ACQUISITIONS

In accordance with ASC Topic 805, “Business Combinations,” we account for acquisitions by applying the acquisition method of accounting. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their fair values as of the closing date of the acquisition. None of our acquisitions presented below were significant, individually or in the aggregate, under Rule 3-05 and Article 11 of SEC Regulation S-X. Our 2014 acquisitions, in aggregate, contributed net revenue and net loss from continuing operations of $6.8 million and $0.1 million, respectively, which are included in our consolidated statements of operations for the year ended December 31, 2014.

Central Desktop

On October 16, 2014, we completed the acquisition of Central Desktop, a leading cloud-based team workspace platform, by acquiring all of Central Desktop’s outstanding stock via merger. The following table summarizes the preliminary consideration paid for Central Desktop (in thousands):



Negotiated sales price	$	25,000
Preliminary working capital and other adjustments	76
Preliminary purchase price	$	25,076

In addition, the Central Desktop merger agreement provides for a potential earn-out payment to the sellers based on its annual revenue growth in 2015. We funded the acquisition through borrowings under our credit facility and cash and equivalents on hand. We incurred $0.4 million of direct transaction costs, which are recorded in acquisition-related costs for the year ended December 31, 2014. Central Desktop’s financial results since its acquisition date are included in our North America segment.

TalkPoint

On September 19, 2014, we completed the acquisition of TalkPoint, a leading provider of webcasting software and services, by acquiring all of TalkPoint’s outstanding equity interests. The following table summarizes the preliminary consideration paid for TalkPoint (in thousands):



Negotiated sales price	$	56,500
Preliminary working capital and other adjustments	(917		)
Preliminary purchase price	$	55,583

In addition, the TalkPoint purchase agreement provides for a potential earn-out payment to the sellers based on its annual revenue growth in 2015. We funded the acquisition through borrowings under our credit facility and cash and equivalents on hand. We incurred $0.4 million of direct transaction costs, which are recorded in acquisition-related costs for the year ended December 31, 2014. TalkPoint’s financial results since its acquisition date are included primarily in our North America segment.

Powwownow

On December 3, 2013, we completed the acquisition of Powwownow, a U.K.-based conferencing and collaboration provider focused on small and midsize businesses, by acquiring all of Powwownow's outstanding stock. The following table summarizes the consideration paid for Powwownow (in thousands):



Negotiated sales price	$	53,183
Working capital and other adjustments	(684		)
Purchase price	$	52,499

In addition, the Powwownow purchase agreement provides for an earn-out payment to the sellers based on its annual revenue growth in 2014. We funded the acquisition through borrowings under our credit facility and incurred $0.4 million of direct transaction costs, which are recorded in acquisition-related costs for the year ended December 31, 2013. Powwownow's financial results since its acquisition date are included in our Europe segment.

ACT

On September 4, 2013, we completed the acquisition of ACT, a U.S.-based global provider of integrated conferencing solutions, by acquiring all of ACT's outstanding stock via merger. The following table summarizes the consideration paid for ACT (in thousands):



Negotiated sales price	$	53,000
Working capital and other adjustments	(1,515		)
Purchase price	$	51,485

We funded the acquisition through borrowings under our credit facility and incurred $1.4 million of direct transaction costs, which are recorded in acquisition-related costs for the year ended December 31, 2013. ACT's financial results since its acquisition date are primarily included in our North America segment, with less significant contribution included within our Europe and Asia Pacific segments.

Valuation of Assets and Liabilities

The fair values of the net tangible and intangible assets acquired and liabilities assumed in connection with these acquisitions have been recognized in our consolidated balance sheets based upon their values at their respective acquisition dates, as set forth below. The excess of the purchase price over the net tangible and intangible assets was recorded as goodwill. The factors contributing to the recognition of goodwill are based on strategic and synergistic benefits that are expected to be realized from an expanded global customer base, including opportunities for us to sell our SaaS solutions to those customers, and opportunities to improve performance by leveraging best practices, operational expertise and global scale. The recognized goodwill for Central Desktop, TalkPoint, Powwownow and ACT are not expected to be deductible for income tax purposes. The valuations for Powwownow and ACT are final.

The preliminary fair values recorded for Central Desktop and TalkPoint were based upon preliminary valuations, and the estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period (up to one year from each acquisition date). The primary areas of the preliminary valuations that are not yet finalized relate to amounts for income taxes including, but not limited to, current tax accounts, deferred tax accounts, amounts for uncertain tax positions and net operating loss carryforwards inclusive of associated limitations and valuation allowances, amounts for state and local excise and sales tax contingencies, the fair values of certain tangible assets and liabilities acquired, certain legal matters, the determination of identifiable intangible assets and the final amount of residual goodwill. We expect to continue to obtain information to assist us in determining the fair values of the assets acquired and liabilities assumed at each acquisition date during the measurement periods.

The preliminary valuation of the assets acquired and liabilities assumed for Central Desktop and TalkPoint and the final valuation of the assets acquired and liabilities assumed for Powwownow and ACT are as follows (in thousands):



	2014				2013
	Central Desktop Preliminary Valuation		TalkPoint Preliminary Valuation		Powwownow Valuation		ACT Valuation
Cash and equivalents	$	193	$	2	$	1,295	$	11,137
Other current assets	1,251		3,330		3,221		12,321
Property and equipment	217		403		889		2,861
Intangible assets	9,200		28,400		35,568		31,000
Deferred income taxes, net	954		463		—		3,026
Other assets	66		1,115		8,150		2,905
Total assets acquired	11,881		33,713		49,123		63,250

Current liabilities	5,817		1,454		4,349		12,969
Long-term liabilities	—		8,006		12,918		4,432
Deferred income taxes, net	3,461		—		5,987		9,933
Total liabilities assumed	9,278		9,460		23,254		27,334

Total identifiable net assets	2,603		24,253		25,869		35,916
Goodwill	22,473		31,330		26,630		15,569
Total net assets	$	25,076	$	55,583	$	52,499	$	51,485

Preliminary Valuation Adjustments for Central Desktop

We performed a preliminary valuation of the assets and liabilities of Central Desktop at its acquisition date. Adjustments as a result of the preliminary valuation and the bases for their determination are summarized as follows:

Developed technology - Developed technology was the primary asset acquired in the Central Desktop acquisition. We valued developed technology using the relief from royalty approach. The developed technology was preliminarily valued at $6.0 million for the acquisition under this approach and will be amortized over seven years.

Customer relationships - Customer relationships were the secondary asset acquired in the Central Desktop acquisition. We valued customer relationships using the income approach, specifically the multi-period excess earnings method. The customer relationships were preliminarily valued at $1.1 million for the acquisition under this approach and will be amortized over ten years.

Non-compete agreements - We valued non-compete agreements using the income approach, specifically based on the negative impact on the business that the individuals could have on revenue. The non-compete agreements were valued at $1.8 million for the Central Desktop acquisition under this approach and will be amortized over five years.

Trade names - We valued trade names using the income approach, specifically the multi-period excess earnings method. In determining the fair value of the trade names, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the trade names after applying a royalty rate to the overall revenue. The trade names were valued at $0.3 million for the Central Desktop acquisition under this approach and will be amortized over two years.

Earn-out - We recorded a contingent consideration liability of approximately $2.9 million as of the acquisition date related to the Central Desktop earn-out, included in “Accrued expenses” under “Current Liabilities” in our consolidated balance sheet. The fair value of the liability was estimated using internal forecasts with inputs that are not observable in the market, and thus represents a Level 3 fair value measurement, as defined in Note 11. The inputs in the Level 3 measurement are not supported by market activity, as they are probability assessments of expected future sales related to our acquisition of Central Desktop during the earn-out period. The earn-out will be re-measured quarterly, with the change being reflected as acquisition-related costs in our consolidated statements of operations.

Preliminary Valuation Adjustments for TalkPoint

We performed a preliminary valuation of the assets and liabilities of TalkPoint at its acquisition date. Adjustments as a result of the preliminary valuation and the bases for their determination are summarized as follows:

Indemnification asset - We recognized an indemnification asset of $1.1 million in connection with the TalkPoint acquisition, which is included above in "Other assets." The indemnification asset represents reimbursements we reasonably expect to receive primarily from escrow funds currently held by a financial institution pursuant to the TalkPoint purchase agreement. We recorded offsetting net contingent tax liabilities of $1.1 million in connection with the recognition of the indemnification asset. The tax contingencies are included in “Accrued expenses” under “Long-Term Liabilities” in our consolidated balance sheets.

Developed technology - Developed technology was the primary asset acquired in the TalkPoint acquisition. We valued developed technology using the relief from royalty approach. The developed technology was preliminarily valued at $16.0 million for the acquisition under this approach and will be amortized over seven years.

Customer relationships - Customer relationships were the secondary asset acquired in the TalkPoint acquisition. We valued customer relationships using the income approach, specifically the multi-period excess earnings method. The customer relationships were preliminarily valued at $9.5 million for the acquisition under this approach and will be amortized over ten years.

Non-compete agreements - We valued non-compete agreements using the income approach, specifically based on the negative impact on the business that the individuals could have on revenue. The non-compete agreements were valued at $2.2 million for the TalkPoint acquisition under this approach and will be amortized over five years.

Trade names - We valued trade names using the income approach, specifically the multi-period excess earnings method. In determining the fair value of the trade names, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the trade names after applying a royalty rate to the overall revenue. The trade names were valued at $0.7 million for the TalkPoint acquisition under this approach and will be amortized over two years.

Earn-out - We recorded a contingent consideration liability of approximately $6.4 million as of the acquisition date related to the Talkpoint earn-out, included in “Accrued expenses” under “Long-Term Liabilities” in our consolidated balance sheets. The fair value of the liability was estimated using internal forecasts with inputs that are not observable in the market, and thus represents a Level 3 fair value measurement, as defined in Note 11. The inputs in the Level 3 measurement are not supported by market activity, as they are probability assessments of expected future sales related to our acquisition of TalkPoint during the earn-out period. The earn-out will be re-measured quarterly, with the change being reflected as acquisition-related costs in our consolidated statements of operations.

Valuation Adjustments for Powwownow

We finalized the valuation of the assets and liabilities of Powwownow at its acquisition date. Adjustments as a result of the valuation and the bases for their determination are summarized as follows:

Indemnification asset - We recognized an indemnification asset of $8.2 million in connection with our Powwownow acquisition, which is included in "Other assets." The indemnification asset represents reimbursement we reasonably expect to receive primarily from escrow funds currently held by a financial institution pursuant to the Powwownow purchase agreement. We recorded an offsetting contingent tax liability of $8.0 million and related interest payable of $0.2 million in connection with the recognition of the indemnification asset. The tax contingency is included in “Accrued expenses” under “Long-Term Liabilities” in our consolidated balance sheets.

Customer relationships - Customer relationships were the primary asset acquired in the Powwownow acquisition. We valued customer relationships using the income approach, specifically the multi-period excess earnings method. The customer relationships were preliminarily valued at $29.0 million for the acquisition under this approach and will be amortized over ten years.

Non-compete agreements - We valued non-compete agreements using the income approach, specifically based on the negative impact on the business that the individuals could have on revenue. The non-compete agreements were valued at $2.1 million for the Powwownow acquisition under this approach and will be amortized over three years.

Trade names - We valued trade names using the income approach, specifically the multi-period excess earnings method. In determining the fair value of the trade names, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the trade names after applying a royalty rate to the overall revenue. The trade names were valued at $4.4 million for the Powwownow acquisition under this approach and will be amortized over ten years.

Earn-out - We recorded a contingent consideration liability of approximately $3.8 million as of the acquisition date related to the Powwownow earn-out. The fair value of the liability was estimated using internal forecasts with inputs that are not observable in the market, and thus represents a Level 3 fair value measurement, as defined in Note 11. The inputs in the Level 3 measurement are not supported by market activity, as they are probability assessments of expected future sales related to our acquisition of Powwownow during the earn-out period. The earn-out was re-measured quarterly, with the change being reflected as acquisition-related costs in our consolidated statements of operations. During 2014, we re-measured this liability, resulting in a reduction in value of $1.9 million based upon revisions to our internal forecasts. This $1.9 million liability is included in "Accrued expenses" under "Current Liabilities" and "Long-term Liabilities" in our consolidated financial statements. See Note 11 for additional information.

Deferred tax liabilities, net - $6.0 million was recorded to adjust deferred taxes for the preliminary fair value adjustments made in accounting for our Powwownow acquisition.

Valuation Adjustments for ACT

We finalized the valuation of the assets and liabilities of ACT at its acquisition date. Adjustments as a result of the valuation and the bases for their determination are summarized as follows:

Indemnification asset - We recognized an indemnification asset of $3.7 million in connection with our ACT acquisition. Of this amount, $1.1 million is included above in "Other current assets" and $2.6 million is included in "Other assets." The indemnification asset represents reimbursement we reasonably expect to receive from escrow funds currently held by a financial institution pursuant to the ACT merger agreement. We recorded an offsetting uncertain tax position of $3.4 million, net of a $0.2 million federal income tax benefit of state income tax, and related interest payable of $0.3 million in connection with the recognition of the indemnification asset. The income tax contingency is included above in “Long-Term Liabilities.”

Customer relationships - Customer relationships were the primary asset acquired in the ACT acquisition. We valued customer relationships using the income approach, specifically the multi-period excess earnings method. In determining the fair value of the customer relationships, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the customer relationship after deducting the contributory asset charges. The customer relationships were preliminarily valued at $30.2 million for the acquisition under this approach and will be amortized over ten years. This total includes an adjustment from the initial preliminary valuation date of $1.3 million for updates in assumptions including discount rate.

Non-compete agreements - We valued non-compete agreements using the income approach, specifically based on the negative impact on the business that the individuals could have on revenue. The non-compete agreements were valued at $0.8 million for the ACT acquisition under this approach and will be amortized over five years.

Deferred tax liabilities, net - $10.9 million was recorded to adjust deferred taxes for the fair value adjustments made in accounting for our ACT acquisition. This includes an adjustment from the initial preliminary valuation date of $5.5 million.

During 2014, we made changes to estimates in goodwill totaling $0.9 million to our final valuation of current assets and liabilities.

Central Desktop and TalkPoint Preliminary Pre-Acquisition Contingencies Assumed

We have evaluated and continue to evaluate pre-acquisition contingencies relating to Central Desktop and TalkPoint that existed as of each acquisition date. Based on our evaluation to date, we have preliminarily determined that certain pre-acquisition contingencies are probable in nature and estimable as of each acquisition date. Accordingly, we have recorded our best estimates for these contingencies as part of the preliminary valuation of the assets and liabilities acquired. We continue to gather information relating to all pre-acquisition contingencies that we have assumed. Any changes to the pre-acquisition contingency amounts recorded during the measurement period will be included in the final valuation and related amounts recognized. Subsequent to the end of the measurement period, any adjustments to pre-acquisition contingency amounts will be reflected in our results of operations.

Other Acquisitions

Copper

On August 1, 2013, we acquired substantially all of the assets and assumed certain liabilities of the conferencing services business of Copper, a U.S.-based audio and web conferencing services provider and an existing reseller of PGi conferencing services, for $10.3 million, including a $0.2 million working capital adjustment finalized in December 2013. We funded the acquisition through borrowings under our credit facility and incurred $0.4 million of direct transaction costs, which are recorded in acquisition-related costs for the year ended December 31, 2013.

Copper's financial results since its acquisition date are included in our North America segment. The primary assets acquired as part of the Copper acquisition were customer relationships totaling $6.4 million and goodwill of $3.3 million. The recognized goodwill for Copper is expected to be deductible for income tax purposes.