Business Combinations

9 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Business Combinations

Business Combinations

    The Company executes accretive business acquisitions in combination with organic growth initiatives as part of its comprehensive business growth and expansion strategy. The Company looks to acquire businesses that are complementary to Ebix's existing products and services. During the nine months ended September 30, 2012 the Company executed and completed five business acquisitions including PlanetSoft, Inc. which is discussed further below; the other acquisitions were not material individually or in the aggregate. The valuation and purchase price allocation for these other individually immaterial business acquisitions, including the valuation of contingent future earnout consideration based on revenue levels, is preliminary as of September 30, 2012. In the fourth quarter the Company will finalize the valuations of these business acquisitions and the related future contingent consideration, and may adjust the amounts recorded as of September 30, 2012 to reflect any revised evaluations of the assets acquired or liabilities assumed.

A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earnout based on reaching certain specified future revenue targets. The Company recognizes these potential obligations as contingent liabilities as reported on its Condensed Consolidated Balance Sheet. As discussed in more detail in Note 1, these contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. As of September 30, 2012, the total of these contingent liabilities was $30.0 million, of which $23.7 million is reported in long-term liabilities, and $6.2 million is included in current liabilities in the Company's Condensed Consolidated Balance Sheet. As of December 31, 2011 the total of these contingent liabilities was $7.6 million which were included in current liabilities in the Company's Consolidated Balance Sheet.

Consideration paid by the Company for the businesses it purchases is allocated to the assets and liabilities acquired based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. Recognized goodwill pertains to the value of the expected synergies to be derived from combining the operations of the businesses we acquire including the value of the acquired workforce.

During the nine months ended September 30, 2012 the Company received a termination fee in connection with a failed business acquisition. In this regard the Company recorded a reduction to general and administrative expense in the approximate amount of $971 thousand (net of directly related internal operating costs incurred by the Company and a portion of the fee that was paid to our investment banker).

Effective June 1, 2012 Ebix closed the merger of California based PlanetSoft, Inc. ("PlanetSoft"). Under the terms of the merger agreement the former PlanetSoft shareholders received $35.0 million cash and 296,560 shares of Ebix common stock valued at $16.86 per share or $5.0 million in the aggregate. Furthermore, under the terms of the agreement the PlanetSoft shareholders hold a put option exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying shares of common stock back to the Company at a 10% discount off of the per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. The initial fair value of this put option liability was determined to be $1.4 million. This put option is described in more detail in Note 7. PlanetSoft is in the business of powering data exchanges that streamline core insurance operations in the areas of client acquisition, underwriting, and distribution management. Due to the fact that PlanetSoft's sales, marketing, and operating functions were immediately integrated into Ebix's operations it is impractical to separately track and disclose specific earnings from this business combination after its acquisition date. The revenue derived from PlanetSoft's operations is included in the Company's Exchange division. The Company accounted for this acquisition by recording $49.4 million of goodwill, $11.1 million of intangible assets pertaining to customer relationships, and $540 thousand of intangible assets pertaining to acquired technology. The former shareholders of PlanetSoft retain the right to earn up to an additional cash consideration if certain incremental revenue targets are achieved over the two-year anniversary date subsequent to the effective date of the acquisition. The Company has tentatively determined that the approximate fair value of this contingent consideration liability is to be $16.3 million.

On February 7, 2011 Ebix closed the merger of Atlanta, Georgia based ADAM with a wholly owned subsidiary of Ebix. Under the terms of the merger agreement, all of the ADAM shareholders received 3.65 million shares of Ebix common stock with a fair value of $87.5 million pursuant to the merger. In addition Ebix paid approximately $944 thousand in cash for then unexercised ADAM stock options. ADAM was a leading provider of health information and benefits technology solutions in the United States. $16.9 million of ADAM's operating revenues recognized since February 7, 2011 were included in the Company's revenues reported in its condensed and consolidated statement of income for the nine months ended September 30, 2011. Correspondingly included in the Company's revenues as reported in its condensed and consolidated statement of income for the nine months ended September 30, 2012 is $18.0 million of ADAM's operating revenue. The revenue derived from ADAM portfolio of products and services is included in the Company's Exchange division. The Company accounted for this acquisition by recording $60.1 million of goodwill, $15.4 million of intangible assets pertaining to customer relationships, $2.1 million of intangible assets pertaining to acquired technology, and $2.0 million of intangible assets pertaining to acquired trademarks.

The aggregated unaudited pro forma financial information pertaining to the all of the Company's acquisitions made during 2011 and 2012 through September 30, 2012, including the acquisitions of PlanetSoft and ADAM as presented in the table below is provided for informational purposes only and does not project the Company's expected results of operations for any future period. No effect has been given in this pro forma information for future synergistic benefits that may still be realized as a result of combining these companies or costs that may yet be incurred in integrating their operations. The 2012 pro forma financial information below includes three and nine months of pro forma results for PlanetSoft and ADAM as if they had been acquired on January 1, 2011, whereas the Company's reported financial statements for the nine months ended September 30, 2012, only includes four months of actual financial results of PlanetSoft since the effective date of its acquisition on June 1, 2012. Similarly, the 2011 pro forma financial information below includes three and nine months of pro forma results for PlanetSoft and ADAM as if they had been acquired on January 1, 2011, whereas the Company's reported financial statements for the nine months ended September 30, 2011 only includes the actual financial results of ADAM since the effective date of its acquisition on February 7, 2011, and no revenues from PlanetSoft.

	Three Months Ending September 30, 2012				Three Months Ending September 30, 2011
	As Reported		Pro Forma		As Reported		Pro Forma
	(unaudited)				(unaudited)
	(In thousands, except per share data)
Revenue	$	53,804	$	54,197	$	42,602	$	52,360
Net Income	$	18,072	$	18,038	$	16,536	$	16,513
Basic EPS	$	0.49	$	0.48	$	0.44	$	0.44
Diluted EPS	$	0.46	$	0.46	$	0.41	$	0.41

In the above table, the unaudited pro forma revenue for the three months ended September 30, 2012 increased by $1.8 million from the unaudited pro forma revenue during the same period in 2011 of $52.4 million to $54.2 million , representing an 3.5% increase. Correspondingly, the reported revenue for the three months ended September 30, 2012 increased by $11.2 million or 26.3% from the reported revenue during the same period in 2011.

	Nine Months Ending September 30, 2012				Nine Months Ending September 30, 2011
	As Reported		Pro Forma		As Reported		Pro Forma
	(unaudited)				(unaudited)
	(In thousands, except per share data)
Revenue	$	145,347	$	158,336	$	124,919	$	156,259
Net Income	$	51,824	$	51,242	$	54,048	$	54,389
Basic EPS	$	1.41	$	1.38	$	1.41	$	1.39
Diluted EPS	$	1.32	$	1.30	$	1.31	$	1.29

In the above table, the unaudited pro forma revenue for the nine months ended September 30, 2012 increased by $2.1 million from the unaudited pro forma revenue during the same period in 2011 of $156.3 million to $158.3 million , representing an 1.3% increase. Correspondingly, the reported revenue for the nine months ended September 30, 2012 increased by $20.4 million or 16.4% from the reported revenue during the same period in 2011.