Acquisitions and Divestitures

Acquisitions

The Company accounts for business acquisitions in accordance with the acquisition method of accounting as prescribed by FASB ASC Topic 805, Business Combinations. The acquisition method of accounting requires the Company to record the net assets and liabilities acquired based on their estimated fair values as of the acquisition date, with any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable intangible assets, to be recorded to goodwill. Under the acquisition method, the operating results of acquired companies are included in the Company's consolidated financial statements beginning on the date of acquisition. The Company did not have any business acquisitions in 2018. In the second quarter of 2017, the Company acquired CEB Inc. ("CEB"), a leading provider of subscription-based, best practice research and analysis focusing on human resources, sales, finance, IT and legal.

The Company recognized $20.0 million and $79.2 million of acquisition and integration charges during the three and six months ended June 30, 2018, respectively, compared to $98.3 million and $111.6 million during the three and six months ended June 30, 2017, respectively. Acquisition and integration charges reflect additional costs and expenses resulting from our acquisitions and include professional fees, severance, stock-based compensation charges and accruals for exit costs for certain office space in Arlington, Virginia related to our acquisition of CEB that the Company does not intend to occupy. During 2018, exit costs represent the single largest component of our acquisition and integration charges. The following table presents a summary of the activity related to our accrual for exit costs at all of our facilities during the six months ended June 30, 2018 (in thousands):



Liability balance at December 31, 2017	$	12,961
Charges and adjustments, net (1) (2)	54,069
Payments, net of $316 in sublease rent	(9,890		)
Liability balance at June 30, 2018 (3)	$	57,140


(1)	The Company recognized $9.8 million and $54.1 million of charges and adjustments, net during the three and six months ended June 30, 2018, respectively, compared to $20.8 million during both the three and six months ended June 30, 2017.


(2)	For the six months ended June 30, 2018, the Company recognized $4.9 million of expense for changes in its exit cost estimates.


(3)	In total, we estimate that we will make net cash payments of approximately $70.0 million for exit costs in connection with the activities described herein. Through June 30, 2018, in the aggregate, we have expensed $67.2 million and had net cash outlays of $10.0 million related to such activities.

Divestitures

During the second quarter of 2018, the Company completed the previously announced sales of two non-core businesses that were reported as part of the Talent Assessment & Other segment. As a result of these divestitures, the Company changed the name of the Talent Assessment & Other segment to Other. Additional information regarding these items is provided below:

CEB Talent Assessment business

On April 3, 2018, the Company sold its CEB Talent Assessment business for $403.0 million and realized approximately $377.8 million in cash from the sale, which is net of cash transferred with the business and certain closing expenses. The cash received is subject to certain post-closing adjustments. The Company recorded a pretax gain of approximately $16.0 million on the sale. The CEB Talent Assessment business was acquired in the CEB acquisition in April 2017 and was a significant portion of the Other segment. During the six months ended June 30, 2018, the CEB Talent Assessment business contributed approximately $47.0 million of revenue and pre-tax income of approximately $2.1 million, substantially all of which was recorded by the Company during the first quarter of 2018.

CEB Workforce Survey and Analytics business

On May 1, 2018, the Company sold its CEB Workforce Survey and Analytics ("WS&A") business for $28.0 million and realized approximately $26.4 million in cash, which is net of certain closing expenses. The cash received is subject to certain post-closing adjustments. The Company recorded a pre-tax gain on the sale of approximately $8.8 million. The WS&A business was also acquired in the CEB transaction and was also reported with the Other segment.

Also during the second quarter of 2018, the Company sold other miscellaneous assets acquired in the CEB transaction. The Company received $1.3 million in net cash proceeds from these sales and recorded a net pre-tax gain of approximately $0.7 million.

The principal components of the assets and liabilities divested in the above transactions are summarized in the table below (in thousands):



Cash and cash equivalents	$	19,625
Fees receivable, net	48,305
Goodwill	246,210
Intangible assets, net	264,120
Other assets (including prepaid expenses and fixed assets)	27,820
Total assets	$	606,080

Accounts payable and accrued liabilities	$	26,022
Deferred revenues	68,910
Other liabilities	51,131
Foreign currency translation adjustment	60,310
Total liabilities and foreign currency translation adjustment	$	206,373