Acquisitions | 9 Months Ended |
Sep. 30, 2013 |
Business Combinations [Abstract] | ' |
Acquisitions | ' |
Acquisitions |
Augmentum Consulting, Ltd. |
On May 2, 2013, the Company acquired a 51% controlling ownership interest in Augmentum Consulting, Ltd. ("Augmentum"), a London based search firm. This acquisition complements CTPartners' existing UK business in a variety of practice areas, provides increased competitive advantage and enhances growth opportunity. |
The Company paid $1.5 million in cash on the acquisition date, recorded a seller note payable valued at $2.5 million, payable in two equal installments on August 31, 2014 and 2015, and a redeemable noncontrolling interest of $3.8 million. The aggregate maximum purchase price may be adjusted based on certain revenue targets over 3 years, not to exceed $8.5 million in total. |
The following table summarizes the fair values of the consideration transferred, assets acquired and liabilities assumed, at acquisition date: |
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Fair value of consideration transferred: | | | | | | | | | | | | | | |
Cash | $ | 1,500 | | | | | | | | | | | | | | |
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Seller note payable for contingent consideration | 2,490 | | | | | | | | | | | | | | |
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Total | 3,990 | | | | | | | | | | | | | | |
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Fair value of redeemable noncontrolling interest | 3,849 | | | | | | | | | | | | | | |
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| $ | 7,839 | | | | | | | | | | | | | | |
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Recognized amounts of identifiable assets acquired and liabilities assumed | | | | | | | | | | | | | | |
Cash | $ | 667 | | | | | | | | | | | | | | |
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Accounts receivable | 2,044 | | | | | | | | | | | | | | |
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Other assets | 96 | | | | | | | | | | | | | | |
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Trade names and trademarks | 204 | | | | | | | | | | | | | | |
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Database content | 835 | | | | | | | | | | | | | | |
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Customer relationships | 474 | | | | | | | | | | | | | | |
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Non-competition agreements | 79 | | | | | | | | | | | | | | |
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Property and equipment | 43 | | | | | | | | | | | | | | |
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Accounts payable and accrued expenses | (1,725 | ) | | | | | | | | | | | | | |
Total identifiable net assets | 2,717 | | | | | | | | | | | | | | |
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Goodwill | 5,122 | | | | | | | | | | | | | | |
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Total fair value of assets acquired and liabilities assumed | $ | 7,839 | | | | | | | | | | | | | | |
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The acquisition of Augmentum includes a contingent consideration arrangement, that allows for adjustment of payments based upon achievement of certain revenue targets over the next three years. The range of undiscounted amounts that the Company could pay for the contingent part of its 51% controlling ownership interest is between zero and $2.5 million, denominated in British pounds and translated at the rate in effect at the end of reporting period. |
The Company has the right to call the remaining 49% interest in Augmentum after August 2, 2014, and Augmentum shareholders have the right to put the remaining 49% interest after September 1, 2014 if the call option has not been exercised, at a pre-determined price, adjustable based on Augmentum's performance. The put option expires on September 12, 2014, if not exercised, and the call option continues to exist indefinitely. The purchase price for the non-controlling interest is determined based on the same formula as contingent consideration, with maximum amount payable of $4.2 million, denominated in British pounds and translated at the rate in effect at the end of the reporting period. As of September 30, 2013, the redemption value of non-controlling interest was $4.0 million. |
The fair value of contingent consideration and the fair value of noncontrolling interest, including the value of the put and the call options, is contingent upon the acquired business revenues, and was estimated through the use of the Monte Carlo model. These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement. These fair value measurements are based on (i) an assumed revenue forecast, (ii) an assumed discount rate of 6.5%, and (iii) assumed market volatility rate range of 10%-12.5% based on the volatility data for companies similar to Augmentum. The fair value of the note payable for contingent consideration recognized on the acquisition date is $2.5 million, and the fair value of the redeemable noncontrolling interest is $3.8 million. |
The fair value of identifiable intangible assets was measured based upon significant inputs that were not observable in the market, and therefore are classified as Level 3. The key assumptions include (i) management's projection of future cash flows based upon past experience and future expectations, and (ii) an assumed discount rate of 18.5%. |
The goodwill of $5.1 million is attributable to the workforce of the acquired business and the synergies expected to arise in connection with the acquisition. The goodwill relating to the Company's acquisition of Augmentum is fully deductible for United States federal income tax purposes. |
The Company incurred acquisition related costs of $0.1 million and $0.8 million for the three and nine months ended September 30, 2013, respectively, which were recorded as general and administrative expenses in the consolidated statements of operations. |
Total revenues and net income attributable to the acquisition, since the acquisition date, included in the consolidated statements of operations for the three and nine months ended September 30, 2013, are as follows: |
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| Three Months Ended September 30, 2013 | Nine Months Ended September 30, 2013 | | | | | | | | | | |
Total Revenues | $ | 1,218 | | $ | 2,140 | | | | | | | | | | | |
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Net Loss | $ | (311 | ) | $ | (192 | ) | | | | | | | | | | |
Pro forma unaudited total revenues and net income/(loss) of the combined entity had the acquisition occurred on January 1, 2012 are presented in the following table. This pro forma information is presented for informational purposes only and is not necessarily indicative of what our actual results of operations would have been had the acquisition occurred at such time. |
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| | Three months ended September 30 | | Nine months ended September 30 |
| | 2013 | | 20121 | | 20132 | | 20123 |
Total Revenues | | $ | 33,641 | | | $ | 34,958 | | | $ | 101,106 | | | $ | 105,692 | |
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Net Income (Loss) | | $ | 536 | | | $ | (1,431 | ) | | $ | (1,086 | ) | | $ | (2,776 | ) |
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1 Pro forma net loss for the three months ended September 30, 2012 is adjusted to include $0.2 million of amortization expense. |
2 Pro forma net loss for the nine months ended September 30, 2013 is adjusted to include $0.1 million of amortization expense, and to exclude $0.7 million of acquisition costs. |
3 Pro forma net loss for the nine months ended September 30, 2012 is adjusted to include $0.6 million of amortization expense and $0.7 million of acquisition costs. |
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Cheverny CEO Search, S.A. |
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On October 10, 2012, the Company completed an acquisition of Cheverny CEO Search, S.A., a Paris, France based search firm focused on executive recruiting. The first payment of $0.5 million was made in cash on the acquisition date, and a non-interest bearing seller note was issued for the remainder. The note is payable in two equal installments of $0.5 million each on July 12, 2013 and July 12, 2014. A portion of the total purchase price was contingent upon the continued employment of the acquiree. Therefore, the contingent portion of the purchase price was accounted for as compensation for post-combination services, recognized over the requisite service period using the graded-vesting method. |
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During the quarter ending March 31, 2013, the Company modified the terms of the Cheverny CEO Search, S.A. acquisition agreement, terminating all employment contingencies. As a result of the amendment, the Company recognized remaining post-combination compensation and incurred a non-recurring charge of $0.8 million relating to Cheverny CEO Search, S.A. post-combination compensation in the first quarter of 2013. The charge is included in compensation and benefits expenses in the consolidated statement of operations for the nine months ended September 30, 2013. |
Latin America |
Effective January 2, 2012, the Company acquired CTPartners Latin America Inc., its independently-owned licensee that had been operating under the name of CTPartners in Latin America for the prior five years. The aggregate purchase price in the agreement was $10.2 million which was paid in cash and the issuance of a non-interest bearing seller note for $5.3 million, due in equal installments of $2.6 million each on January 2, 2013 and January 2, 2014 respectively. A portion of the total purchase price was contingent upon the continued employment of certain key employees. The purchase agreement provides that the selling shareholders are required to repay to the Company up to the aggregate amount of $7.2 million if their employment terminates prior to the 36-month anniversary of the closing of the transaction. Therefore, the contingent portion of the purchase price was accounted for as compensation for post-combination services, and initially recognized over three years using the graded-vesting method. After accounting for a portion of the purchase price as post-combination compensation, the fair value of the consideration allocation to the assets and liabilities acquired was $3.0 million. Post-combination compensation expense of $1.5 million and $4.6 million was included in the results of operations for the three and nine months ended September 30, 2012, respectively. |
During the quarter ending March 31, 2013, the Company modified the terms of the Latin America acquisition agreement, terminating all employment contingencies. As a result of the amendment, the Company recognized the remaining post-combination compensation and incurred a non-recurring charge of $1.1 million relating to Latin America post-combination compensation in the first quarter of 2013. The charge is included in compensation and benefits expenses in the consolidated statement of operations for the nine months ended September 30, 2013. |