Mergers and Acquisitions

12 Months Ended

Sep. 29, 2013

Mergers and Acquisitions

Mergers and Acquisitions

5.           Mergers and Acquisitions

              At the beginning of the first quarter of fiscal 2011, we acquired all of the outstanding capital stock of BPR, Inc. ("BPR"), a Canadian scientific and engineering services firm that provides multidisciplinary consulting and engineering support for water, energy, industrial plants, buildings and infrastructure projects. This acquisition further expanded our geographic presence in Eastern Canada, and enabled us to provide clients with additional services throughout Canada. BPR is part of our ECS segment. The estimated fair value of the purchase price was $185.7 million as of the acquisition date, of which payments of $157.0 million were financed with borrowings under our credit facility and available cash resources, and $28.7 million was the estimated fair value of contingent earn-out liabilities on acquisition with a maximum of $39.2 million upon the achievement of specified financial objectives over a two-year period from the acquisition date. The goodwill related to the BPR acquisition represented the value paid for the assembled work force, the international geographic presence in Eastern Canada, and engineering and consulting expertise. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition:

	Amount
	(in thousands)
Current assets	$	77,698
Property and equipment		7,178
Goodwill		128,140
Intangible and other assets		36,988
Current liabilities		(42,481	)
Long-term deferred taxes		(9,622	)
Noncontrolling interests		(12,222	)
Net assets acquired	$	185,679

              In fiscal 2011, we made other acquisitions that enhanced our service offerings and expanded our geographic presence in the ECS and TSS segments. The aggregate purchase price for these acquisitions was approximately $100 million as of the respective acquisition dates. Of this amount, $68.7 million was paid to the sellers, $4.5 million was accrued in accordance to the purchase agreements, and $26.9 million was the estimated fair value of contingent earn-out obligations with an aggregate maximum of $32.3 million upon the achievement of specified financial objectives.

              In fiscal 2012, we made acquisitions that enhanced our service offerings and expanded our geographic presence in our ECS and TSS segments. The aggregate purchase price for these acquisitions was $63.2 million as of the respective acquisition dates. Of this amount, $42.2 million was paid to the sellers, $2.0 million was accrued in accordance to the purchase agreements, and $19.0 million was the estimated fair value of contingent earn-out obligations with an aggregate maximum of $20.0 million upon the achievement of specified financial objectives.

              On December 31, 2012, we acquired American Environmental Group, Ltd. ("AEG"), headquartered in Richfield, Ohio. AEG provides environmental, design, construction and maintenance services primarily to solid and hazardous waste, environmental, energy and utility clients. On January 28, 2013, we acquired Parkland Pipeline Contractors Ltd., Parkland Pipeline Equipment Ltd., Park L Projects Ltd. and Parkland Projects Ltd. (collectively, "Parkland"), headquartered in Alberta, Canada. Parkland serves the oil and gas industry in Western Canada, and specializes in the technical support, engineering support and construction of pipelines and oilfield facilities. AEG and Parkland are both included in our RCM segment. We also made other acquisitions that enhanced our service offerings and expanded our geographic presence in our ECS and TSS segments during fiscal 2013. The aggregate fair value of the purchase prices for fiscal 2013 acquisitions was $248.9 million. Of this amount, $171.6 million was paid to the sellers, $2.0 million was recorded as liabilities in accordance with the purchase agreements, and $75.3 million was the estimated fair value of contingent earn-out obligations, with an aggregate maximum of $86.7 million upon the achievement of specified financial objectives.

              Goodwill additions resulting from the above business combinations are primarily attributable to the existing workforce of the acquired companies and synergies expected to arise after the acquisitions. The results of these acquisitions were included on the consolidated financial statements from their respective closing dates. None of the acquisitions were considered material, individually or in the aggregate, for the respective reporting periods. As a result, no pro forma information has been provided. The purchase price allocations related to fiscal 2013 acquisitions are preliminary, and subject to adjustment, based on the valuation and final determination of net assets acquired. We do not believe that any adjustments will have a material effect on the consolidated results of operations.

              At September 29, 2013, there was a total maximum of $101.3 million of outstanding contingent consideration related to acquisitions completed during or subsequent to fiscal 2010. Of this amount, $81.8 million was estimated as the fair value and accrued on our consolidated balance sheet. The following table summarizes the changes in the carrying value of estimated contingent earn-out liabilities:

	Fiscal Year Ended
	September 29, 2013			September 30, 2012			October 2, 2011
	(in thousands)
Beginning balance (at fair value)	$	51,539		$	75,159		$	20,504
Estimated earn-out liabilities for acquisitions during the fiscal year		75,253			18,981			55,622
Earn-out liabilities for acquisitions completed prior to fiscal 2010.		250			9,974			21,978
Increases due to re-measurement of fair value reported in interest expense		2,433			1,374			1,612
Net decreases due to re-measurement of fair value reported as gains in operating income		(9,560	)		(19,246	)		(1,755	)
Foreign exchange impact		(2,480	)		3,027			(743	)
Earn-out payments:
Reported as cash used in operating activities		(695	)		(601	)		–
Reported as cash used in investing activities		(1,279	)		(11,773	)		(22,059	)
Reported as cash used in financing activities		(33,672	)		(18,055	)		–
Settlement of receivables due from sellers		–			(7,301	)		–
Ending balance (at fair value)	$	81,789		$	51,539		$	75,159