Business Combinations

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combinations

11. Business Combinations

On September 16, 2013, the Company completed the acquisition of Novella Clinical Inc. (“Novella”) through the purchase of 100% of Novella’s outstanding stock for approximately $146.5 million in cash (net of approximately $26.2 million of acquired cash) plus contingent consideration in the form of potential annual earn-out payments totaling up to $21.0 million contingent upon the achievement of certain revenue and net new business targets for approximately three years following closing. The Company recognized a liability of approximately $14.3 million as the estimated acquisition date fair value of the earn-out, which was included in accrued expenses on the accompanying condensed consolidated balance sheet. Novella has operations primarily in the United States and Europe and is a clinical research organization focused primarily on emerging oncology customers as well as those in the medical device and diagnostics sectors. As part of its Product Development segment, the Company expects that Novella will complement its clinical service offerings through its focus on emerging companies and by adding expertise in oncology and medical devices.

The acquisition of Novella was accounted for as a business combination and, accordingly, the assets acquired and the liabilities assumed have been recorded at their respective estimated fair values as of the acquisition date. In connection with the acquisition of Novella, the Company recorded approximately $116.2 million of goodwill which was assigned to the Product Development segment and is not deductible for income tax purposes. The goodwill was primarily attributable to the assembled workforce of Novella and expected synergies. In addition, the Company recorded approximately $42.7 million of identifiable definite-lived intangible assets consisting primarily of $440,000 for non-compete agreements, $20.8 million for customer relationships, $14.0 million for backlog and $7.5 million for a trade name. The definite-lived intangible assets are being amortized over a weighted average estimated useful life of approximately 7 years.

The following table summarizes the preliminary fair value of the net assets acquired (in thousands):

Assets acquired:
Cash	$	26,190
Accounts receivable		31,185
Prepaid expenses and other current assets		2,203
Property and equipment		9,611
Goodwill		116,246
Acquired intangibles		42,740
Liabilities assumed:
Accounts payable and accrued expenses		(9,970)
Income tax payable		(357)
Deferred taxes		(16,916)
Deferred revenue		(12,641)
Other long-term liabilities		(1,334)
Net assets acquired	$	186,957

The Company is continuing to evaluate the initial purchase price allocation as of September 16, 2013. Further adjustments may be necessary as additional information related to the fair values of assets acquired and liabilities assumed is assessed during the measurement period (up to one year from the acquisition date).

The pro forma results and the revenues and earnings of the acquired business are immaterial for separate disclosure.