Acquisitions and Investments

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Acquisitions and Investments

5. Acquisitions and Investments

2014 Acquisitions

During 2014, the Company has made payments related to acquisitions and investments in aggregate of $238.7 million. During 2014, the Company has made deferred payments of purchase price related to 2013 acquisitions of $23.2 million.

Equity Method Investment in Masternaut

On April 28, 2014, the Company completed an equity method investment in Masternaut Group Holdings Limited (“Masternaut”), Europe’s largest provider of telematics solutions to commercial fleets, included in “Equity method investment” in its unaudited Consolidated Balance Sheets. The Company owns 44% of the outstanding equity of Masternaut.

Comdata

On August, 12, 2014, the Company announced that it signed a definitive agreement to acquire Comdata Inc. (“Comdata”) from Ceridian LLC, a portfolio company of funds affiliated with Thomas H. Lee Partners, L.P. (“THL”) and Fidelity National Financial Inc. (NYSE: FNF), for $3.45 billion. Concurrent with the closing of the acquisition, a representative from THL will be appointed to the FleetCor board of directors.

Comdata is a leading business-to-business provider of innovative electronic payment solutions. As an issuer and a processor, Comdata provides fleet, virtual card and gift card solutions to over 20,000 customers. Comdata has approximately 1,300 employees and enables over $54 billion in payments annually. This acquisition will complement the Company’s current fuel card business in the U.S. and add a new product with the virtual payments business.

FleetCor will finance the $3.45 billion acquisition with approximately $2.4 billion of new debt and the issuance of approximately 7.3 million shares of FleetCor common stock. The cash payments will be used to pay off Comdata’s outstanding indebtedness. This acquisition is anticipated to be completed during the fourth quarter of 2014.

Other

During 2014, the Company has also acquired Pacific Pride, a U.S. fuel card business, and a fuel card portfolio from Shell in Germany.

2013 Acquisitions

During 2013, the Company completed acquisitions with an aggregate purchase price of $849.0 million, net of cash acquired of $35.6 million, including deferred payments of $36.8 million and the estimated fair value of contingent earn out payments of $83.1 million.

For certain acquisitions in 2013, the consideration transferred includes contingent consideration based on achieving specific financial metrics in future periods. The contingent consideration agreements (the “agreements”) require the Company to pay the respective prior owners if earnings before interest, taxes, depreciation and amortization (EBITDA) and revenues grow at a specified rate over the most recent corresponding specified period, based on a sliding scale. The potential future payments that the Company could be required to make related to these contingent consideration agreements ranges from $59 to $83 million based on current operating results. The fair value of the arrangements included in the acquisition consideration is estimated using a Monte Carlo Simulation approach and the probability-weighted discounted cash flow approach and considered historic expenses, historic EBITDA and revenue growth and current projections for the respective acquired entities. At September 30, 2014 the Company has recorded $78.6 million of contingent consideration, which is payable in the fourth quarter of 2014 and first quarter of 2015. As the payments are due within one year of the date of acquisition, the Company did not apply a discount rate to the potential payments. Any changes to the contingent consideration ultimately paid or any changes in the fair value of such amounts would result in additional income or expense in the Consolidated Statements of Income. Changes in the aggregate fair values of the respective contingent earn out payments during the third quarter of 2014 were not material. Acquisition amounts are presented at the applicable acquisition date foreign exchange spot rate.

The Company’s purchase price allocation related to each of the entities acquired in 2013 is complete.

2013 Totals

The following table summarizes the preliminary allocation of the purchase price for all acquisitions during 2013 (in thousands):

Trade and other receivables	$	71,671
Prepaid expenses and other		12,555
Property and equipment		5,791
Other long term assets		53,737
Goodwill		643,116
Other intangible assets		473,000
Notes and other liabilities assumed		(283,245	)
Deferred tax liabilities		(77,543	)
Other long term liabilities		(50,091	)
Aggregate purchase prices	$	848,991

Intangible assets allocated in connection with the purchase price allocations consisted of the following (in thousands):

	Useful Lives (in Years)		Value
Customer relationships		3 – 20	$	357,260
Trade names and trademarks—indefinite		N/A		46,900
Trade names and trademarks		15		200
Merchant network		10		16,750
Software		3 – 10		36,890
Non-competes		5		15,000
			$	473,000

In connection with 2013 acquisitions, the Company has uncertain tax positions aggregating $13.4 million and contingent liabilities aggregating $49.2 million. The Company has been indemnified by the respective sellers for a portion of these acquired liabilities. As a result, an indemnification asset of $51.1 million was recorded. The potential range of acquisition related contingent liabilities that the Company estimates would be incurred and ultimately recoverable, and for which the Company has recorded indemnification assets in the Consolidated Balance Sheets, is $50.0 million to $51.1 million.