Acquisitions and Transfers

9 Months Ended

Sep. 30, 2012

Acquisitions and Transfers

Acquisitions and Transfers

4.  Acquisitions and Transfers

Since January 1, 2011, we acquired five businesses in the media services industry. The objective of each transaction was to expand our product offerings, customer base, global digital distribution network, and/or to better serve the advertising community.  We have or expect to realize operating synergies from each of the transactions, or the acquired operation has or will create opportunities for the acquired entity to sell its services to our customers. Both of these factors resulted in a purchase price that contributed to the recognition of goodwill.  A summary of the acquisitions is as follows:

Business Acquired	Date of Closing	Net Assets Acquired (in millions)		Form of Consideration
North Country	July 31, 2012	$	3.7	Cash
Peer 39	April 30, 2012	15.7		Cash/Stock
EyeWonder	September 1, 2011	61.0		Cash
MediaMind	July 26, 2011	499.3		Cash
MIJO	April 1, 2011	43.8		Cash

Each of the acquired businesses has been included in our results of operations since the date of closing.  Accordingly, 2012 and 2011 operating results are not entirely comparable due to these acquisitions and related costs.

During the second quarter ended June 30, 2012, we finalized the purchase price allocation of our July 2011 acquisition of MediaMind.  In the final purchase price allocation we increased goodwill by $3.8 million, increased noncurrent deferred income tax liabilities by $1.8 million, increased other noncurrent liabilities by $0.3 million, reduced noncurrent deferred tax assets by $2.6 million and reduced accrued liabilities by $0.9 million.  The consolidated balance sheet at December 31, 2011 has been retrospectively adjusted to reflect the final MediaMind purchase price allocation.

During the third quarter ended September 30, 2012, we finalized the purchase price allocation of our September 2011 acquisition of EyeWonder.  The final purchase price allocation did not change the amounts previously reported.

Transfer Majority of Chors Unit

On April 2, 2012, in consideration of $0.1 million, we transferred the majority of the assets, agreements and employees of Chors GmbH (“Chors”), our German limited liability company that was acquired in the acquisition of EyeWonder in September 2011, to 24/7 Real Media Deutschland GmbH (“24/7 Germany”), a German limited liability company, and an affiliate of WPP plc, an international advertising and media investment management firm.  In addition, 24/7 Germany agreed to refer or transition no less than $5.0 million worth of revenue (as defined) to us within one year of the closing.  For the three months ended March 31, 2012, we reported $1.3 million of revenue and $0.3 million of income before income taxes from Chors.  We did not report a significant gain or loss in connection with the transfer.

Acquisition of North Country

On July 31, 2012, we acquired the assets and operations of privately-held North Country Media Group, Inc. (“North Country”), a market leader in the customization and distribution of direct response advertising, for $1.8 million in cash plus contingent consideration we valued at $1.9 million.  The contingent consideration payment ranges from $0 to $1.9 million.  Payment of the contingent consideration is dependent upon North Country meeting three separate future revenue targets through July 2014.  North Country provides media advertising services to advertising agencies and advertisers participating in the direct response advertising industry and is part of our television segment.

The purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values.  We allocated $1.1 million to customer relationships, $0.2 million to trade name and $0.5 million to noncompetition agreements.  The customer relationships, trade name and noncompetition agreements acquired in the transaction are being amortized on a straight-line basis over 10 years, 6 years and 5 years, respectively.  The weighted average amortization period is 8.2 years.  The goodwill and intangible assets created in the acquisition are deductible for tax purposes.  The acquired assets include $0.4 million of gross receivables which we recognized at their estimated fair value of $0.4 million.  We recognized $0.5 million of revenue and $0.1 million income before income taxes from North Country in our consolidated results of operations for the two months ended September 30, 2012.  The North Country purchase price allocation is final.

Acquisition of Peer 39

On April 30, 2012, we acquired Peer39, Inc. (“Peer 39”), a provider of webpage level data for approximately $15.7 million in cash, shares of our common stock and an installment payment.  Peer 39, based in New York City, is the leading provider of data based on the content and structure of web pages for the purpose of improving the relevance and effectiveness of online display advertising.  Peer 39 analyzes web pages in terms of quality, safety and brand category allowing advertisers to make better buying decisions.  In connection with the transaction, we (i) paid $10.1 million in cash, (ii) issued 357,143 shares of our common stock and (iii) agreed to pay up to $2.3 million in an installment payment within one year of the acquisition. Peer 39’s operating results are included in our online segment.

The purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values.  The customer relationships, trade name, developed technology and noncompetition agreements acquired in the transaction are being amortized on a straight-line basis over 10 years, 10 years, 6 years and 4 years, respectively.  The weighted average amortization period is 7.1 years.  We plan to make a timely election such that the acquisition is treated as an asset purchase for tax purposes. Accordingly, the goodwill and intangible assets created in the acquisition are expected to be deductible for income tax purposes.  The acquired assets include $0.8 million of gross receivables which we recognized at their estimated fair value of $0.8 million.  We recognized $2.7 million of revenue and a $1.0 million loss before income taxes from Peer 39 in our consolidated results of operations for the five months ended September 30, 2012.

During the third quarter we finalized our purchase price allocation of Peer 39.  As noted above, we have elected to treat the acquisition as an asset purchase for tax purposes.  As a result, we changed the purchase price allocation to eliminate deferred tax assets and liabilities with a corresponding adjustment to goodwill.  We also (i) reduced developed technology by $1.3 million, accrued liabilities by $0.9 million and noncompetition agreements by $0.3 million, and (ii) increased customer relationships by $0.8 million with a corresponding adjustment to goodwill.

Purchase Price Allocations

The following table summarizes the estimated fair values of the Peer 39 and North Country assets acquired and liabilities assumed at the respective dates of acquisition (in millions).

Category	Peer 39			North Country
Current assets	$	2.4		$	0.5
Property and equipment	0.7			0.7
Other noncurrent assets	0.5			—
Customer relationships	3.1			1.1
Trade names	0.2			0.2
Developed technology	1.8			—
Noncompetition agreements	1.0			0.5
Goodwill	7.2			0.9
Total assets acquired	16.9			3.9
Less other liabilities assumed	(1.2		)	(0.2		)
Net assets acquired	$	15.7		$	3.7

Pro Forma Financial Information

The following pro forma financial information presents our results of operations for the three and nine month periods ended September 30, 2012 and 2011 as if (i) the acquisitions of North Country, Peer 39, EyeWonder, MediaMind and MIJO and (ii) the disposition of the Chors assets, had occurred on January 1, 2011 (in thousands, except per share amounts).  A table of actual amounts is provided for reference.

	As Reported											Pro Forma
	Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011		2012			2011			2012			2011
Revenues	$	93,818		$	84,594		$	283,003		$	215,956	$	94,125		$	97,048		$	285,045		$	298,008
Income (loss) from continuing operations	(219,727		)	(2,697		)	(217,930		)	20,689		(219,731		)	(8,074		)	(219,289		)	(1,567		)
Income (loss) per share — continuing operations:
Basic	$	(7.96	)	$	(0.10	)	$	(7.95	)	$	0.75	$	(7.96	)	$	(0.29	)	$	(7.95	)	$	(0.06	)
Diluted	$	(7.96	)	$	(0.10	)	$	(7.95	)	$	0.74	$	(7.96	)	$	(0.29	)	$	(7.95	)	$	(0.06	)