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 but paid $15.9 million from restricted cash in the third quarter of 2018 related to deferred consideration from a prior year acquisition. 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 $17.1 million and $96.3 million of acquisition and integration charges during the three and nine months ended September 30, 2018, respectively, compared to $30.5 million and $142.1 million during the three and nine months ended September 30, 2017, respectively. Acquisition and integration charges reflect additional costs and expenses resulting from our acquisitions and include, among other items, 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 represented 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 nine months ended September 30, 2018 (in thousands):



Liability balance at December 31, 2017	$	12,961
Charges and adjustments, net (1) (2)	60,196
Payments, net of $783 in sublease rent	(15,730		)
Liability balance at September 30, 2018 (3)	$	57,427


(1)	The Company recognized $6.1 million and $60.2 million of charges and adjustments, net during the three and nine months ended September 30, 2018, respectively, compared to $1.0 million and $21.1 million during the three and nine months ended September 30, 2017, respectively.


(2)	During the nine months ended September 30, 2018, the Company recognized $4.5 million of expense for changes in our original estimates of exit cost obligations.


(3)	In total, we estimate that the Company will make net cash payments of approximately $76.9 million for exit costs in connection with the activities described herein. Through September 30, 2018, in the aggregate, we have expensed $73.3 million and had net cash outlays of $15.9 million related to such activities.

Divestitures

During 2018, the Company completed the divestiture of three non-core businesses, all of which were acquired in the CEB acquisition in April 2017 and were reported in the Company's Other segment. These three businesses contributed approximately $97.0 million of revenue and $60.1 million of gross contribution in 2018. The Company used the cash proceeds from these divestitures to pay down outstanding debt.

Additional information regarding these divestitures is provided below:

CEB Challenger training business

On August 31, 2018, the Company sold its CEB Challenger training business for $119.1 million and realized approximately $116.2 million in cash, which is net of working capital adjustments and certain closing costs. The cash received is subject to certain post-closing adjustments. The Company recorded a pretax gain on the sale of approximately $12.2 million.

CEB Workforce Survey and Analytics business

On May 1, 2018, the Company sold its CEB Workforce Survey and Analytics business for $28.0 million and realized approximately $26.4 million in cash, which is net of certain closing expenses. The Company recorded a pretax gain on the sale of approximately $8.8 million.

CEB Talent Assessment business

On April 3, 2018, the Company sold its CEB Talent Assessment business for $403.0 million and realized approximately $375.8 million in cash from the sale, which is net of cash transferred with the business and certain closing expenses. The Company recorded a pretax gain of approximately $16.7 million on the sale.

Other asset sales

During the nine months ended September 30, 2018, the Company also received approximately $2.3 million in cash proceeds and recorded a net pretax gain of approximately $0.8 million from the sale of certain other miscellaneous assets acquired in the CEB transaction. On October 31, 2018, the Company divested a small non-core Research business called Metrics That Matter, which was also acquired in the CEB acquisition. The divestiture of Metrics That Matter will be reported in the Company's fourth quarter 2018 results.

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



Cash and cash equivalents	$	19,624
Fees receivable, net	60,077
Goodwill	315,645
Intangible assets, net	302,415
Other assets (including prepaid expenses and fixed assets)	29,725
Total assets	$	727,486

Accounts payable and accrued liabilities	$	29,780
Deferred revenues	85,970
Other liabilities	50,743
Foreign currency translation adjustment	60,160
Total liabilities and foreign currency translation adjustment	$	226,653