Business Acquisition

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Business Acquisition

Business Acquisitions

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology and acquire skilled personnel.

The Company completed the following acquisitions during the first three months of fiscal 2016, paying the purchase price in cash in each transaction: (a) an asset purchase of VaultLogix, acquired on February 17, 2016, a Massachusetts-based provider of cloud data backup and storage for business clients; (b) a share purchase of the entire issued capital of CallStream Group Limited, acquired on March 3, 2016, a provider of cloud-based call management solutions to markets in the United Kingdom; and (c) other immaterial acquisitions of online data backup and email marketing businesses.

The condensed consolidated statement of income, since the date of each acquisition, and balance sheet, as of March 31, 2016, reflect the results of operations of all 2016 acquisitions. For the three months ended March 31, 2016, these acquisitions contributed $2.3 million to the Company's revenues. Net income contributed by these acquisitions was not separately identifiable due to j2 Global's integration activities and is impracticable to provide. Total consideration for these transactions was $48.9 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the allocation of the purchase consideration for these acquisitions (in thousands):

Assets and Liabilities	Valuation
Accounts receivable	$	2,550
Property and equipment	616
Other assets	632
Software	45
Trade names	4,121
Customer relationships	19,422
Other intangibles	383
Goodwill	24,876
Other accrued liabilities	(1,329		)
Deferred revenue	(69		)
Deferred tax liability	(2,374		)
Total	$	48,873

During the first three months of 2016, the purchase price accounting has been finalized for the following acquisitions:(i) LiveVault, (ii) Salesify and (iii) other immaterial fax and online data backup businesses. The initial accounting for all other acquisitions is incomplete and subject to change, which may be significant. j2 Global has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.

During the three months ended March 31, 2016, the Company recorded adjustments to prior period acquisitions due to the finalization of purchase accounting in the Business Cloud Services segment which resulted in a net increase in goodwill in the amount of $0.6 million. In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions and updated the purchase accounting of Offers.com in the Digital Media segment, which resulted in a net decrease in goodwill in the amount of $(6.1) million with a corresponding increase in trade names, net and other purchased intangibles, net (See Note 6 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to the amortization expense within the Condensed Consolidated Statement of Income for the three months ended March 31, 2016.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with these acquisitions during the three months ended March 31, 2016 is $24.9 million, of which $15.8 million is expected to be deductible for income tax purposes.