Business Combinations |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations |
Business Combinations
During the three months ended September 30, 2015, the Company completed four acquisitions. The fair values of these acquisitions, as set forth below, are considered preliminary and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). Any prospective adjustments would change the fair value allocation as of the acquisition date.
The following table summarizes the preliminary fair value of the assets and liabilities assumed in the acquisitions (in thousands):
WOI Stock Purchase
On July 1, 2015, the Company acquired Western Outdoor Interactive Private Limited (“WOI”) for approximately $38.3 million in cash and $4.3 million of contingent consideration. WOI produces and licenses games and applications for global in-flight entertainment, provides technical services to third parties for global in-flight entertainment user interfaces. The acquisition is intended to augment and diversify the Company’s Content operating segment. The goodwill recorded for the WOI acquisition was $17.3 million. Key factors that contributed to the recognition of WOI goodwill were trained workforce, expansion of international operations, the opportunity to consolidate and complement existing content operations, and the opportunity to generate future synergies within the existing Content business. As a result of the stock purchase of WOI, the goodwill is not deductible for tax purposes.
Significant other assets and net liabilities assumed and included in the table above were approximately $4.7 million in accounts receivable, $11.0 million of deferred tax liabilities and $1.8 million of fixed assets that included two long-term office buildings lease arrangements. The net tax liability is made up of short-term deferred tax assets of $0.2 million and long-term deferred tax liabilities of $11.2 million, largely driven by the tax impact of the fair value of the intangible assets. The Company incurred approximately $0.5 million in transaction costs associated with the WOI purchase. The sellers of WOI have the opportunity to receive an additional $5.0 million in cash if, among other things, WOI achieves certain revenue and earnings targets within the first and second yearly anniversaries of the closing date (the “WOI earn-out”). The WOI earn-out fair valued as of the acquisition date was approximately $4.3 million and presented as other long-term liabilities.
RMG Asset Acquisition
On July 1, 2015, the Company acquired certain assets and assumed certain liabilities of RMG Networks Holding Corporation ("RMG") for approximately $2.2 million in cash. These assets were integrated into the Company's advertising and sponsorship team, which provides digital media advertising and related services through executive clubs, in-flight entertainment systems, in-flight Wi-Fi portals and in private terminals. The acquisition is intended to enhance the Company’s digital media offerings within its Content operating segment. The goodwill recorded for the acquisition of assets from RMG was $2.1 million. Key factors that contributed to the recognition of goodwill were the opportunity to expand the Company's digital media offerings to the travel industry, the opportunity to consolidate and complement existing Content operations, and the opportunity to generate future synergies with our existing business. As a result of the asset purchase, the goodwill is deductible for tax purposes.
Significant other assets and net liabilities assumed and included in the table above were approximately $2.2 million in accounts receivable, $3.1 million of revenue share liabilities and a $1.0 million provision for estimated losses on a specific loss contract expiring in December 2015. The Company incurred approximately $0.2 million in transaction costs associated with the acquisition of assets from RMG. RMG has the opportunity to receive an additional $3.0 million in cash if, among other things, certain revenue and earnings targets are achieved with respect to the acquired assets within the first anniversary of the closing date.
NavAero, Inc. Stock Purchase
On August 4, 2015, the Company acquired NavAero Holding AB (“NavAero”) for approximately $4.8 million in cash and $0.3 million contingent consideration. NavAero is engaged in developing and commercializing technologies to enable and deploy electronic flight bag solutions for the commercial aviation market, which allows airlines to improve their in-flight operations. The acquisition is intended to enhance the Company’s Connectivity operating segment. The goodwill recorded for the NavAero acquisition was $3.3 million. Key factors that contributed to the recognition of NavAero goodwill were trained workforce, expansion of international operations, the opportunity to expand into new product and technology offerings within the airline industry, and to a lesser extent the opportunity to generate future synergies with our existing business. As a result of the stock purchase of navAero, the goodwill is not deductible for tax purposes.
Significant other assets and net liabilities assumed included a net tax liability of $0.6 million, which is made up of short-term deferred tax assets of $0.1 million and long-term deferred tax liabilities of $0.6 million. The Company incurred approximately $0.3 million in transaction costs associated with the NavAero purchase. The sellers of NavAero have the opportunity to receive an additional $1.0 million in cash if NavAero achieves certain revenue targets through December 31, 2016 (the “NavAero earn-out”).
masFlight, Inc. Stock Purchase
On August 4, 2015, the Company acquired Marks Systems, Inc. doing business as masFlight for approximately $10.3 million in cash and $9.4 million contingent consideration. The acquisition was completed as a merger resulting in the acquisition subsidiary, masFlight Inc. (“masFlight”) as the surviving corporation. masFlight pioneered the adoption of cloud-based technologies to collect, compile, link, validate and host a variety of information and offer a single solution enabling airlines to analyze predictive data to run their operations more effectively and efficiently. The acquisition is intended to enhance the Company’s Connectivity operating segment. The goodwill recorded for the masFlight acquisition was $16.2 million. Key factors that contributed to the recognition of masFlight goodwill were trained workforce, expansion into new operations data solutions offerings, the opportunity to consolidate and complement current Connectivity operations within the airline industry as well as expand into new industries, and the opportunity to generate future savings through synergies with our existing business. As a result of the acquisition, the goodwill is not deductible for tax purposes.
Significant other assets and net liabilities assumed included a net tax liability of $1.4 million, which is made up of net short-term deferred tax asset of $0.3 million and long-term deferred tax liabilities of $1.7 million. The Company incurred approximately $0.3 million in transaction costs associated with the masFlight purchase. The sellers of masFlight have the opportunity to receive up to an additional $20.0 million in cash if, among other things, masFlight achieves certain operational, revenue and earnings targets at various dates through December 31, 2019. As a portion of the contingent consideration is subject to future employment of certain key employee of masFlight, certain contingent consideration will be recorded as compensation expenses prospective to the acquisition date. The fair value of masFlight contingent consideration as of the acquisition date was $9.4 million.
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