XML 79 R11.htm IDEA: XBRL DOCUMENT v3.3.1.900
ACQUISITIONS
12 Months Ended
Dec. 31, 2015
Business Combinations [Abstract]  
ACQUISITIONS
ACQUISITIONS

RentRange, Investability and Onit Solutions Acquisitions

On October 9, 2015, we acquired GoldenGator, LLC (doing business as RentRange®), REIsmart, LLC (doing business as Investability) and Onit Solutions, LLC, a support company for RentRange and Investability (collectively, the “Acquired RentRange and Investability Businesses”). RentRange is a leading provider of rental home data and information to the financial services and real estate industries, delivering a wide assortment of address and geography level data, analytics, and rent-based valuation solutions for single and multi-family properties. Investability is an online residential real estate search and acquisition platform that utilizes data and analytics to allow real estate investors to access the estimated cash flow, capitalization rate, net yield and market value of properties for sale in the United States. The purchase price of $24.8 million was composed of $17.5 million in cash and 247 thousand shares of restricted common stock of the Company with a value of $7.3 million as of the closing date. The restricted stock is subject to transfer restrictions and potential forfeiture provisions upon issuance. These restrictions and forfeiture provisions will be removed over a four year period, subject to meeting certain continued employment conditions with the Company and meeting certain acquisition related escrow release conditions. The Acquired RentRange and Investability Businesses are not material in relation to the Company’s results of operations or financial position.

The preliminary allocation of the purchase price is as follows:
(in thousands)
 
 
 
 
 
Cash
 
$
3

Accounts receivable, net
 
245

Premises and equipment, net
 
1,206

Other assets
 
199

Software
 
1,265

Trademarks and trade names
 
1,205

Databases/other
 
910

Non-compete agreements
 
330

Customer relationships
 
255

Goodwill
 
19,565

 
 
25,183

Accounts payable and accrued expenses
 
(391
)
 
 
 
Purchase price
 
$
24,792




CastleLine Acquisition    

On July 17, 2015, we acquired CastleLine Holdings, LLC and its subsidiaries (“CastleLine”), a specialty risk management and insurance services firm. CastleLine provides financial products and services to parties involved in the origination, underwriting, purchase and securitization of residential mortgages. The purchase consideration was composed of $12.3 million of cash at closing, $10.5 million of cash payable over four years from the acquisition date and 495 thousand shares of restricted common stock of the Company with a value of $14.4 million as of the closing date. Of the cash payable following acquisition, $3.8 million is contingent on certain future employment conditions of certain of the sellers, and therefore excluded from the purchase price. The CastleLine acquisition is not material in relation to the Company’s results of operations or financial position.

The preliminary allocation of the purchase price is as follows:
(in thousands)
 
 
 
 
 
Cash
 
$
1,088

Accounts receivable, net
 
510

Prepaid expenses
 
66

Restricted cash
 
2,501

Non-compete agreements
 
1,105

Databases/other
 
465

Customer relationships
 
395

Trademarks and trade names
 
150

Goodwill
 
28,125

 
 
34,405

Accounts payable and accrued expenses
 
(875
)
Deferred revenue
 
(87
)
 
 
 
Purchase price
 
$
33,443


Owners Acquisition

On November 21, 2014, we acquired certain assets and assumed certain liabilities of Owners Advantage, LLC (“Owners”). Owners is a self-directed online real estate marketplace. We paid $19.8 million at closing in cash and agreed to pay additional contingent consideration of up to an additional $7.0 million over two years following the closing (“Owners Earn Out”), based on Adjusted Revenue (as defined in the purchase agreement). At closing, we estimated the fair value of the Owners Earn Out to be $1.9 million determined based on the present value of future estimated Owners Earn Out payments. After the acquisition date, the allocation of the purchase price was adjusted based upon information that subsequently became available relating to acquisition date working capital, resulting in a payment to the sellers of less than $0.1 million. The Owners acquisition and the adjustment to the preliminary allocation of the purchase price are not material in relation to the Company’s results of operations or financial position.

The final allocation of the purchase price is as follows:
(in thousands)
 
 
 
 
 
Accounts receivable, net
 
$
32

Prepaid expenses
 
28

Software
 
501

Trademarks and trade names
 
1,431

Goodwill
 
19,775

 
 
21,767

Accounts payable
 
(22
)
 
 
 
Purchase price
 
$
21,745



Mortgage Builder Acquisition

On September 12, 2014, we acquired certain assets and assumed certain liabilities of Mortgage Builder Software, Inc. (“Mortgage Builder”) pursuant to a Purchase and Sale Agreement dated July 18, 2014 (the “Purchase and Sale Agreement”). Mortgage Builder is a provider of residential mortgage loan origination and servicing software systems. Pursuant to the terms of the Purchase and Sale Agreement, we paid $15.7 million at closing in cash (net of closing working capital adjustments). Additionally, the Purchase and Sale Agreement provides for the payment of up to $7.0 million in potential additional consideration (the “MB Earn-Out”) based on Adjusted Revenue (as defined in the Purchase and Sale Agreement) in the three consecutive 12-month periods following closing. At closing, we estimated the fair value of the MB Earn-Out to be $1.6 million determined based on the present value of future estimated MB Earn-Out payments. After the acquisition date, the allocation of the purchase price was adjusted based upon information that subsequently became available relating to acquisition date working capital, resulting in an obligation of the sellers to pay the Company $0.2 million. The Mortgage Builder acquisition and the adjustment to the preliminary allocation of the purchase price are not material in relation to the Company’s results of operations or financial position.

The final adjusted allocation of the purchase price is as follows:
(in thousands)
 
 
 
 
 
Cash
 
$
668

Accounts receivable, net
 
1,102

Prepaid expenses
 
38

Premises and equipment, net
 
553

Software
 
1,509

Trademarks and trade names
 
209

Customer relationships
 
4,824

Goodwill
 
9,135

 
 
18,038

Accounts payable and accrued expenses
 
(950
)
 
 
 
Purchase price
 
$
17,088



See Note 10 for additional information on the impairment of Technology Services goodwill for the year ended December 31, 2015, which includes Mortgage Builder goodwill.

Equator Acquisition

On November 15, 2013, we completed the acquisition of all of the outstanding limited liability company interests of Equator, LLC (“Equator”) pursuant to a Purchase and Sale Agreement dated August 19, 2013 (the “Purchase Agreement”).  Pursuant to the terms of the Purchase Agreement, we paid $63.4 million at closing in cash (net of closing working capital adjustments), subject to certain post-closing adjustments based on current assets and current liabilities of Equator at closing. After the acquisition date, management adjusted the purchase price allocation based upon information that has subsequently become available relating to acquisition date working capital, resulting in an obligation of the Company to pay the sellers an additional $3.7 million. Consequently, the Company retrospectively adjusted the fair value of the assets acquired and liabilities assumed in the consolidated balance sheet as of December 31, 2013 as well as disclosed the corresponding amount of non-cash investing and financing activities in the consolidated statement of cash flows for the year ended December 31, 2014.

The Purchase Agreement also provided for the payment of up to $80 million in potential additional consideration (“Equator Earn Out”). The Equator Earn Out was determined based on Equator’s Adjusted EBITA (as defined in the Purchase Agreement) in the three consecutive 12-month periods following closing. Up to $22.5 million of the Equator Earn Out could be earned in each of the first two 12-month periods and up to $35.0 million could be earned in the third 12-month period.  Any amounts earned upon the achievement of Adjusted EBITA thresholds would be payable through 2017.  We could have, at our discretion, paid up to 20% of each payment of any of the Equator Earn Out in shares of Company restricted stock, with the balance paid in cash. As of the closing date, we estimated the fair value of the Equator Earn Out to be $46.0 million, determined based on the present value of future estimated Equator Earn Out payments at such date, which has subsequently been reduced to $0 with a settlement payment of $0.5 million, as further described below and in Note 6. The acquisition date fair value of the Equator Earn Out is included as a component of the purchase price of Equator.

 
 
Initial purchase price allocation
 
Adjustments
 
Adjusted purchase price allocation
(in thousands)
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
$
9,293

 
$
3,490

 
$
12,783

Prepaid expenses and other current assets
 
954

 
(393
)
 
561

Premises and equipment
 
16,974

 

 
16,974

Customer relationships, trademarks and trade names
 
43,393

 

 
43,393

Goodwill
 
82,460

 

 
82,460

Other non-current assets
 
242

 
78

 
320

Assets acquired
 
153,316

 
3,175

 
156,491

Accounts payable and accrued expenses
 
(7,232
)
 
536

 
(6,696
)
Deferred revenue
 
(36,689
)
 

 
(36,689
)
Liabilities assumed
 
(43,921
)
 
536

 
(43,385
)
 
 
 
 
 
 
 
Purchase price
 
$
109,395

 
$
3,711

 
$
113,106

 
 
Estimated life
(in years)
 
 
 
Premises and equipment (excluding internally developed software)
 
3 - 5
Internally developed software (included in premises and equipment)
 
7
Customer relationships (weighted average)
 
15
Trade names
 
4


In accordance with ASC Topic 805, Business Combinations, the liability for contingent consideration is reflected at fair value and adjusted each reporting period with the change in fair value recognized in earnings. During 2014, the fair value of the contingent consideration related to the Equator acquisition was reduced by $37.9 million with a corresponding increase in earnings based on management’s revised estimates that expected earnings of Equator would be lower than projected at the time of acquisition. The reduction in fair value was recorded in 2014 and is reflected as a reduction of selling, general and administrative expenses in the consolidated statements of operations (see Note 19).
 
See Note 10 for additional information on the impairment of Technology Services goodwill for the years ended December 31, 2015 and 2014, which includes Equator goodwill.
 
ResCap Fee-Based Businesses
 
On April 12, 2013, we entered into an agreement with Ocwen to establish additional terms related to the existing servicing arrangements between Altisource and Ocwen in connection with certain mortgage servicing platform assets of ResCap (the “ResCap Business”). The agreement provides that (i) Altisource will be a provider to Ocwen of certain services related to the ResCap Business, (ii) Ocwen will not establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services as they relate to the ResCap Business and (iii) Ocwen will market and promote the utilization of Altisource’s services to their various third party relationships. Additionally, the parties agreed to use commercially reasonable best efforts to ensure that the loans associated with the ResCap Business are boarded onto Altisource’s mortgage servicing platform. We paid $128.8 million to Ocwen in connection with the ResCap fee-based businesses agreement.

We acquired no tangible assets and assumed no liabilities in connection with the ResCap transaction. However, certain employees as well as practices and processes developed to support the ResCap servicing portfolio were components of the transaction. We accounted for this transaction as a business combination in accordance with ASC Topic 805, Business Combinations.
 
Management prepared a final purchase price allocation and assigned associated asset lives based upon available information at the time of the agreement and until finalized as of December 31, 2013. The agreement consideration of $128.8 million was fully allocated to the customer relationship intangible asset with an estimated average useful life of 7 years.

See Note 10 for additional information on the impairment of a portion of the ResCap customer relationship intangible asset for the year ended December 31, 2015.




Homeward Fee-Based Businesses
 
On March 29, 2013, we acquired certain fee-based businesses associated with Ocwen’s acquisition of Homeward. As part of the acquisition, Ocwen agreed not to develop similar fee-based businesses that would directly or indirectly compete with services provided by Altisource to Ocwen with respect to the Homeward servicing portfolio. Additionally, the terms of our Service Agreements with Ocwen were amended to extend the term from 2020 to 2025 (see Note 3). We paid $75.8 million, after a working capital and pre-acquisition net income adjustment payment by Ocwen of $11.1 million, which we received in September 2013.
 
Since the acquisition date, management adjusted the purchase price allocation and assigned associated asset lives based upon information that has become available. In addition to the working capital adjustment, we also reduced premises and equipment by $1.2 million based on a post-acquisition detailed analysis of software licenses received and increased current liabilities by $2.0 million based on a subsequent detailed analysis of obligations payable as of the closing date, which we paid in 2014. Consequently, the Company disclosed the corresponding amount of non-cash investing and financing activities in the consolidated statement of cash flows for the year ended December 31, 2013.

The final adjusted allocation of the purchase price is as follows:

(in thousands)
 
 
 
 
 
Premises and equipment
 
$
1,559

Customer relationship
 
75,609

Goodwill
 
2,039

 
 
79,207

Accounts payable and accrued expenses
 
(3,390
)
 
 
 
Purchase price
 
$
75,817



 
 
Estimated life
(in years)
 
 
 
Premises and equipment
 
3 - 5
Customer relationships
 
7


See Note 10 for additional information on the impairment of a portion of the Homeward customer relationship intangible asset for the year ended December 31, 2015.

The following table presents the unaudited pro forma consolidated results of operations for the year ended December 31, 2013 as if the Equator, ResCap and Homeward transactions had occurred at the beginning of the period presented.
 
 
Year ended
December 31, 2013
(in thousands, except per share amounts)
 
As reported
 
Pro forma
 
 
 
 
 
Revenue
 
$
768,357

 
$
854,098

Net income attributable to Altisource
 
129,973

 
132,907

Earnings per share — diluted
 
5.19

 
5.31



The unaudited pro forma information presents the combined operating results of Altisource and the Homeward fee-based business, ResCap fee-based business and Equator. The Homeward fee-based business, ResCap fee-based business and Equator operating results were derived from their historical financial statements for the most comparable periods available. The results prior to the acquisition dates have been adjusted to include the pro forma impact of the adjustment of amortization of the acquired intangible assets based on the purchase price allocations, the adjustment of interest expense reflecting the portion of our senior secured term loan used in the Homeward fee-based business, ResCap fee-based business and Equator transactions and to reflect the impact of income taxes on the pro forma adjustments utilizing Altisource’s effective income tax rate.

The unaudited pro forma results are presented for illustrative purposes only and do not reflect additional revenue opportunities, the realization of any potential cost savings and any related integration costs. Certain revenue opportunities and cost savings may result from the transactions and the conversion to the Altisource model; however, there can be no assurance that these revenue opportunities and cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the transactions occurred as of the beginning of the period presented, nor is the pro forma data intended to be a projection of results that may be obtained in the future.