Business Combinations

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combinations

Business Combinations

dlc Acquisition

On June 1, 2015, Encore’s U.K.-based subsidiary, Cabot Credit Management Limited and its subsidiaries (collectively, “Cabot”), acquired Hillesden Securities Ltd and its subsidiaries (“dlc”), a U.K.-based acquirer and collector of non-performing unsecured consumer debt for approximately £180.6 million (approximately $274.7 million), (the “dlc Acquisition”). The dlc Acquisition was financed with borrowings under Cabot’s existing revolving credit facility and under Cabot’s senior secured bridge facility. Refer to Note 9, “Debt” for further details of Cabot’s revolving credit facility and senior secured bridge facility.

The dlc Acquisition was accounted for using the acquisition method of accounting and, accordingly, the tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the date of the acquisition. Fair value measurements have been applied based on assumptions that market participants would use in the pricing of the respective assets and liabilities.

The components of the purchase price allocation for the dlc Acquisition were as follows (in thousands):

Purchase price:
Cash paid at acquisition	$	268,391
Deferred consideration	6,306
Total purchase price	$	274,697
Allocation of purchase price:
Cash	$	30,518
Investment in receivable portfolios	215,988
Deferred court costs	760
Property and equipment	1,327
Other assets	2,384
Liabilities assumed	(46,435		)
Identifiable intangible assets	3,669
Goodwill	66,486
Total net assets acquired	$	274,697

The goodwill recognized is primarily attributable to synergies that are expected to be achieved by combining dlc and Cabot's existing contingent collections operations. The entire goodwill of $66.5 million related to the dlc Acquisition is not deductible for income tax purposes.

Total acquisition and integration costs related to the dlc Acquisition were approximately $2.8 million for the year ended December 31, 2015, and have been expensed in the accompanying consolidated statements of income within general and administrative expenses. The amount of revenue and net income attributable to Encore included in the Company’s consolidated statement of income for the year ended December 31, 2015 related to dlc was $27.5 million and $6.3 million, respectively.

Pro forma financial information for the dlc Acquisition has not been included as the computation of such information is impracticable and too onerous due to the complexities of a hypothetical calculation because dlc’s revenue recognition methodology prior to the dlc Acquisition was significantly different from GAAP.

Atlantic Acquisition

On August 6, 2014, the Company acquired all of the outstanding equity interests of Atlantic Credit & Finance, Inc. pursuant to a stock purchase agreement (the “Atlantic Acquisition”). The components of the purchase price allocation for the Atlantic Acquisition were as follows (in thousands):

Purchase price:
Cash paid at acquisition	$	196,104
Allocation of purchase price:
Cash	$	16,743
Investment in receivable portfolios	105,399
Deferred court costs	995
Property and equipment	1,331
Other assets	14,679
Liabilities assumed	(25,586		)
Identifiable intangible assets	2,595
Goodwill	79,948
Total net assets acquired	$	196,104

The following summary presents unaudited pro forma consolidated results of operations for the years ended December 31, 2014 and 2013, as if the Atlantic Acquisition had occurred on January 1, 2013. The following unaudited pro forma financial information does not necessarily reflect the actual results that would have occurred had Encore and Atlantic been combined during the periods presented, nor is it necessarily indicative of the future results of operations of the combined companies (in thousands):

	(Unaudited) Year Ended December 31,
	2014		2013
Consolidated pro forma revenue	$	1,110,872	$	837,878
Consolidated pro forma income from continuing operations attributable to Encore	110,016		81,140

Marlin Acquisition

On February 7, 2014, the Company, through its Cabot subsidiary, completed the acquisition (the “Marlin Acquisition”) of Marlin Financial Group Limited (“Marlin”).

The components of the purchase price allocation for the Marlin Acquisition were as follows (in thousands):

Purchase price:
Cash paid at acquisition	$	274,068
Allocation of purchase price:
Cash	$	16,342
Investment in receivable portfolios	208,450
Deferred court costs	914
Property and equipment	1,335
Other assets	18,091
Liabilities assumed	(299,699		)
Identifiable intangible assets	1,819
Goodwill	326,816
Total net assets acquired	$	274,068

Pro forma financial information for the Marlin Acquisition has not been included as the computation of such information is impracticable and too onerous due to the complexities of a hypothetical calculation because Marlin’s revenue recognition methodology prior to the Marlin Acquisition was significantly different from GAAP.

Other Acquisitions

In addition to the dlc Acquisition discussed above, the Company, through its subsidiaries, acquired other businesses during the year ended December 31, 2015, for total consideration of $49.4 million, net of cash acquired. The initial purchase price allocation for these other acquisitions were based on the preliminary assessment of assets acquired and liabilities assumed, which is subject to change within one year of the date of the acquisition. These transactions included the acquisition of a controlling interest (50.25%) in Baycorp Holdings Pty Limited (“Baycorp”), a debt resolution specialist in Australia. Based on the preliminary assessment, the fair value of total assets acquired from Baycorp at the time of acquisition was approximately $76.1 million. These acquisitions were immaterial to the Company’s financial statements individually and in the aggregate during their respective reporting periods.

In addition to the Atlantic Acquisition and the Marlin Acquisition discussed above, the Company completed certain other acquisitions during the year ended December 31, 2014. The total considerations transferred net of cash acquired for these acquisitions were approximately $59.4 million. These acquisitions were immaterial to the Company’s financial statements individually and in the aggregate during their respective reporting periods.