Business Acquisitions

The Company’s business acquisitions are accounted for under the purchase method of accounting in accordance with the FASB’s accounting guidance on the accounting for business combinations. Accordingly, the consideration paid by the Company for the businesses it purchases is allocated to the tangible and intangible 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 in part 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. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record significant adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in our consolidated statements of operations.

The Company's practice is to immediately tightly integrate all functions including infrastructure, sales and marketing, administration, product development after a business acquisition is consummated, so as to ensure that synergistic efficiencies are maximized and redundancies eliminated, and to rapidly leverage cross-selling opportunities. Furthermore the Company centralizes certain key functions such as information technology, marketing, sales, human resources, finance, and other general administrative functions after an acquisition, in order and to quickly realize cost efficiencies. By executing this integration strategy it becomes neither practical nor feasible to accurately and separately track and disclose the earnings from the business combinations we have executed after they have been acquired.

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 terms for the contingent earn-out payments in most of the Company's business acquisitions typically address the GAAP recognizable revenues achieved by the acquired entity over a one, two, and/or three year period subsequent to the effective date of their acquisition by Ebix. These terms typically establish a minimum threshold revenue target with achievement of revenues recognized over that target being awarded in the form of a specified cash earn-out payment. The Company applies these terms in its calculation and determination of the fair value of contingent earn-out liabilities for purchased businesses as part of the related valuation and purchase price allocation exercise for the corresponding acquired assets and liabilities. The Company recognizes these potential obligations as contingent liabilities as reported on its Consolidated Balance Sheets. 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. During each of the years ending December 31, 2017, 2016 and 2015, respectively, these aggregate contingent accrued earn-out business acquisition consideration liabilities, were reduced by $164 thousand, $1.3 million and $1.5 million, respectively, due to remeasurements as based on the then assessed fair value and changes in the amount and timing of anticipated future revenue levels. These reductions to the contingent accrued earn-out liabilities resulted in corresponding reduction to general and administrative expenses as reported on the Consolidated Statements of Income. As of December 31, 2017, the total of these contingent liabilities was $37.1 million, of which $33.1 million is reported in long-term liabilities, and $4.0 million is included in current liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2016 the total of these contingent liabilities was $8.5 million of which $6.6 million was reported in long-term liabilities, and $1.9 million was included in current liabilities in the Company's Consolidated Balance Sheet.

2017 Acquisitions

Via - Effective November 1, 2017 Ebix acquired Via, a recognized leader in the travel space in India and an Omni-channel online travel and assisted e-commerce exchange. Ebix acquired Via for upfront cash consideration in the amount $78.8 million plus possible future contingent payments of up to $2.3 million based on any potential claims made by tax authorities over the subsequent twelve month period following the effective date of the acquisition and $2.0 million based on the receipt of refunds pertaining to certain advance tax payments and withholding taxes, both of which are included in Other current liabilities in the Company's Consolidated Balance Sheet. The valuation and purchase price allocation for the Via acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.

Paul Merchants - Effective November 1, 2017 Ebix acquired the MTSS Business of Paul Merchants, the largest international remittance service provider in India, for upfront cash consideration in the amount $37.4 million. The valuation and purchase price allocation for the Paul Merchants acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.

Wall Street - Effective October 1, 2017 Ebix acquired the MTSS Business of Wall Street, an inward international remittance service provider in India, along with the acquisition of its subsidiary company Goldman Securities Limited for upfront cash consideration in the amount $7.4 million. The valuation and purchase price allocation for the Wall Street acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.

YouFirst - Effective September 1, 2017 Ebix acquired the MTSS Business of YouFirst , an inward international remittance service provider in India, for upfront cash consideration in the amount $10.2 million. The valuation and purchase price allocation for the YouFirst acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.

beBetter - Effective June 1, 2017 Ebix acquired the assets of beBetter a technology enabled corporate wellness provider that provides end-to-end wellness solutions offering a variety of tools and programs, including interactive platforms, health screening, coaching, tobacco cessation, weight and stress management, health information, and numerous other products and services. Ebix acquired the assets and intellectual property of beBetter for $1.0 million plus possible future contingent earn-out payments of up to $2.0 million based on earned revenues over the subsequent twenty-four month period following the effective date of the acquisition.

ItzCash - Effective April 1, 2017 Ebix entered into a joint venture with India-based Essel Group, while acquiring an 80% stake in ItzCash, India’s leading payment solutions exchange. ItzCash is recognized as a leader in the prepaid cards and bill payments space in India. Under the terms of the agreement, ItzCash was valued at a total enterprise value of approximately $150 million. Accordingly, Ebix acquired an 80% stake in ItzCash for $120 million including upfront cash of $76.3 million plus possible future contingent earn-out payments of up to $44.0 million based on earned revenues over the subsequent thirty-six month period following the effective date of the acquisition. $4.0 million of the possible future contingent earn-out payments is being held in escrow accounts for the twelve month period following the effective date of the acquisition to ensure that the acquired business achieves the minimum specified annual gross revenue threshold, which if not achieved will result in said funds being returned to Ebix. The Company has determined that the fair value of the contingent earn-out consideration is $34.6 million as of December 31, 2017. The valuation and purchase price allocation for the ItzCash acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.

2016 Acquisitions

Wdev - Effective November 1, 2016 Ebix acquired Wdev, a Brazilian company that provides IT services and software development for the Latin American insurance industry. Ebix acquired Wdev for upfront cash consideration in the amount of $10.5 million, plus possible future contingent earn-out payments of up to $15.7 million based on earned revenues over the subsequent thirty-eight month period following the effective date of the acquisition. $2.9 million of the upfront cash consideration is being held in an escrow account for the thirty-eight month period following the effective date of the acquisition to ensure that the acquired business achieves the minimum specified annual net revenue threshold, which if not achieved will result in said funds being returned to Ebix. The Company has determined that the fair value of the contingent earn-out consideration is $2.5 million as of December 31, 2017.

EbixHealth JV - Effective July 1, 2016 Ebix and IHC jointly executed a Call Notice agreement, whereby Ebix purchased additional common units in the EbixHealth JV from IHC constituting eleven percent (11%) of the EbixHealth JV for $2.0 million cash which resulted in Ebix holding an aggregate fifty-one percent (51%) controlling equity interest in the EbixHealth JV. Previously, effective September 1, 2015 Ebix and IHC formed a joint venture named EbixHealth JV. Ebix paid $6.0 million and contributed a license to use certain CurePet software and systems valued by the EbixHealth JV at $2.0 million, for its initial 40% membership interest in the EbixHealth JV.

Hope Health - Effective November 1, 2016 Ebix acquired the assets of Hope Health, a Michigan corporation and publisher of health and wellness continuing education products. Ebix acquired the assets and intellectual property of Hope Health for $1.72 million.

2015 Acquisitions

Via Media Health - The Company acquired Via Media Health, effective March 1, 2015. Via Media Health is one of India’s leading health content and communication companies. Ebix acquired Via Media Health for upfront cash consideration in the amount of $1.0 million, plus a possible future one time contingent earn- out payment of up to $372 thousand based on earned revenues over the subsequent twelve month period following the effective date of the acquisition, and an additional possible one time future performance bonus of up to $1.0 million depending upon revenue growth realized in the business over the subsequent twenty-four month period following the effective date of the acquisition. The Company accounted for this acquisition by recording $2.0 million of goodwill, $383 thousand of intangible assets pertaining to customer relationships, and $101 thousand of intangible assets pertaining to acquired technology. The Company has determined that the fair value of the contingent earn-out consideration was zero as of December 31, 2017.

PB Systems - The Company acquired PB System, effective June 1, 2015. PB Systems develops and implements software solutions for insurance clients. Ebix acquired PB Systems for upfront cash consideration in the amount of $12.4 million, plus possible future contingent earn-out payments of up to $8.0 million based on earned revenues over the subsequent twenty-four month period following the effective date of the acquisition. The Company initially accounted for this acquisition by recording $6.8 million of goodwill, and $10.3 million of intangible assets pertaining to customer relationships. In the Company's Form 10-K for the year ended December 31, 2015, the Company had disclosed that the valuation and purchase price allocation for the PB Systems acquisition was preliminary because all of the information necessary to determine the fair value of the acquired customer relationship intangible asset and fair value of the revenue-based earn-out contingent liability was still in the process of being evaluated by management and the Company's external valuation firms. This evaluation was completed during the second quarter ended June 30, 2016 and based on this the final goodwill and intangible assets pertaining to customer relationships recorded were $11.2 million and $2.1 million, respectively. The changes that resulted were a $(8.2) million reduction to the customer relationship intangible asset, a $(3.2) million reduction to the deferred tax liability, a $(664) thousand reduction to the revenue-based earn-out contingent liability, and a corresponding and offsetting $4.3 million increase to goodwill. The Company has determined that the fair value of the contingent earn-out consideration is zero as of December 31, 2017.

The following table summarizes the fair value of the consideration transferred, net assets acquired and liabilities assumed, as a result of the acquisitions, that were recorded during 2017 and 2016:



	December 31,
(in thousands)	2017			2016
Fair value of total consideration transferred
Cash	$	211,143		$	10,992
Equity instruments	—			2,763
Contingent earn-out consideration arrangement (net)	30,149			5,785
Upfront cash consideration being held in an escrow account	4,040			—
Previous cash and other consideration in investment of EbixHealth JV	—			8,000
Total consideration transferred	245,332			27,540

Fair value of equity components recorded (not part of consideration)
Gain on previously carried 40% equity interest in the EbixHealth JV	—			1,162
Recognition of noncontrolling interest of joint ventures	27,625			11,223
Total equity components recorded	27,625			12,385

Total consideration transferred and equity components recorded	$	272,957		$	39,925

Fair value of assets acquired and liabilities assumed
Cash	$	18,982		$	2,333
Short term investments	24,206			—
Restricted cash	4,040			8,175
Other current assets	39,680			6,282
Property, plant, and equipment	1,018			842
Other long term assets	1,683			7
Intangible assets, definite lived	11,267			(3,184		)
Intangible assets, indefinite lived	11,168			—
Capitalized software development costs	1,705			—
Deferred tax liability	(3,405		)	1,972
Current and other liabilities	(58,324		)	(16,587		)
Net assets acquired, excludes goodwill	52,020			(160		)

Goodwill	220,937			40,085

Total net assets acquired	$	272,957		$	39,925

The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2017 and 2016:



	December 31,
	2017			2016
			Weighted Average				Weighted Average
Intangible asset category	Fair Value		Useful Life	Fair Value			Useful Life
	(in thousands)		(in years)	(in thousands)			(in years)
Customer relationships	$	518	10.0	$	3,929		9.7
Developed technology	—		0.0	1,056			5.0
Dealer's network	10,499		17.9	—			0.0
Purchase accounting adjustments for prior year acquisitions	250		0.0	(8,169		)	0.0
Total acquired intangible assets	$	11,267	17.6	$	(3,184	)	8.7

Estimated aggregate future amortization expense for the intangible assets recorded as part of the business acquisitions described above and all other prior acquisitions is as follows:



Estimated Amortization Expenses (in thousands):
For the year ending December 31, 2018	$	6,860
For the year ending December 31, 2019	6,634
For the year ending December 31, 2020	6,208
For the year ending December 31, 2021	5,608
For the year ending December 31, 2022	5,248
Thereafter	15,153

	$	45,711

The Company recorded $7.3 million, $6.8 million, and $7.2 million of amortization expense related to acquired intangible assets for the years ended December 31, 2017, 2016, and 2015, respectively.