Business Combinations

12 Months Ended

Sep. 30, 2018

18. BUSINESS COMBINATIONS AND DIVESTITURES

Business Combinations

2018

The Company completed two acquisitions in the year ended September 30, 2018, for a total aggregate consideration of $7,413, which includes cash consideration paid at closing of $7,091, cash consideration paid subsequent to closing of $125, cash consideration payable in the next fiscal year of $15, and contingent consideration payable in July 2019 and 2020 with aggregate acquisition date fair value estimated at $182.

Azimuth Communications, Inc. (“Azimuth”) – On April 6, 2018, the Company’s Communications segment acquired all of the outstanding capital stock of Azimuth, a Portland, Oregon-based provider of design and integration services for structured cabling, physical security, access control systems, distributed antenna systems, wireless access, and audio visual systems. Azimuth operates within the Company’s Communications segment. The acquisition of Azimuth has accelerated our expansion into the Pacific Northwest market, which the Company believes to be an attractive market.

Electrical Contractors North, Inc. ("ECNI") – On July 31, 2018, the Company’s Residential segment acquired substantially all of the assets of Electrical Contractors North, Inc. ("ECNI"), a Salt Lake City, Utah-based provider of electrical contracting for multi-family residential and hotel construction. We believe the acquisition of ECNI furthers our Residential segment’s growth strategy by providing a foothold in the Salt Lake City market.

The Company accounted for these fiscal 2018 transactions under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). The valuations derived from estimated fair value assessments and assumptions used by management are preliminary pending finalization of certain tangible and intangible asset valuations and assessment of deferred taxes. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquired and liabilities assumed. This may result in adjustments to the preliminary amounts recorded. The preliminary valuation of the assets and liabilities assumed for our fiscal 2018 acquisitions as of the acquisition dates is as follows:

Current assets		$	1,767
Property and equipment			590
Intangible assets (primarily customer relationships)			3,182
Goodwill			4,164
Current liabilities			(1,580)
Long term liabilities			(14)
Deferred tax liability			(696)
	Net assets acquired	$	7,413

With regard to goodwill, the balance is attributable to the workforce of the acquired business and other intangibles that do not qualify for separate recognition. In connection with the Azimuth and ECNI acquisitions, we acquired goodwill of $4,164, of which $1,448 is tax deductible.

In conjunction with these acquisitions, we acquired receivables totaling $1,478, of which we estimate none to be uncollectible at the date of acquisition. In aggregate, these two acquisitions contributed $4,965 in additional revenue and $532 in additional operating loss during the year ended September 30, 2018.

2017

The Company completed three acquisitions in the year ended September 30, 2017, for a total aggregate consideration of $20,979. See Note 18, “Business Combinations and Divestitures” in our Annual Report on Form 10-K for the year ended September 30, 2017, for further information.

• Freeman Enclosure Systems, LLC (“Freeman”) – We acquired 100% of the membership interests and associated real estate of Freeman and its affiliate Strategic Edge LLC on March 16, 2017. Strategic Edge LLC was subsequently merged into Freeman, with Freeman as the surviving entity. Freeman is included in our Infrastructure Solutions segment. Freeman’s ability to manufacture custom generator enclosures has expanded our solutions offering.

• Technical Services II, LLC (“Technical Services”) – STR Mechanical, our 80% owned subsidiary which is consolidated, acquired all of the membership interests of Technical Services, a Chesapeake, Virginia-based provider of mechanical maintenance services, including commercial heating, ventilation and air conditioning, food service equipment, electrical and plumbing services, on June 15, 2017. Technical Services operates as a subsidiary of STR Mechanical within the Company’s Commercial & Industrial segment. The acquisition of Technical Services has expanded our geographic reach and diversified our customer base for mechanical maintenance services.

• NEXT Electric, LLC (“NEXT Electric”) – On July 14, 2017, the Company acquired 80% of the membership interests of NEXT Electric, a Milwaukee, Wisconsin-based electrical contractor specializing in the design, installation and maintenance of electrical systems for commercial, industrial, healthcare, water treatment and education end markets. NEXT Electric operates within the Company’s Commercial & Industrial segment.

The total purchase consideration for the Freeman, Technical Services and Azimuth acquisitions included contingent consideration payments based on the acquired company’s earnings, as defined in the applicable purchase and sale agreement. The fair value of the total contingent consideration liability for all acquisitions, including Freeman, Technical Services, and Azimuth, was estimated at $680 as of September 30, 2018, and is accrued in accrued liabilities and other non-current liabilities on our Condensed Consolidated Balance Sheets.

The preliminary estimates for Freeman, Technical Services and NEXT Electric were finalized during the year ended September 30, 2018.

Noncontrolling Interest

Our agreements governing the operations of STR and NEXT Electric contain a provision where, at any time after five years from the acquisition date, we may purchase all or a portion of the 20% noncontrolling interest. Pursuant to this provision, we may purchase the noncontrolling interest, or, with notice, the noncontrolling interest holders may cause us to purchase their interests, for a contractually determined price based on the trailing 2 year earnings before interest, taxes, depreciation, and amortization of STR and NEXT Electric, calculated at the time of the purchase.

As of the acquisition date, the fair value of the noncontrolling interest in STR and NEXT Electric was equal to 20% of the overall fair value of STR and NEXT Electric.