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Business Combinations
12 Months Ended
Dec. 31, 2022
Business Combinations [Abstract]  
Business Combinations

4. Business Combinations

FastPay

On July 8, 2021, the Company entered into a stock purchase agreement for all of the equity interests of FastPay, a leading provider of payments automation solutions for the media industry. This acquisition expanded the Company’s portfolio of automated payments technologies and services to middle market companies across the media landscape in the United States. The Company paid consideration of approximately $77,089 which consisted of $46,089 in cash and 1,239,973 shares of common stock of the Company with an aggregate value of $31,000 based on the Company's IPO price of its common stock of $25. Additional amounts may be earned upon achievement of future performance goals measured on annual performance for 2021, 2022 and 2023. The aggregate amount of potential additional payments is $9,000, evenly split between cash and common stock. The Company recorded additional consideration of $1,880 related to contingent consideration in liabilities on its consolidated balance sheets. Additionally, the Company included identified deferred payment obligations of $792 in consideration paid.

On July 24, 2021, the Company paid contingent consideration with an aggregate value of $1,000 consisting of $500 in cash and 19,998 shares of common stock with a value of $500 based on the Company's IPO price of its common stock of $25.

The number of shares of common stock initially issued, including contingent consideration, was adjusted in accordance with terms of the purchase agreement based on the change in the value of the Company's common stock in connection with its IPO. The Company determined that the variability in the number of shares issued in the transaction represents a call option. The value of the call option was determined to be $4,118 and reduces the consideration allocated to the fair value of the business and was recorded as reduction to additional paid-in capital of $4,118 at the date of the acquisition.

During the year ended December 31, 2022, the Company settled a liability for contingent consideration for 2021 performance in the amount of $688 with a cash payment of $344 and the issuance of 20,564 shares of common stock.

In allocating the preliminary purchase price, the Company recorded the following assets acquired and liabilities assumed based on their estimated fair values at the date of the acquisition:

Consideration transferred

 

 

 

Closing cash consideration, net of cash acquired

 

$

46,089

 

Common stock consideration

 

 

31,000

 

Contingent consideration

 

 

1,880

 

Deferred payment obligation

 

 

792

 

Call option

 

 

(4,118

)

Fair value of total consideration transferred

 

$

75,643

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed

 

 

 

Current assets

 

$

2,115

 

Property and equipment

 

 

118

 

Operating lease right-of-use assets

 

 

561

 

Other noncurrent assets and deposits

 

 

90

 

Intangible assets

 

 

 

Customer relationships

 

 

18,000

 

Acquired technology

 

 

14,000

 

Trade name

 

 

2,500

 

Non-compete agreements

 

 

2,100

 

Goodwill

 

 

60,225

 

Total identifiable assets acquired

 

 

99,709

 

Accounts payable

 

 

3,241

 

Accrued expenses

 

 

15,457

 

Lease liabilities

 

 

561

 

Deferred tax liability

 

 

4,807

 

Total liabilities assumed

 

 

24,066

 

Purchase price paid, net of cash acquired

 

$

75,643

 

The calculation of fair value for the acquired assets and liabilities was prepared using primarily Level 3 inputs under ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). The Company determined the fair value of the identifiable intangible assets acquired with the assistance of third-party valuation consultants. The determination of fair value utilized the relief-from-royalty method for the acquired technology and the trade name. The multi-period excess earnings method was utilized to determine the fair value of the customer relationships. The amount recorded for acquired technology represents the estimated fair value of FastPay's payment technology. The amount recorded for customer relationships represents the fair values of the underlying relationship with FastPay's customers. The amount recorded for tradename represents the fair value of the brand recognition of FastPay. The weighted average useful life of acquired intangibles is 12 years. The goodwill balance is primarily attributable to the assembled workforce and expanded market opportunities within the market verticals in which FastPay operates. The goodwill balance is not deductible for tax purposes. From the date of the acquisition through December 31, 2021, the Company recorded measurement-period adjustments which are included in the table above. These adjustments increased the consideration paid by $126 for adjustments to the preliminary working capital balances and recognized a deferred tax liability of $4,807, resulting in a corresponding increase in goodwill. During the year ended December 31, 2022, the Company did not make any adjustments to the purchase price allocation for FastPay.

Core Associates and Orbiion

The Company accounted for the following transactions as business combinations during the year ended December 31, 2020 in accordance with the provisions of ASC Topic 805, Business Combinations, and has included the financial results of each acquisition in its consolidated financial statements from the date of the acquisition.

The Company also evaluated the acquisitions quantitatively and qualitatively and determined them to be insignificant both individually and in the aggregate. Therefore, certain pro forma disclosures under ASC 805-10-50 have been omitted.

On December 30, 2020 AvidXchange acquired all of the issued and outstanding equity interest of Core Associates, the maker of TimberScan, an AP approval processing and content management software. Total purchase price was approximately $24,408, net of $1,836 of cash acquired. The Company paid approximately $19,408 in cash at closing, inclusive of working capital adjustments, and issued 408,064 common shares valued at $5,000. The fair value of the common shares was determined based on the

estimated fair value at the time of the transaction. The Company incurred transaction costs associated with the acquisition of approximately $1,298.

In allocating the purchase price, the Company recorded the following assets acquired and liabilities assumed based on their estimated fair values at the date of the acquisition:

Current assets

 

 

 

Other assets

 

$

658

 

Intangible assets

 

 

 

Customer relationships

 

 

3,700

 

Acquired technology

 

 

5,700

 

Trade name

 

 

2,500

 

Goodwill

 

 

14,766

 

Total identifiable assets acquired

 

 

27,324

 

Accounts payable

 

 

266

 

Accrued expenses

 

 

150

 

Deferred revenue

 

 

2,500

 

Total liabilities assumed

 

 

2,916

 

Purchase price paid, net of cash acquired

 

$

24,408

 

The calculation of fair value for the acquired assets and liabilities was prepared using primarily Level 3 inputs under ASC 820. The Company determined the fair value of the identifiable intangible assets acquired with the assistance of third-party valuation consultants. The determination of fair value utilized the relief-from-royalty method to value the acquired technology and the trade name, and the multi-period excess earnings method to value the customer relationships. The amount recorded for acquired technology represents the estimated fair value of Core’s SaaS and on-premises software technology. The amount recorded for customer relationships represents the fair values of the underlying relationship with Core’s customers and business partners. The amount recorded for tradename represents the fair value of the brand recognition of Core and their main product TimberScan. The weighted average useful life of acquired intangibles and tradename is nine years and eleven years, respectively. The goodwill balance is primarily attributed to the assembled workforce and expanded market opportunities when integrating AvidPay with the Core platform to create a cohesive AP and payment offering. The goodwill balance is deductible for tax purposes.

On October 29, 2020, the Company completed an asset acquisition with the stockholders of Orbiion, Inc., (“Orbiion”) a California corporation, for total consideration of approximately $1,409, including 80,640 shares of common stock valued at approximately $988. The purchase price of Orbiion was primarily attributable to the acquired workforce and the expected strategic synergies and was therefore fully allocated to goodwill. The goodwill balance is deductible for tax purposes.