Business Acquisitions, Dispositions and Other Significant Transactions | 6 Months Ended |
Jun. 30, 2014 |
Business Combinations [Abstract] | ' |
Business Acquisitions, Dispositions And Other Significant Transactions [Text Block] | ' |
BUSINESS ACQUISITIONS, DISPOSITIONS AND OTHER SIGNIFICANT TRANSACTIONS |
Acquisitions |
Gravity |
On January 23, 2014, the Company acquired Gravity, a company that provides content personalization technology and publisher solutions to create relevant consumer and advertiser experiences, for a purchase price of $83.2 million, net of cash acquired. An additional $7.6 million of cash consideration was deferred and will be paid over a two year service period to certain Gravity employees contingent upon their future service to the Company, which is being recorded as compensation expense over the required service period. The purchase price includes $0.8 million related to the portion of the fair value of converted Gravity awards that was attributable to pre-acquisition service. An additional $5.9 million of fair value of unvested AOL restricted stock issued to Gravity employees is being recognized as equity-based compensation expense over the remaining award service periods. |
|
The Company preliminarily recorded $46.1 million of goodwill (which is not deductible for tax purposes) and $40.4 million of intangible assets associated with this acquisition. The intangible assets associated with this acquisition consist primarily of technology, customer relationships and trade names, all of which are being amortized on a straight-line basis over a period of five years. The fair value of the significant identified intangible assets was estimated by using relief from royalty and multi-period excess earnings valuation methodologies, which represent level 3 fair value measurements. Inputs used in the methodologies primarily included projected future cash flows, discounted at a rate commensurate with the risk involved. The primary area where preliminary estimates are not yet finalized relates to deferred tax assets and liabilities. |
Unaudited pro forma results of operations assuming this acquisition had taken place at the beginning of each period are not provided because the historical operating results of Gravity were not significant and pro forma results would not be significantly different from reported results for the periods presented. |
Convertro |
On May 6, 2014, the Company acquired Convertro, a leading attribution modeling technology company that helps marketers reallocate budgets within their media channels, sites, placements and creatives, for a total purchase price of $98.5 million, net of cash acquired. The purchase price included $88.9 million in cash, $8.9 million estimated fair value (with a gross value of $10.0 million) of contingent consideration to be paid to Convertro shareholders upon meeting specified product development milestones over the next 17 months, and $0.7 million of the $2.1 million estimated fair value of the unvested in-the-money options held by Convertro employees replaced with unvested AOL restricted stock and related to pre-acquisition service period. |
The remaining $1.4 million fair value of issued restricted stock is being recognized as equity-based compensation expense over the remaining awards requisite service periods. The integration of Convertro technology is expected to enhance the ability of advertisers to customize their audience segments and establish a map of user journey to a particular event across media channels (e.g., a conversion, completion), thereby enabling the Company’s advertisers to develop a media plan that maximizes return on ad spend across various media channels. The Company borrowed $75 million under its senior secured revolving credit facility agreement (the “Credit Facility Agreement”) to facilitate funding of this acquisition. |
$6.0 million of the $8.9 million contingent consideration is classified within other current liabilities and the remaining $2.9 million is classified within other long-term liabilities on the condensed consolidated balance sheets based on the expected timing of payment. The Company determined the fair value of the liability for the contingent consideration based on a probability-weighted discounted cash flow analysis, which represents a level 3 fair value measurement. In addition to the purchase price paid for this business, the Company agreed to pay up to a $9.0 million retention bonus to certain Convertro employees which is being recorded as compensation expense over the two years required service period. |
The Company preliminarily recorded $72.9 million of goodwill (which is not deductible for tax purposes) and $29.2 million of intangible assets associated with this acquisition. The intangible assets associated with this acquisition consist of technology, trade names and customer relationships, all of which are being amortized on a straight-line basis over a period of five years, consistent with the useful lives of comparable intangible assets purchased under similar circumstances. |
The fair value of the significant identified intangibles assets was estimated by using a discounted cash flow analysis using the excess earnings approach, relief from royalty approach and replacement cost approach, respectively, which represent level 3 fair value measurements. Inputs used in the methodologies primarily included projected future cash flows, discounted at a rate commensurate with the risk involved. The primary area where preliminary estimates are not yet finalized relates to the valuation of deferred tax assets, liabilities and intangible assets. |
Unaudited pro forma results of operations assuming this acquisition had taken place at the beginning of each period are not provided because the historical operating results of Convertro were not significant and pro forma results would not be significantly different from reported results for the periods presented. |
Dispositions and Disposals |
Patch |
On January 29, 2014, the Company entered into a joint venture with DMEP Corp. dba Hale Global (“Hale Global”), whereby the Company contributed Patch into a new limited liability company, which is operated and majority owned by Hale Global subsequent to the closing of the transaction. The Company recorded a loss on disposition of $3.1 million, which primarily represents the difference between the $12.8 million fair value of the Company’s 40% retained interest in Patch and the carrying value of contributed net assets. The loss on disposition is included in the loss on disposal of assets in the Company’s condensed consolidated statement of comprehensive income (loss). The fair value of the Company’s retained interest in the joint venture is being accounted for as an equity method investment. Due to the Company’s significant continuing involvement with the joint venture, the disposed component did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements. |
Sale of Dulles Technology Center |
On July 30, 2014, the Company completed the sale of a data center property located in Virginia for cash of approximately $33.1 million, net of costs to sell the property. As of June 30, 2014, the assets associated with this property met the held for sale criteria and were reclassified from property and equipment, net, to assets held for sale on the condensed consolidated balance sheets. The Company recorded an immaterial impairment on the assets reclassified as held for sale during the three months ended June 30, 2014. |