| Acquisitions | 2. Acquisitions
Technorati –
On February 19, 2016, the Company entered into an Asset
Purchase Agreement to acquire substantially all of the assets of
Technorati, Inc. (“Technorati”), an advertising
technology company, for $3.0 million in cash (the
“Purchase Price”). The Company completed the
acquisition on February 26, 2016 (the “Closing”).
The Company expects the acquisition of Technorati to drive
additional advertising demand, to accelerate its content and
advertising syndication strategy by giving the Company access to
over 1,000 new publishers, and to add new tools for publishers to
its existing platform. The Company expects to realize synergies and
economies of scale by combining Technorati’s publisher
network, proprietary SmartWrapper solution and other advertising
technology with its existing network of Managed Portals and
Advertising solutions.
The assets acquired include Technorati’s intellectual
property and advertising technology platforms, customer and
publisher relationships, accounts receivable and equipment. The
Company also assumed certain obligations of Technorati, including
post-Closing obligations under contracts assigned to the Company
and the payment of outstanding liabilities to its publishers. Ten
of Technorati’s employees commenced employment with
Synacor.
The Company paid $2.5 million of the Purchase Price at the Closing,
withheld $0.5 million of the purchase price to secure
Technorati’s indemnification obligations under the Asset
Purchase Agreement, and owes Technorati approximately $0.1 million
in post-closing working capital adjustments. Pursuant to the terms
of the Asset Purchase Agreement, Technorati shall indemnify the
Company for breaches of its representations and warranties,
breaches of covenants and certain other matters. The
representations and warranties set forth in the Asset Purchase
Agreement generally survive for 12 months following the Closing,
with longer survival periods for certain fundamental
representations and warranties.
Consideration and Allocation of Purchase Price –
The transaction was accounted for as a purchase in accordance with
FASB Accounting Standards Codification (“ASC”) Topic
805, Business
Combinations
The estimated transaction consideration, as well as the preliminary
allocation of the purchase price to the assets acquired and
liabilities assumed as of the date of the acquisition are presented
in the table below. Management is responsible for determining,
as of the Closing, the fair value of tangible and identifiable
intangible assets acquired and liabilities assumed, and the
estimated useful lives for any depreciable and amortizable
assets. Management considered a number of factors, including
reference to a valuation analysis performed solely for the purpose
of this allocation in accordance with ASC Topic 805. The
Company’s estimates are based on assumptions believed to be
reasonable, but which are inherently uncertain and
unpredictable. This analysis required the use of
management’s assumptions, which would not reflect
unanticipated events and circumstances that may occur.
Consideration (in thousands):
Cash consideration $ 2,500
Fair value of indemnification holdback 500
Fair value of post-closing working capital adjustment 67
Total consideration $ 3,067
Purchase price allocation (in thousands):
Assets acquired:
Accounts receivable $ 965
Property and equipment 96
Customer and publisher relationships 1,380
Technology 730
Goodwill 751
Total assets acquired 3,922
Liabilities assumed:
Accounts payable and accrued expenses 855
Net assets acquired $ 3,067
While the Company has used its best estimates and assumptions to
value the assets acquired and liabilities assumed, the purchase
price allocation is preliminary and could change during the
measurement period, not to exceed one year, if new information is
obtained about the facts and circumstances that existed as of the
Closing, that if known would have resulted in the recognition of
additional assets or liabilities or resulted in changes in the
recorded values of assets and liabilities. It is expected that
acquired goodwill will be deductible for United States tax
purposes. We will amortize technology and customer and
publisher relationships over estimated useful lives of five
years.
Acquisition costs of $0.1 million were incurred during the first
quarter of 2016 and charged to general and administrative
expense.
Zimbra –
As more fully discussed in our Annual Report on Form 10-K for the
year ended December 31, 2015, on August 18, 2015 the Company
and Sync Holdings, LLC, its wholly-owned subsidiary, entered into
an Asset Purchase Agreement (the “Asset Purchase
Agreement”) with Zimbra, Inc. (now known as TZ Holdings) to
acquire certain assets related to TZ Holdings’
email/collaboration products and services business, including
certain of its wholly-owned foreign subsidiaries. The business
acquired by the Company pursuant to the Asset Purchase Agreement is
referred to herein as “Zimbra.” Zimbra includes
software for email/collaboration, calendaring, file sharing,
activity streams and social networks, among other things. The
Zimbra software is used globally by service providers, governments
and companies. The Company completed the acquisition (the
“Acquisition”) on September 14, 2015 (the
“Closing”).
Pro Forma Results
The following unaudited pro forma information presents the combined
results of the Company’s operations as if the Acquisition had
been completed on January 1, 2014, the beginning of the
comparable prior reporting periods. The unaudited pro forma results
include adjustments to reflect: (i) the carve-out of revenue
and expenses relating to the portion of the Zimbra business not
acquired; (ii) the elimination of depreciation and
amortization from Zimbra’s historical financial statements
and the inclusion of depreciation and amortization based on the
fair values of acquired property, plant and equipment and
intangible assets; (iii) the fair value of deferred revenue
liabilities assumed; (iv) recognition of the post-acquisition
share-based compensation expense related to stock options that were
granted to Zimbra employees who accepted employment with Synacor;
(v) the elimination of intercompany revenue and expenses
between Zimbra and Synacor; and (iv) the elimination of
acquisition-related expenses.
The unaudited pro forma results do not reflect any cost saving
synergies from operating efficiencies or the effect of the
incremental costs incurred in integrating the two companies.
Accordingly, these unaudited pro forma results are presented for
informational purpose only and are not necessarily indicative of
what the actual results of operations of the combined company would
have been if the acquisition had occurred at the beginning of the
periods presented, nor are they indicative of future results of
operations.
Set forth below is the unaudited pro forma consolidated results of
operations of the Company and Zimbra as if the Acquisition occurred
as of January 1, 2014 (in thousands, except per share amounts):
Three months June 30, 2015 Six months
Revenue $ 31,042 $ 64,413
Operating loss $ (1,636 ) (3,313 )
Net loss $ (2,093 ) $ (4,246 )
Net loss per share (basic and diluted): $ (0.07 ) $ (0.14 ) |
