BUSINESS COMBINATIONS

12 Months Ended

Mar. 31, 2017

BUSINESS COMBINATIONS [Abstract]

BUSINESS COMBINATIONS

14. BUSINESS COMBINATIONS

OneCloud Consulting, Inc

On May 17, 2017, our subsidiary ePlus Technology, inc., acquired OneCloud Consulting, Inc (“OneCloud”). Based in Milpitas, CA, OneCloud is a versatile team of highly trained technology consultants, architects, developers and instructors. OneCloud enables its customers’ cloud and application strategy via professional services, technical education and software development. The acquisition provides us with additional ability to address customers’ needs in cloud-based solutions and infrastructure; including DevOps, OpenStack, and other emerging technologies, to our broad customer base. Total consideration includes $8.8 million paid in cash at closing and contingent consideration up to $4.5 million to be paid over three years. Our initial accounting for the acquisition is not complete as further time is needed to properly value all the acquired assets and assumed liabilities.

Consolidated IT Services acquisition

On December 6, 2016, our subsidiary ePlus Technology, inc., acquired certain assets and assumed certain liabilities of the IT Services equipment and integration business of Consolidated Communications Holdings, Inc. (“Consolidated IT Services”), which provides data center, unified communications, networking, and security solutions to a diverse set of domestic and international customers including commercial, enterprise, and state, local, and education (SLED) organizations in the upper Midwest. The primary reasons for this acquisition are that Consolidated IT Services expands our reach to the upper Midwest, a new geography for ePlus, and enables us to market our advanced technology solutions to their long-standing client base.

The total purchase price was $13.1 million consisting of $9.5 million paid in cash at closing and the present value of $4.0 million that is being paid in cash in equal quarterly installments over 2 years, less $0.4 million that was paid back to us on February 7, 2017 as part of the final working capital adjustment. Our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable and other current assets	$	7,491
Property and equipment		1,045
Identified intangible assets		3,810
Accounts payable and other current liabilities		(5,786	)
Total identifiable net assets		6,560
Goodwill		6,507
Total purchase consideration	$	13,067

Our allocation of the purchase consideration is preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available.

The identified intangible assets of $3.8 million consist entirely of customer relationships with an estimated useful life of 7 years.

We recognized goodwill related to this transaction of $6.5 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period through the acquisition date had the acquisition date been April 1, 2016, is not material.

IGX acquisition

On December 4, 2015, our subsidiary ePlus Technology, inc., acquired certain assets and assumed certain liabilities of IGX Acquisition Global, LLC (“IGX Acquisition”), and IGX Support, LLC, including IGX Acquisition’s wholly-owned subsidiary, IGXGlobal UK Limited (collectively, “IGX”), which provide advanced security solutions, secured networking products and related professional services to a diverse set of domestic and international customers including commercial, enterprise, and state, local, and education (SLED) organizations. IGX is headquartered near Hartford, CT and has a sales presence in New York and Boston as well as an operating branch in London that serves its United Kingdom (“UK”) and global customers. IGXGlobal UK Limited is a private limited company, registered in England and Wales.

The total purchase price, net of cash acquired, was $16.6 million paid in cash. The allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable—trade, net	$	8,457
Property and equipment		81
Identified intangible assets		8,710
Accounts payable and other current liabilities		(8,641	)
Deferred tax liability		(89	)
Total identifiable net assets		8,518
Goodwill		8,131
Total purchase consideration	$	16,649

The identified intangible assets consist of the following:

	Estimated Useful Lives (in years)		Acquisition Date Amount
Intangible assets—customer relationships		7	$	7,680
Intangible assets—trade names		10		520
Intangible assets—backlog		1		510
Total identified intangible assets			$	8,710

We assigned goodwill related to this transaction of $8.1 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce, an entry into the UK and European markets and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill that is expected to be deductible for tax purposes is $5.8 million. The impact to our revenues and net earnings from this acquisition is not material.

Evolve acquisition

On August 18, 2014, our subsidiary, ePlus Technology, inc., acquired the operating assets and assumed certain liabilities of Granite Business Solutions, Inc. dba Evolve Technology Group (“Evolve”). Located in Sacramento, CA, Evolve provided information security, collaboration, virtualization and data center solutions to an established customer base of state, local and educational institutions, as well as commercial enterprises. Our acquisition expands our presence in the western United States.

The total purchase price was $10.5 million, which consists of cash paid, amounts to be paid to Evolve upon collection of certain accounts receivables, and the fair value of contingent consideration. We estimated the fair value of the contingent consideration to be $2.0 million as of the acquisition date using a Monte Carlo simulation model. The maximum payout for contingent consideration is $2.5 million over 3 years. The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date, including identifiable intangible assets of $4.0 million related to customer relationships with an estimated useful life of 6 years, and other net assets of $0.6 million. We recognized goodwill related to this transaction of $4.5 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce, their presence in the western United States, and expected synergies, none of which qualify for recognition as a separate intangible asset. Goodwill associated with the acquisition is deductible for tax purposes.