Acquisitions

6 Months Ended

Apr. 30, 2011

Acquisitions [Abstract]

Acquisitions

2. Acquisitions

On December 1, 2010, the Company acquired Linc pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), by and among ABM, Linc, GI Manager LP, as the Members Representative, and Lightning Services, LLC, a wholly-owned subsidiary of ABM (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub merged with and into Linc, and Linc continued as the surviving corporation and as a wholly-owned subsidiary of ABM. The aggregate purchase price for all of the outstanding limited liability company interests of Linc was $300.6 million. The purchase price was subsequently reduced by $1.9 million to $298.7 million in connection with a working capital adjustment. The agreement related to the working capital adjustment was executed on April 29, 2011, and the cash was received by the Company on May 3, 2011. In connection with the acquisition, the Company incurred $4.9 million in direct acquisition costs that were expensed as incurred and included as selling, general and administrative expenses. Linc provides end-to-end integrated facilities management services that improve operating efficiencies, reduce energy consumption, and lower overall operational costs for governmental, commercial, and residential clients throughout the United States and in select international markets. Some of these services are performed through franchisees and other affiliated entities. The operations of Linc are included in the Engineering segment as of the acquisition date. Revenues and operating profit associated with Linc and included in the Company’s condensed consolidated statements of income were $134.0 million and $1.8 million, respectively, for the three months ended April 30, 2011, and $227.6 million and $4.1 million, respectively, for the six months ended April 30, 2011. Pro forma financial information for this acquisition has not been provided, as such information is not material to the Company’s financial results.

This acquisition was accounted for under the acquisition method of accounting. The Company has performed a preliminary allocation of the purchase price to the underlying assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with any excess of the purchase price allocated to goodwill. The Company has not completed the analysis of certain acquired assets and assumed liabilities, including, but not limited to, acquired intangible assets and self-insurance reserves. The Company is continuing its review of these items during the measurement period, and further changes to the preliminary allocation will be recognized as the valuations are finalized.

The preliminary purchase price and related allocations are summarized as follows:

(in thousands)
Purchase price:
Total cash consideration	$	298,720
Allocated to:
Cash and cash equivalents	$	8,467
Trade accounts receivable		86,335
Prepaid expenses and other current assets		7,108
Investments in unconsolidated affiliates		14,011
Property, plant and equipment		9,349
Other identifiable intangible assets		86,300
Other assets		25,149
Accounts payable		(38,042	)
Insurance claims		(2,332	)
Accrued expenses and other current liabilities		(23,697	)
Non-current liabilities		(22,063	)
Goodwill		148,135
Net assets acquired	$	298,720

The acquired intangible assets will be amortized using the sum-of-the-years-digits method or, where appropriate, the straight-line method. The weighted-average amortization period for the acquired intangible assets are: 14 years for customer contracts, 10 years for the increase in the investment in unconsolidated affiliates carrying values, and 10 years for trademarks, which is consistent with the estimated useful life considerations used in the determination of their fair values. The amount allocated to goodwill is reflective of the Company’s identification of buyer-specific synergies that the Company anticipates will be realized by, among other things, reducing duplicative positions and back office functions, consolidating facilities, and reducing professional fees and other services.

The transaction was a taxable asset acquisition of the Linc organization for U.S. income tax purposes, and no deferred taxes have been recorded on a significant portion of the acquired assets and liabilities. However, deferred taxes have been recorded for certain assets and liabilities where the Company receives a carryover basis for tax purposes. Additional deferred taxes may be recorded as the Company finalizes its assessment of the fair values of the remaining acquired assets and liabilities. A significant portion of the goodwill associated with the acquisition is expected to be amortizable for income tax purposes.