23. Business combination

(a)

Mascus acquisition

On February 19, 2016 (the “Mascus Acquisition Date”), the Company acquired 100% of the issued and outstanding shares of Mascus International Holdings BV (“Mascus”), for cash consideration of €26,569,000 (US $29,597,000). In addition to cash consideration, €3,080,000 (US $3,432,000) is consideration contingent on Mascus achieving certain operating performance targets over next three-year period following the acquisition. Mascus is based in Amsterdam and provides an online equipment listing service for used heavy machines and trucks. The acquisition expands the breadth and depth of equipment disposition and management solutions the Company can offer its customers.

The acquisition was accounted for in accordance with ASC 805. The assets acquired and liabilities assumed were recorded at their estimated fair values at the Mascus Acquisition Date. Goodwill of $19,321,000 was calculated as the fair value of consideration over the estimated fair value of the net assets acquired.

23. Business combination (continued)

(a)Mascus acquisition (continued)

Mascus provisional purchase price allocation


		February 19, 2016
Purchase price	$	29,597
Fair value of contingent consideration		3,432
Non-controlling interest (1)		488
Total fair value at Mascus Acquisition Date		33,517

Fair value of assets acquired:
Cash and cash equivalents	$	1,785
Trade and other receivables		1,290
Prepaid expenses		453
Property, plant and equipment		104
Intangible assets (2)		14,817

Fair value of liabilities assumed:
Trade and other payables		1,533
Other non-current liabilities		37
Deferred tax liabilities		2,683
Fair value of identifiable net assets acquired		14,196
Goodwill acquired on acquisition	$	19,321

(1)

The Company acquired 100% of Mascus and within the Mascus group of entities there are two subsidiaries that are not wholly-owned. As such, the Company acquired non-controlling interests. The fair value of the non-controlling interest was determined using an income approach based on entity cash flows attributable to non-controlling interest.

(2)

Intangible assets consist of customers relationships with an amortization period of 17 years and trade names with indefinite lives.

The amounts included in the Mascus provisional purchase price allocation are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the Mascus Acquisition Date. The final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the Mascus Acquisition Date. Adjustments to the preliminary values during the measurement period will be recorded in the operating results of the period in which the adjustments are determined. Changes to the amounts recorded as assets and liabilities will result in a corresponding adjustment to goodwill.

23. Business combination (continued)

(a)Mascus acquisition (continued)

Goodwill

Goodwill has been allocated entirely to the Mascus reporting unit based on an analysis of the fair value of assets acquired. The main drivers generating goodwill are the anticipated synergies from (1) the Company's core auction expertise and transactional capabilities to Mascus' existing customer base, and (2) Mascus' providing existing technology to the Company's current customer base. Other factors generating goodwill include the acquisition of Mascus' assembled work force and their associated technical expertise.

Contributed revenue and net income

The results of Mascus’ operations are included in these condensed consolidated financial statements from Mascus’ Acquisition Date. For the period from February 19, 2016 to March 31, 2016 Mascus’ contribution to the Company’s revenues was $1,268,000. Mascus’ contribution to net income from February 19, 2016 to March 31, 2016 was insignificant. Pro forma results of operations have not been presented as such pro forma financial information would not be materially different from historical results.

Contingent Consideration

The Company may pay an additional amount not exceeding €3,080,000 (US$3,432,000) contingent upon the achievement of certain operating performance targets over the next three-year period. The Company has recognized a liability equal to the estimated fair value of the contingent payments the Company expects to make as of the acquisition date. The Company will re-measure this liability each reporting period and record changes in the fair value in the consolidated income statement.

Transactions recognized separately from the acquisition of assets and assumptions of liabilities

Acquisition-related costs

Expenses totalling $717,500 for legal and other acquisition-related costs are included in the consolidated income statement for the period ended March 31, 2016.

Employee compensation in exchange for continued services

The Company may pay additional amounts not exceeding €1,625,000 (US$1,849,000) over three-year periods based on key employees’ continuing employment with Mascus.

(b)

Xcira acquisition

On November 4, 2015 (the “Xcira Acquisition Date”), the Company acquired 75% of the issued and outstanding shares of Xcira LLC (“Xcira”) for cash consideration of $12,359,000. The remaining 25% interests remain with the two founders of Xcira. Xcira is a Florida-based company, incorporated in the United States and its principal activity is the provision of software and technology solutions to auction companies. By acquiring Xcira, the Company acquired information technology capability and platform to build on its strong online bidding customer experience, and further differentiate itself from other industrial auction companies.

The Company has the option to buy out the remaining interest of the Xcira sellers subject to the terms of the Xcira Purchase Agreement. The acquisition was accounted for in accordance with ASC 805. The assets acquired, liabilities assumed, and the non-controlling interest were recorded at their estimated fair values at the Xcira Acquisition Date. Full goodwill of $10,659,000 was calculated as the fair value of consideration over the estimated fair value of the net assets acquired.

23. Business combination (continued)

(b)Xcira acquisition (continued)

Xcira final purchase price allocation



		November 4, 2015
Purchase price	$	12,359
Non-controlling interest		4,119
Total fair value at Xcira acquisition date		16,478

Assets acquired:
Cash and cash equivalents	$	252
Trade and other receivables		1,382
Prepaid expenses		62
Property, plant and equipment		314
Other non-current assets		11
Intangible assets ~		4,300

Liabilities assumed:
Trade and other payables		502
Fair value of identifiable net assets acquired		5,819
Goodwill acquired on acquisition	$	10,659

~Consists of existing technology and customer relationships with an amortization life of five and 20 years, respectively

There was no contingent consideration under the terms of the acquisition, and as such no acquisition provisions were created.

Assets acquired and liabilities assumed

At the date of acquisition, the carrying values of the assets and liabilities acquired approximated their fair values, except intangible assets, whose fair values were determined using appropriate valuation techniques.

Goodwill

Goodwill has been allocated entirely to the Company’s Core Auction segment and based on an analysis of the fair value of assets acquired. The main drivers generating goodwill are the Company’s ability to utilize Xcira’s experience to differentiate the Company’s online bidding service from other industrial auction companies, as well as to secure Xcira’s bidding technology. Online bidding represents a significant and growing portion of all bidding conducted at the Company’s auctions.

Non-controlling interests

The fair value of the 25% non-controlling interest in Xcira is estimated to be $4,119,000.

Contributed revenue and net loss

The results of Xcira’s operations are included in these condensed consolidated financial statements from the date of acquisition. For the three months ended March 31, 2016, Xcira’s contribution to the Company’s revenues and net income were $1,251,000 and $469,000, respectively. Pro forma results of operations have not been presented as such pro forma financial information would not be materially different from historical results.

23. Business combination (continued)

(b)Xcira acquisition (continued)

Future development of internally-generated software

The Company may pay an additional amount not exceeding $2,700,000 over a two-year period upon achievement of certain conditions related to the delivery of an upgrade to its existing technology.

Employee compensation in exchange for continued services

The Company may pay an additional amount not exceeding $2,000,000 over a three-year period based on the Founder’s continuing employment with Xcira .