Business combinations

6 Months Ended

Jun. 30, 2021

Business combinations

Business combinations

5.   Business combinations

Rouse acquisition

On December 8, 2020, the Company acquired all of the issued and outstanding units of Rouse for a total purchase price of $251,724,000. The Company paid cash consideration of $250,265,000 of which $2,169,000 was placed in escrow. In the second quarter of 2021, the Company received a post-closing release from escrow of $728,000 related to net working capital adjustments, resulting in total net cash consideration paid of $249,537,000 as of June 30, 2021.

Rouse is a leading provider of construction equipment market data intelligence and performance benchmarking solutions. Rouse provides appraisals to asset backed lenders, market intelligence and software to rental companies, contractors and dealers to optimize the used equipment sales process, and comparisons of rental rates, utilization, and other key performance metrics to industry benchmarks for rental companies and dealers. The combination of Rouse with the Company is expected to enhance the data analytics and service offerings available to customers.

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The following table summarizes the fair value of consideration transferred at the date of acquisition, as well as the final purchase price allocation of the fair value of assets acquired and liabilities assumed.

	December 8, 2020
Total cash consideration paid	$	249,537
Equity consideration paid for pre-combination services		1,459
Final purchase price	$	250,996

Rouse purchase price allocation

	December 8, 2020
Purchase price	$	250,996
Assets acquired:
Cash and cash equivalents	$	226
Trade and other receivables		4,601
Other current assets		159
Property, plant and equipment		1,171
Other non-current assets		3,741
Deferred tax assets		7,584
Intangible assets		79,300
Liabilities assumed:
Trade and other payables		5,630
Other non-current liabilities		3,188
Deferred tax liabilities		936
Fair value of identifiable net assets acquired		87,028
Goodwill acquired on acquisition	$	163,968

5.   Business combinations (continued)

Rouse purchase price allocation (continued)

The following table summarizes the fair values of the identifiable intangible assets acquired:

	Fair value		Weighted average
Asset	at acquisition		amortization period
Customer relationships		71,000	15 years
Software and technology assets		7,500	4 years
Trade names and trademarks	$	800	2 years
Total	$	79,300	13.8 years

During the quarter ended March 31, 2021 the Company recorded an adjustment of $603,000 to increase the liabilities assumed and increase the goodwill acquired on acquisition. During the quarter ended June 30, 2021 the Company finalized the net working capital adjustment under the purchase agreement and reduced the purchase price by $728,000. The Company also recorded an adjustment of $1,677,000 to reduce the liabilities assumed on acquisition. These measurement period adjustments, since acquisition, resulted in a total net decrease to goodwill of $1,802,000.

The purchase price allocation has been finalized as of June 30, 2021. As at Q2, 2021, $1,169,000 continues to be held in escrow until December 4, 2021 or until such date that a joint decision is made for the funds to be released.

Goodwill

Goodwill has been assigned and allocated to “Other” for segmented information purposes and is based on an analysis of the fair value of net assets acquired. Goodwill relates to benefits expected from the acquisition of Rouse’s business, its assembled workforce and associated technical expertise, as well as anticipated synergies from the Company’s auction expertise and transactional capabilities to Rouse’s existing customer base. The transaction is considered a taxable business combination and all of the goodwill is deductible for tax purposes.

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

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At the date of acquisition, the Company issued 312,193 common shares to certain previous unitholders of Rouse in return for their continuing employment service. The common shares are expected to vest at various vesting dates over a three-year period from the date of acquisition as continuing employment services are provided to the Company. At the date of acquisition, the Company estimated that it will recognize a total fair value of $20,735,000 share-based continuing employment costs in acquisition-related costs over the vesting period, with an increase to additional paid-in capital, subject to continuing employment of those individuals. As and when the common shares vest, the Company will recognize the fair value of the issued common shares from additional paid-in capital to share capital.

During the three month period ended March 31, 2021, one of the previous unitholders of Rouse, who became an employee of the Company after the acquisition, terminated their employment contract which resulted in the forfeiture of 55,510 shares as no vesting conditions had been achieved and reversal of share based continuing employment costs of $98,000. As a result, as at June 30, 2021, the number of common shares expected to vest is 256,683 and the total unrecognized fair value of the share-based continuing employment costs expected to be recognized is $11,898,000 (Note 18).

During the quarter ended June 30, 2021, the Company recorded $3,049,000 acquisition-related costs for legal, advisory, integration and other professional fees, which included $2,678,000 of share-based continuing employment costs.