Acquisitions | 9 Months Ended |
Sep. 30, 2014 |
Business Combinations [Abstract] | ' |
Acquisitions | ' |
Acquisitions |
Park Brown |
On July 1, 2014, the Company acquired Park Brown International Pty Ltd ("Park Brown"), an executive search firm focusing on the energy, natural resources and infrastructure sectors based in Perth, Australia. |
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The Company paid $0.9 million in cash on the acquisition date, and recorded a seller note payable valued at $2.1 million, payable over three years from the date of acquisition, and subject to adjustment based on certain revenue targets over three years. |
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The following table summarizes the preliminary fair values of the consideration transferred, assets acquired and liabilities assumed, at acquisition date: |
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Fair value of consideration transferred: | | | | | | | | | | | | | |
Cash | $ | 923 | | | | | | | | | | | | | |
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Seller note payable for contingent consideration | 2,096 | | | | | | | | | | | | | |
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Total | $ | 3,019 | | | | | | | | | | | | | |
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Recognized amounts of identifiable assets acquired and liabilities assumed | | | | | | | | | | | | | |
Accounts receivable | $ | 328 | | | | | | | | | | | | | |
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Other assets | 823 | | | | | | | | | | | | | |
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Trade names and trademarks | 67 | | | | | | | | | | | | | |
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Database content | 141 | | | | | | | | | | | | | |
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Customer relationships | 402 | | | | | | | | | | | | | |
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Property and equipment | 18 | | | | | | | | | | | | | |
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Accounts payable and accrued expenses | (465 | ) | | | | | | | | | | | | |
Total identifiable net assets | 1,314 | | | | | | | | | | | | | |
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Goodwill | 1,705 | | | | | | | | | | | | | |
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Total fair value of assets acquired and liabilities assumed | $ | 3,019 | | | | | | | | | | | | | |
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The weighted average life of total amortizable intangible assets acquired is 9.1 years. |
The acquisition of Park Brown includes a contingent consideration arrangement that allows for adjustment of payments based upon achievement of certain revenue targets. The fair value of contingent consideration is based upon the future revenues attributable to the acquired business, and was estimated through the use of the Monte Carlo model. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. These fair value measurements are based on (i) an assumed revenue forecast, (ii) an assumed discount rate of 4.8%, and (iii) assumed market volatility rate range of 10.0%. The fair value of the note payable for contingent consideration recognized on the acquisition date was $2.1 million. As of September 30, 2014, the fair value of the note payable was $1.9 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 20.5%. |
The goodwill of $1.7 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 Park Brown is fully deductible for United States federal income tax purposes. |
The Company incurred acquisition related costs of $0.3 million, which were recorded as general and administrative expenses in the consolidated statements of operations for the three and nine months ended September 30, 2014. |
The 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, 2014 are as follows: |
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| Three Months | | Nine Months | | | | | | | | |
Ended | Ended | | | | | | | | |
30-Sep-14 | 30-Sep-14 | | | | | | | | |
Total Revenues | $ | 1,177 | | | $ | 1,177 | | | | | | | | | |
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Net Income/(Loss) | $ | (152 | ) | | $ | (152 | ) | | | | | | | | |
The amounts of revenue and net loss related to the acquisition that are included in our consolidated statements of operations and the pro forma financial information as if the acquisition had occurred on January 1, 2013, 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 happened at such time. |
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Pro forma unaudited total revenues and net income of the combined entity had the acquisition date been January 1, 2013 are as follows: |
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| Three Months Ended | | Nine Months Ended |
30-Sep | 30-Sep |
| 2014(1) | | 2013 | | 2014(2) | | 2013(3) |
Total Revenues | $ | 46,553 | | | $ | 34,394 | | | $ | 135,527 | | | $ | 100,743 | |
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Net Income | $ | 1,613 | | | $ | 750 | | | $ | 5,071 | | | $ | (2,185 | ) |
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(1) Pro forma net income for the three months ended September 30, 2014 is adjusted to exclude $0.3 million of acquisition costs. |
(2) Pro forma net income for the nine months ended September 30, 2014 is adjusted to exclude $0.3 million of acquisition costs and to include $0.1 million of amortization costs. |
(3) Pro forma net income for the nine months ended September 30, 2013 is adjusted to include $0.3 million of acquisition costs and $0.1 million of amortization costs. |
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Johnson Executive Search |
On March 1, 2014, the Company acquired Johnson Executive Search ("Johnson"), an independent executive search and leadership advisory firm based in Sydney, Australia. The firm works with clients in the financial services, legal and professional services, technology and communications, consumer and industrial sectors. This acquisition expands the Company's presence in Asia-Pacific region. |
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The Company paid $2.3 million in cash on the acquisition date, and recorded a seller note payable valued at $2.5 million, payable over three years from the date of acquisition, and subject to adjustment based on certain revenue targets over three years. |
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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 | $ | 2,336 | | | | | | | | | | | | | |
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Seller note payable for contingent consideration | 2,523 | | | | | | | | | | | | | |
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Total | $ | 4,859 | | | | | | | | | | | | | |
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Recognized amounts of identifiable assets acquired and liabilities assumed | | | | | | | | | | | | | |
Accounts receivable | $ | 380 | | | | | | | | | | | | | |
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Other assets | 53 | | | | | | | | | | | | | |
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Trade names and trademarks | 189 | | | | | | | | | | | | | |
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Database content | 321 | | | | | | | | | | | | | |
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Customer relationships | 227 | | | | | | | | | | | | | |
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Property and equipment | 187 | | | | | | | | | | | | | |
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Accounts payable and accrued expenses | (251 | ) | | | | | | | | | | | | |
Total identifiable net assets | 1,106 | | | | | | | | | | | | | |
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Goodwill | 3,753 | | | | | | | | | | | | | |
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Total fair value of assets acquired and liabilities assumed | $ | 4,859 | | | | | | | | | | | | | |
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The weighted average life of total amortizable intangible assets acquired is 8 years. |
The acquisition of Johnson includes a contingent consideration arrangement that allows for adjustment of payments based upon achievement of certain revenue targets over the next three years. The fair value of contingent consideration is based upon the future revenues attributable to the acquired business, and was estimated through the use of the Monte Carlo model. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. These fair value measurements are based on (i) an assumed revenue forecast, (ii) an assumed discount rate of 8.5%, and (iii) assumed market volatility rate range of 10%. The fair value of the note payable for contingent consideration recognized on the acquisition date was $2.5 million. As of September 30, 2014, the fair value of the note payable was $2.4 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 13.5%. |
The goodwill of $3.8 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 Johnson is fully deductible for United States federal income tax purposes. |
The Company incurred acquisition related costs of $0.6 million, which were recorded as general and administrative expenses in the consolidated statements of operations for the nine months ended September 30, 2014. |
The total revenues and net income attributable to the acquisition, since the acquisition date, included in the consolidated statements of operations for the nine months ended September 30, 2014 are as follows: |
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| Three Months | | Nine Months | | | | | | | | |
Ended | Ended | | | | | | | | |
30-Sep-14 | 30-Sep-14 | | | | | | | | |
Total Revenues | $ | 761 | | | $ | 2,240 | | | | | | | | | |
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Net Income | $ | (1,058 | ) | | $ | (1,260 | ) | | | | | | | | |
The amounts of revenue and net income related to the acquisition that are included in our consolidated statements of operations and the pro forma financial information as if the acquisition had occurred on January 1, 2013, 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 happened at such time. |
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Pro forma unaudited total revenues and net income of the combined entity had the acquisition date been January 1, 2013 are as follows: |
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| Three Months Ended | | Nine Months Ended |
30-Sep | 30-Sep |
| 2014 | | 2013 | | 2014(1) | | 2013(2) |
Total Revenues | $ | 46,553 | | | $ | 35,765 | | | $ | 135,282 | | | $ | 106,375 | |
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Net Income | $ | 1,301 | | | $ | 902 | | | $ | 5,380 | | | $ | (2,821 | ) |
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(1) Pro forma net income for the nine months ended September 30, 2014 is adjusted to exclude $0.6 million of acquisition costs. |
(2) Pro forma net loss for the nine months ended September 30, 2013 is adjusted to include $0.6 million million of acquisition costs and $0.1 million of amortization costs. |
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 three years, not to exceed $8.5 million in total. The Company had 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 if the call option has not been exercised, at a pre-determined price, adjustable based on Augmentum's performance. On September 4, 2014 the Company acquired remaining 49% interest in Augmentum for $3.9 million, of which $1.6 million was paid in cash at closing. The remainder will be paid over two years. |
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 is between zero and $3.6 million, denominated in British pounds and translated at the rate in effect at the end of reporting period. |
The fair value of contingent consideration is contingent upon the future revenues attributable to the acquired business, 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 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. |
Cheverny CEO Search, S.A. |
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 of the purchase price. The note was 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 certain shareholders 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. |
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 $10.5 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 shareholders. 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. |
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. |