Business Combinations

Fiscal 2016 Acquisitions

Acquisition of WIRmachenDRUCK GmbH

On February 1, 2016, we acquired 100% of the outstanding shares of WIRmachenDRUCK GmbH, a web-to-print business focused primarily on the German market. At closing, we paid €138,383 ($150,128 based on the exchange rate as of the date of acquisition) in cash and transferred €8,121 ($8,810 based on the exchange rate as of the date of acquisition) in ordinary shares of Cimpress N.V. We paid €1,850 in cash ($2,082 based on the exchange rate on the date of payment) during the fourth quarter of fiscal 2016 as a post-closing adjustment based on WIRmachenDRUCK's net cash and working capital position as of the acquisition date.

In addition, we agreed to a sliding scale earn-out of up to €40,000 ($43,395 based on the exchange rate as of the date of acquisition) based on the achievement of a cumulative gross profit target for calendar years 2016 and 2017 and is payable at our option in cash or ordinary shares. The estimated fair value of the earn-out as of the acquisition date was $9,872, based on a Monte Carlo Simulation valuation model. We will re-evaluate the fair value of the earn-out on a quarterly basis and recognize any change in estimate in general and administrative expense. As of June 30, 2016 there has been no change in our fair value estimate of the earn-out as of the acquisition date.

As a portion of the earn-out attributed to the two majority selling shareholders is contingent upon their post-acquisition employment, $8,687 is not included as part of the purchase consideration but will be recognized as compensation expense through the required employment period ending in December 2017.The remaining earn-out of $1,185 not contingent upon post-acquisition employment is included as a component of purchase consideration. On July 15, 2016, as a result of a statutory tax notice we amended the terms of our contingent consideration arrangement with the two majority selling shareholders to remove the post-acquisition employment requirement. As the arrangement is no longer contingent upon continued employment, we will accelerate the remaining unrecognized compensation expense and adjust the existing liability to fair value. The amendment is considered a Type II subsequent event, and we will recognize approximately $6,957 (based on the June 30, 2016 fair value) in general and administrative expense during the first quarter of fiscal 2017 in which period the arrangement was amended.

The acquisition supports our strategy to build a mass customization platform via focused brands and complements similar previous investments in Europe. WIRmachenDRUCK brings internet-based capabilities that aggregate and route large numbers of small orders to a network of specialized production partners. Their outsourced supply chain model allows them to compete across a vast selection of product types, formats, sizes, finishing options and delivery choices.

Our consolidated financial statements include WIRmachenDRUCK from February 1, 2016, the date of acquisition. WIRmachenDRUCK's revenue included in our consolidated revenues for the year ended June 30, 2016 was $72,620. WIRmachenDRUCK's net income included in our consolidated net income attributable to Cimpress N.V. for the year ended June 30, 2016 was $3,420, inclusive of amortization of identifiable intangible assets but exclusive of earn-out related compensation expense and corporate level interest expense.

The table below details the consideration transferred to acquire WIRmachenDRUCK:



Cash consideration	$	152,100
Cimpress N.V. shares transferred	8,810
Fair value of contingent consideration	1,185
Total consideration	$	162,095

The excess of the purchase price paid over the fair value of WIRmachenDRUCK's net assets was recorded as goodwill, which is primarily attributed to expected expansion of the customer base and value of the workforce of WIRmachenDRUCK. Goodwill is not expected to be deductible for tax purposes, and has been attributed to our Upload and Print business units reportable segment. The fair value of the assets acquired and liabilities assumed was:



	Amount			Weighted Average Useful Life in Years
Tangible assets acquired and liabilities assumed
Cash and cash equivalents	$	15,220		n/a
Other current assets	5,231			n/a
Other non-current assets	1,259			n/a
Accounts payable and other current liabilities	(17,566		)	n/a
Deferred tax liability (1)	(26,863		)	n/a
Identifiable intangible assets:
Customer relationships	24,952			7
Trade name	24,952			15
Print network	23,867			9
Referral network	10,849			7
Developed technology	8,679			3
Goodwill (1)	91,515			n/a
Total purchase price	$	162,095

_________________

(1) As we finalized our purchase accounting during the fourth quarter of fiscal 2016, a measurement period adjustment was identified resulting in a $474 adjustment between goodwill and deferred tax liabilities.

Other fiscal 2016 acquisitions

During the first quarter of fiscal 2016, we acquired two businesses that were not material to our results either individually or in the aggregate. Complementing our Upload and Print business units segment, we acquired all of the outstanding capital stock of Tradeprint Distribution Limited (formerly known as Fairprint Distribution Limited) and Litotipografia Alcione S.r.l. on July 31, 2015 and July 29, 2015, respectively. The aggregate consideration for these two acquisitions was $25,547, net of cash acquired. The consideration was allocated to the fair value of the assets acquired and liabilities assumed based on estimated fair values as of the respective acquisition dates. The aggregate allocation to goodwill, intangible assets, and net tangible assets was $9,571, $14,359 and $1,617, respectively.

Goodwill is calculated as the excess of the consideration over the fair value of the net assets, including intangible assets, and is primarily related to expected synergies from the transactions. The goodwill for these two acquisitions is not deductible for tax purposes, and has been attributed to our Upload and Print business units. The results of these acquisitions have been included in the consolidated financial statements from the date of purchase and are not material for the year ended June 30, 2016.

We utilized proceeds from our credit facility to finance our fiscal 2016 acquisitions. In connection with these acquisitions, we incurred transaction costs related to investment banking, legal, financial, and other professional services of $1,289 during the year ended June 30, 2016. We have not presented pro forma results of the operations of the companies we acquired in fiscal 2016 because the effects of the acquired companies are not material to our consolidated financial statements.

Fiscal 2015 Acquisitions

Acquisition of Exagroup SAS

On April 15, 2015, we acquired 70% of the shares of Exagroup SAS, a French simplified joint stock company, for a purchase price of €91,305 ($97,012 based on the exchange rate as of the date of acquisition), plus the post-closing adjustment of €4,575 ($4,862 based on the exchange rate as of the date of payment) based on Exagroup's working capital and debt, of which €3,261 ($3,678 based on the exchange rate on the payment date) was paid during fiscal 2016 and the remaining €1,314 is expected to be paid in fiscal 2019. All shareholders of Exagroup sold the entirety of their Exagroup holdings, with the exception of Nicolas Dematté and Marise Dematté (the “Remaining Shareholders”), who each retained a 15% ownership interest in Exagroup. We utilized proceeds from our credit facility to finance the acquisition. The acquisition supports our strategy of building a software-enabled operational platform that aggregates and optimizes the supply chain and production of mass customized products such as signage, printing, apparel and promotional products. Exagroup brings a large variety of high quality products and a sophisticated network of outsourcing partners that we expect, over time, to significantly expand the breadth and depth of the selection available on our mass customization platform.

Our consolidated financial statements include Exagroup from April 15, 2015, the date of acquisition. Exagroup's revenue included in our consolidated revenues for the year ended June 30, 2015 was $18,155. Exagroup's net income included in our consolidated net income attributable to Cimpress N.V. for the year ended June 30, 2015 was $563, inclusive of amortization of identifiable intangible assets.

Noncontrolling Interest

At the closing, we entered into reciprocal put and call options with the Remaining Shareholders with respect to the 30% of Exagroup shares held by the Remaining Shareholders, pursuant to which each of the Remaining Shareholders has the right to put his or her Exagroup shares to us for a period of 30 days beginning on April 15, 2019. If one or both of the Remaining Shareholders does not exercise his or her put option, then we have the right to exercise our call option on such Remaining Shareholder's Exagroup shares for a period of 30 days beginning on January 10, 2020. If the put or call options are exercised, the aggregate purchase and sale price for such shares will be €39,000. We may pay an additional contingent payment that is dependent on Exagroup’s achievement of certain revenue targets for calendar year 2017, as well as the continued employment of the Remaining Shareholders. This potential additional payment is contingent upon the Remaining Shareholders' post-acquisition employment and is recognized as compensation expense over the vesting period (through December 31, 2017). As of June 30, 2016, the maximum remaining contingent payment is €4,000 as one of the Remaining Shareholders ceased to be an employee during the period. We estimate the value of the potential payment based on the achievement targets to be zero as of June 30, 2016.

The table below details the consideration transferred to acquire Exagroup:



Cash paid	$	97,012
Working capital and debt adjustment	4,832
Total consideration	$	101,844

The excess of the purchase price paid over the fair value of Exagroup's net assets was recorded as goodwill, which is primarily attributable to cost synergies expected from manufacturing and tax efficiency opportunities, as well as the value of the workforce of Exagroup. Goodwill is not expected to be deductible for tax purposes, and has been attributed to our Upload and Print business units reportable segment. The fair value of the assets acquired and liabilities assumed was:



				Weighted Average
	Amount			Useful Life in Years
Tangible assets acquired and liabilities assumed:
Cash and cash equivalents	$	18,991		n/a
Other current assets (1)	14,318			n/a
Non-current assets	18,711			n/a
Accounts payable and other current liabilities	(21,008		)	n/a
Deferred tax liability	(21,655		)	n/a
Other long term liabilities	(9,966		)	n/a
Identifiable intangible assets:
Customer relationships	35,434			7-9
Trade name	11,900			10-14
Developed technology	9,669			3
Noncontrolling interest	(43,354		)
Goodwill (2)	88,804			n/a
Total purchase price	$	101,844

__________________

(1) Includes real estate assets classified as held for sale of $1,971.

(2) Refer to Note 9 for discussion of the goodwill impairment loss recognized for the Exagroup reporting unit during the year ended June 30, 2016 of $30,841.

Other fiscal 2015 acquisitions

FotoKnudsen AS

On July 1, 2014, we acquired 100% of the outstanding shares of FotoKnudsen AS, a Norwegian photo product company focused primarily on the Norwegian markets. This acquisition expands our presence in the European home and family market. At closing, we paid €14,045 ($19,224 based on the exchange rate as of the date of acquisition) in cash, subject to certain post-acquisition escrow adjustments. We recognized the assets and liabilities on the basis of their fair values at the date of our acquisition, with any excess of the purchase price paid over the fair value of the net assets recorded as goodwill. Of the total purchase price of $19,224, $11,754 was allocated to goodwill, $9,218 to acquired intangible assets and $1,748 to net liabilities. Goodwill is not expected to be deductible for tax purposes, and has been attributed to our All Other Business Units reportable segment. The revenue and earnings included in our consolidated financial statements for the year ended June 30, 2015 was not material.

FL Print SAS

On April 9, 2015, we acquired 100% of the outstanding shares of FL Print SAS (which we refer to as Easyflyer), a French web-to-print business focused primarily on large format products. At closing, we paid €4,800 ($5,174 based on the exchange rate as of the date of acquisition) in cash, subject to certain post-acquisition escrow adjustments. We have recognized the assets and liabilities on the basis of their fair values at the date of our acquisition, with any excess of the purchase price paid over the fair value of the net assets recorded as goodwill. Of the total purchase price of $5,174, $3,592 was allocated to goodwill, $2,003 to acquired intangible assets and $421 to net liabilities. Goodwill is not expected to be deductible for tax purposes, and has been attributed to our Upload and Print business units reportable segment. The revenue and earnings included in our consolidated financial statements for the year ended June 30, 2015 was not material.

In addition, we agreed to two additional payments based on Easyflyer's calendar year 2015 and 2018 revenue and EBITDA targets. As these additional payments are contingent upon the sellers' post-acquisition employment, they are not included as part of the consideration but will be recognized as compensation expense over the required employment period. During the fiscal year ended June 30, 2016, we amended the terms of the arrangement resulting in the acceleration of one payment of $3,397 and we recognized $3,113 of additional expense in general and administrative expense during the period. In addition, we modified the performance targets for the second additional payment, which includes calendar year 2017 revenue targets and remains contingent upon the seller's post-acquisition employment. We estimate the value of the potential payment as of June 30, 2016 to be $2,220, which will be accrued over the vesting period. We recognized an immaterial amount in general and administrative expense for the year ended June 30, 2016.

druck.at Druck-und Handelsgesellschäft mbH

On April 17, 2015, we acquired 100% of the outstanding shares of druck.at Druck-und Handelsgesellschäft mbH (which we refer to as druck.at), a web-to-print business focused primarily on the Austrian market. This acquisition supports our strategy to leverage a common platform across multiple brands like druck.at, which offers a wide variety of high quality printed products. We paid €20,000 ($21,537 based on the exchange rate as of the date of acquisition) in cash at closing, and paid a fixed deferred payment of €3,300 ($3,663 based on the exchange rate as of the date of payment) in cash during the fourth quarter of fiscal 2016. We amended the terms of the deferred payment to accelerate the payment to June 30, 2016. The payment was originally due in July 2017 if the seller continued to be employed by druck.at or in April 2019. As the timing of the deferred payment was contingent upon the sellers post-acquisition employment, an immaterial portion of the deferred payment was recognized as compensation in general and administrative expense upon acceleration.

We recognized the assets and liabilities on the basis of their fair values at the date of the acquisition, with any excess of the purchase price paid over the fair value of the net assets recorded as goodwill. Of the total purchase price of $24,517, $10,877 was allocated to goodwill, $12,491 to acquired intangible assets and $1,149 to net assets. Goodwill is not expected to be deductible for tax purposes, and has been attributed to our Upload and Print business units reportable segment. The revenue and earnings included in our consolidated financial statements for the year ended June 30, 2015 was not material.

We utilized proceeds from various debt sources to finance our fiscal 2015 acquisitions. In connection with these acquisitions, we incurred transaction costs related to investment banking, legal, financial, and other professional services of $2,576 and $394 which were recorded during the years ended June 30, 2015 and 2014, respectively, in general and administrative expenses. Pro forma results of the operations have not been presented because the effects of the fiscal 2015 acquisitions were not material to the consolidated financial statements.

Fiscal 2014 Acquisitions

Acquisition of Pixartprinting S.p.A.

On April 3, 2014, we acquired 97% of the outstanding corporate capital of Pixartprinting S.p.A., a joint stock corporation incorporated under the laws of Italy, as follows;


•	We acquired all of the Pixartprinting corporate capital held by Alcedo III, a close-ended investment fund, representing 72.75% of Pixartprinting’s outstanding corporate capital.


•	We acquired a portion of the Pixartprinting corporate capital held by Cap2 S.r.l., a company controlled by Pixartprinting’s founder, representing 21.25% of Pixartprinting’s outstanding corporate capital, and Cap2 retained 3% of Pixartprinting’s outstanding corporate capital (the “Cap2 Retained Equity”).

•

We acquired all of the Pixartprinting corporate capital held by Alessandro Tenderini, Pixartprinting’s Chief Executive Officer, at closing representing 3% of Pixartprinting’s outstanding corporate capital. Mr. Tenderini had the right to purchase 1% of the corporate capital of Pixartprinting from Cimpress (the “CEO Retained Equity”) for an aggregate purchase price of €10 during the 10 business days after April 3, 2015, so long as Mr. Tenderini remained a Cimpress Italy employee on that date, and Mr. Tenderini exercised this purchase right in April 2015.

Cimpress agreed to pay an aggregate base purchase price of €127,850 ($175,896 based on the exchange rate as of the date of acquisition) in cash, subject to working capital and other adjustments, and a sliding-scale earn-out of up to €9,600 ($13,208 based on the exchange rate as of the date of acquisition) in cash on or after December 31, 2014 based upon the acquired business achieving certain revenue and EBITDA targets for calendar year 2014. The estimated fair value of the earn-out payment of $4,953 was included as a component of the purchase price based on an evaluation of the likelihood of achievement of the contractual conditions and weighted probability assumptions of these outcomes. Based on Pixartprinting's 2014 results, we paid the maximum amount achievable of €9,600 ($10,890 based on the exchange rate as of the date of payment) during fiscal 2015.

Our consolidated financial statements include the accounts of Pixartprinting from April 3, 2014, the date of acquisition. Pixartprinting’s revenue included in our consolidated revenues for the year ended June 30, 2014 was $27,208. Pixartprinting's net income included in our consolidated net income attributable to Cimpress N.V. for the year ended June 30, 2014 was $2,687, inclusive of amortization of identifiable intangible assets.

Noncontrolling Interest

We entered into a Put and Call Option Agreement with Cap2, with respect to the Cap2 Retained Equity. Pursuant to the Put and Call Option Agreement, Cap2 has the right to sell to us all (but not less than all) of the Cap2 Retained Equity at the end of Pixartprinting’s fiscal years ending June 30, 2015, 2016 and 2017 for a purchase price based on Pixartprinting’s EBITDA and net financial position (as reflected in its annual financial statements) for the fiscal year as to which the put option is exercised. We have the right to buy from Cap2 all (but not less than all) of the Cap2 Retained Equity at the end of Pixartprinting’s fiscal years ending June 30, 2017 and 2018 for a purchase price based on Pixartprinting’s EBITDA and net financial position (as reflected in its annual financial statements) for the fiscal year as to which the call option is exercised. The parties’ put and call rights are also triggered by certain other events and are exercisable during 30-day periods following the determination of the option purchase price for the relevant fiscal year. Due to the presence of the put arrangement, the noncontrolling interest is presented as temporary equity in our consolidated balance sheet. Upon acquisition, we recognized the noncontrolling interest at fair value of $5,728 and adjust the balance for the pro rata impact of the Pixartprinting earnings or loss, as well as adjustments to increase the balance to the redemption value, if necessary. Refer to Note 15 for additional details.

CEO Retained Equity

We entered into a Put and Call Option Agreement with Mr. Tenderini with respect to the CEO Retained Equity. Because this purchase right is contingent upon Mr. Tenderini's post-acquisition employment, it is not included as part of the consideration but will be recognized as share-based compensation over the vesting period. The award is considered a liability award and is marked to fair value each reporting period. In order to estimate the fair value of the award we utilize a lattice model with a Monte Carlo simulation. Pursuant to the Put and Call Option Agreement, Mr. Tenderini has the right to sell to us all (but not less than all) of the CEO Retained Equity at the end of Pixartprinting’s fiscal years ending June 30, 2015, 2016 and 2017 for a purchase price based on Pixartprinting’s EBITDA and net financial position (as reflected in its annual financial statements) for the fiscal year as to which the put option is exercised. We have the right to buy from Mr. Tenderini all (but not less than all) of the CEO Retained Equity at the end of Pixartprinting’s fiscal years ending June 30, 2017 and 2018 for a purchase price based on Pixartprinting’s EBITDA and net financial position (as reflected in its annual financial statements) for the fiscal year as to which the call option is exercised. The parties’ put and call rights are also triggered by certain other events and are exercisable during 30-day periods following the determination of the option purchase price for the relevant fiscal year. The total fair value of the award as of June 30, 2016 is $3,650 and we have recognized $1,211, $2,177 and $439 in general and administrative expense for the years ended June 30, 2016, 2015 and 2014, respectively.

The table below details the consideration transferred to acquire Pixartprinting:



Cash paid	$	175,896
Shareholder loans assumed	20,227
Fair value of contingent consideration	4,953
Total consideration	$	201,076

The excess of the purchase price paid over the fair value of Pixartprinting’s net assets was recorded as goodwill, which is primarily attributable to expected synergies and the value of the workforce of Pixartprinting. Goodwill is not expected to be deductible for tax purposes, and has been attributed to our Upload and Print business units reportable segment. The fair value of the assets acquired and liabilities assumed was:



				Weighted Average
	Amount			Useful Life in Years
Tangible assets acquired and liabilities assumed:
Cash and cash equivalents	$	6,913		n/a
Other current assets	5,601			n/a
Non-current assets	20,582			n/a
Accounts payable and other current liabilities	(17,681		)	n/a
Deferred tax liability	(20,640		)	n/a
Other long-term liabilities	(9,943		)	n/a
Identifiable intangible assets:
Customer relationships	42,375			6
Trade name	16,372			10
Developed technology	8,943			3
Noncontrolling interest	(5,728		)
Goodwill	154,282			n/a
Total purchase price	$	201,076

Acquisition of Printdeal B.V. (formerly known as People & Print Group B.V.)

On April 1, 2014, we acquired 100% of the outstanding shares of Printdeal B.V. (formerly known as People & Print Group B.V.), an online Dutch printing company focused primarily on the Dutch and Belgian markets. At the closing, we paid €20,545 ($28,300 based on the exchange rate as of the date of acquisition) in cash, subject to working capital and other adjustments, and an additional €4,000 ($5,509 based on the exchange rate as of the date of acquisition), which was paid in cash during the third quarter of fiscal 2016. In addition to the initial purchase consideration, we agreed to a sliding scale earn-out that is based on calendar year 2015 revenue and EBITDA targets. The estimated acquisition date fair value of the earn-out payment of $9,053 was included as a component of the purchase price based on an evaluation of the likelihood of achievement of the contractual conditions and weighted probability assumptions of these outcomes. During fiscal 2015, we amended the terms to pay a fixed amount of €15,000, of which €8,000 was paid in March 2015 ($8,270 based on the exchange rate as of the date of payment) and the remaining €7,000 ($7,819 based on the exchange rate as of the date of payment) was paid in June 2016.

We recognized the assets and liabilities on the basis of their fair values at the date of our the acquisition, with any excess of the purchase price paid over the fair value of the net assets recorded as goodwill. Of the total purchase price of $42,862, $20,605 was allocated to goodwill, $23,968 to acquired intangible assets and $1,711 to net liabilities. Goodwill is not expected to be deductible for tax purposes, and has been attributed to our Upload and Print business units reportable segment. The revenue and earnings included in our fiscal 2014 consolidated financial statements since the acquisition date are not material.

We utilized proceeds from our credit facility to finance our fiscal 2014 acquisitions. In connection with these acquisitions, we incurred transaction costs related to investment banking, legal, financial, and other professional services of approximately $4,530 in the year ended June 30, 2014, which were recorded in general and administrative expenses.

Identifiable Intangible Assets

We used the income approach to value the trade names, customer relationships and customer network and a replacement cost approach to value developed technology. The income approach calculates fair value by discounting the forecasted after-tax cash flows back to a present value using an appropriate discount rate. The baseline data for this analysis was the cash flow estimates used to price the transaction.

In estimating the useful life of the acquired assets, we reviewed the expected use of the assets acquired, factors that may limit the useful life of an acquired asset or may enable the extension of the useful life of an acquired asset without substantial cost, the effects of obsolescence, demand, competition and other economic factors, and the level of maintenance expenditures required to obtain the expected future cash flows from the asset. We amortize acquired intangible assets over their economic useful lives using either a method that is based on estimated future cash flows or a straight-line basis over the periods benefited.