Acquisitions

9 Months Ended

Sep. 30, 2022

Acquisitions

Acquisitions

5. Acquisitions

Acquisitions have been accounted for using the acquisition method of accounting pursuant to FASB ASC 805, “Business Combinations.” Amounts allocated to the purchased assets and liabilities are based upon the total purchase price and the estimated fair values of such assets and liabilities on the effective date of the purchase as determined by an independent third party. The results of operations have been included in the Company’s results of operations prospectively from the date of acquisition.

Author! B.V.

On March 2, 2021, the Company completed a transaction that qualified as a business combination for a total consideration of $2,667. The business combination was not significant to our condensed consolidated financial statements. Based on the Company’s purchase price allocation, approximately $1,200, $100 and $1,200 of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively.

Insight Medical Writing Limited

On June 7, 2021, the Company completed a transaction that qualified as a business combination for a total consideration of $15,197. The business combination was not significant to our condensed consolidated financial statements. Based on the Company’s purchase price allocation, approximately $7,400 and $4,700 of the purchase price was assigned to customer relationships and goodwill, respectively.

Pinnacle 21, LLC

On October 1, 2021, the Company acquired 100% of the equity of Pinnacle 21, LLC (“Pinnacle”). Pinnacle  provides software and services for preparing clinical trial data for regulatory submission. The acquisition executed on the Company’s strategy to invest in innovation to increase the use cases of biosimulation and grow adoption of Certara’s end-to-end platform.

The acquisition of Pinnacle was treated as a purchase in accordance with ASC 805, “Business Combinations”, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction.

The following table summarizes the fair value of the consideration paid as well as the fair values of the assets acquired and liabilities assumed as of the date of the acquisition:

Fair value of consideration:	Pinnacle
Cash paid to sellers	$	249,115
Cash paid to others and escrow		17,200
Unregistered shares of Certara, Inc. (2,239,717 shares)		72,760
Total consideration	$	339,075
Assets acquired and liabilities assumed:
Cash and cash equivalents	$	19,409
Accounts receivable		2,925
Other current assets		619
Property and equipment		258
Deferred tax assets		2,907
Identifiable intangible assets:
Trademark		15,800
Acquired software		103,000
Customer relationships		24,600
Goodwill		180,947
Long-term deposits		34
Current liabilities		(794)
Current portion of deferred revenue		(10,630)
Net assets acquired	$	339,075

The fair value of the unregistered shares given as part of the purchase consideration was determined based on the market price of Certara common stock on the closing date less a 7% discount for lack of marketability.

The acquisition was structured as an asset acquisition for income tax purposes; therefore, the Company’s tax basis in Pinnacle’s identifiable assets reflects the fair value of consideration paid. However, the Company did not recognize tax basis in certain liabilities assumed on the acquisition date; resulting in deferred income taxes being recorded in purchase accounting.  

The fair value of the intangible assets is based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements within the fair value measurement hierarchy. The fair value of the customer relationships (Distributor method), trademarks (Relief from Royalty method) and developed technology (Multi-Period Excess Earnings Method) was determined under the income approach.  

Goodwill of $180,947 was recorded to reflect the excess of the purchase price over the estimated fair value of the net identifiable assets acquired, which is generally deductible for income tax purposes. The excess of the purchase prices over the fair values of the acquired business's net assets represent cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill.  

Integrated Nonclinical Development Solutions, Inc.

On January 3, 2022, the Company completed the acquisition of Integrated Nonclinical Development Solutions, Inc. (“INDS”), a company that provides the SEND Explorer software and drug development consulting for a total consideration of $8,048. The business combination was not significant to the Company’s condensed consolidated financial statements. Based on the Company’s purchase price allocation, approximately $2,380, $1,040, $100, and $2,910 of the purchase price was assigned to customer relationships, developed technology, non-compete agreements, and goodwill, respectively.

The condensed consolidated financial statements include the operating results of each acquisition from the date of acquisition.