements of Operations.