Acquisitions

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Acquisitions

Acquisitions

We periodically complete business combinations that align with our business strategy. The assets and liabilities acquired are recorded at their estimated fair values and the results of operations of each acquired business are included in our consolidated statements of income from their acquisition dates. Transaction costs related to acquisitions are expensed as incurred and are included in SG&A expense in the consolidated statements of income. Transaction costs totaled $4,944 in 2016, $2,210 in 2015 and $1,329 in 2014. All of the acquisitions completed during the past 3 years were cash transactions, funded by net cash provided by operating activities and/or use of our credit facility. We completed these acquisitions to increase our mix of marketing solutions and other services revenue, to improve our product and service offerings and to reach new customers.

2016 acquisitions – During 2016, we completed the following acquisitions which are included within our Small Business Services segment and for which the allocation of the purchase price to the assets acquired and liabilities assumed has been finalized:

• In February 2016, we acquired selected assets of Category 99, Inc., doing business as MacHighway®, a web hosting and domain registration service provider.

• In March 2016, we acquired selected assets of New England Art Publishers, Inc., doing business as Birchcraft Studios, a supplier of personalized invitations, holiday cards, all-occasion cards and social announcements.

• In June 2016, we acquired selected assets of L.A.M. Enterprises, Inc., a provider of printed and promotional products.

• In June 2016, we acquired selected assets of National Document Solutions, LLC, a provider of printing, promotional products, office products, scanning and document management solutions.

• In June 2016, we acquired selected assets of Liquid Web, LLC, a web hosting services provider.

• In July 2016, we acquired selected assets of Inkhead, Inc., a provider of customized promotional products. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $4,421. The acquisition resulted in goodwill as the acquisition enables us to diversify our promotional product offerings and bring these offerings to our customer base.

During 2016, we completed several acquisitions which are included within our Small Business Services segment and for which we expect to finalize the allocation of the purchase price by mid-2017. Valuations for certain property, plant and equipment, intangible assets and goodwill remain subject to change, as does the estimated useful lives of the acquired long-lived assets. These acquisitions were as follows:

• In April 2016, we acquired selected assets of 180 Fusion LLC, a digital marketing services provider. The preliminary allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $800. The acquisition resulted in goodwill as we expect it will enhance our Small Business Services product set by providing valuable marketing tools to our customers, thus, enhancing customer acquisition and loyalty.

• In August 2016, we acquired selected assets of BNBS, Inc., doing business as B&B Solutions, a provider of printing, promotional and office products and services. The preliminary allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $850. The acquisition resulted in goodwill as the acquisition enables us to diversify our product offerings and bring these offerings to our customer base.

• In September 2016, we acquired all of the outstanding capital stock of Payce, Inc., a provider of payroll processing, payroll tax filing and related payroll services. The preliminary allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $6,852. The acquisition resulted in goodwill as we expect Payce's expertise, customer mix and operational strength to enhance our existing portfolio of small business services.

• In October 2016, we acquired selected assets of Excel Graphic Services, Inc., a provider of printing, promotional products and document management services.

• In October 2016, we acquired selected assets of PTM Document Systems, Inc., the exclusive source of the Print to Mail™ systems used in schools, hospitals and businesses.

• In December 2016, we acquired selected assets of Digihost Ltd., a web services provider located in Ireland.

• During 2016, we acquired the operations of several small business distributors. The assets acquired consisted primarily of customer list intangible assets. As these distributors were previously part of our Safeguard distributor network, our revenue was not impacted by these acquisitions and the impact to our costs was not significant.

During 2016, we completed two acquisitions which are included within our Financial Services segment and for which we expect to finalize the allocation of the purchase price by the third quarter of 2017 when our valuation of several of the acquired assets and liabilities is completed, as well as the determination of the estimated useful lives of the acquired intangibles. These acquisitions were as follows:

• In October 2016, we acquired selected assets of Data Support Systems, Inc., a provider of image-based software for payment-related back-office case management. The preliminary allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $4,108. The acquisition resulted in goodwill as Data Support Systems' solutions are complementary to those of our Wausau Financial Services business which creates significant cross-sell opportunities.

• In December 2016, we acquired all of the equity of First Manhattan Consulting Group, LLC (FMCG Direct), a provider of data-driven marketing solutions for financial institutions. The preliminary allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $112,295. The acquisition resulted in goodwill as we expect revenue synergies with our Datamyx business and to bring FMCG Direct's solutions to our clients. We also expect some cost synergies, for example leveraging common data sources.

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed for the FMCG Direct acquisition was as follows:

(in thousands)	FMCG Direct
Net tangible assets acquired and liabilities assumed(1)	$	4,205
Identifiable intangible assets:
Customer list/relationships	55,000
Technology-based intangible	28,000
Trade name	3,000
Total intangible assets(2)	86,000
Goodwill	112,295
Total aggregate purchase price	202,500
Liability for holdback payments	(18,500		)
Payment for acquisition, net of cash acquired	$	184,000

⁽¹⁾ Net tangible assets acquired consisted primarily of accounts receivable outstanding as of the date of acquisition.

⁽²⁾ The preliminary useful lives of the acquired intangible assets were as follows: customer list/relationships – 7 years; technology-based intangible – 5 years; and trade name – 4 years.

2015 acquisitions – During 2015, we completed the following acquisitions which are included within our Small Business Services segment and for which the allocation of the purchase price to the assets acquired and liabilities assumed was finalized during 2015:

• In January 2015, we acquired selected assets of Range, Inc., a marketing services provider.

• In February 2015, we acquired selected assets of Verify Valid LLC, a provider of electronic check payment services. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $5,650. This acquisition resulted in goodwill as the acquired technology enabled us to diversify our payment product and service offerings and bring these offerings to our customer base.

• In August 2015, we acquired selected assets of Tech Assets, Inc., a provider of shared hosting websites to small businesses using cPanel web hosting technology. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $2,628. This acquisition resulted in goodwill as we expected to accelerate revenue growth by combining our capabilities with Tech Asset's tools and hosting technology.

• In September 2015, we acquired selected assets of FMC Resource Management Corporation, a marketing services provider.

During 2015, we completed two acquisitions which are included within our Financial Services segment and for which we finalized the allocation of the purchase price during 2016. These acquisitions were as follows:

• In October 2015, we acquired all of the equity of Datamyx LLC, a provider of risk-based, date-driven marketing solutions. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $91,637. This acquisition resulted in goodwill as it enhances our Financial Services product set by providing valuable marketing tools and other analytical services our customers use to help them market their businesses.

• In December 2015, we acquired substantially all of the assets of FISC Solutions, a provider of back-office treasury management and outsourcing solutions.

The allocation of the purchase price to the assets acquired and liabilities assumed for the Datamyx LLC acquisition was as follows:

(in thousands)	Datamyx LLC
Net tangible assets acquired and liabilities assumed(1)	$	4,392
Identifiable intangible assets:
Customer list/relationships	61,000
Internal-use software	2,000
Trade name	1,000
Total intangible assets(2)	64,000
Goodwill	91,637
Payment for acquisition, net of cash acquired	$	160,029

⁽¹⁾ Net tangible assets acquired consisted primarily of accounts receivable outstanding as of the date of acquisition.

⁽²⁾ The useful lives of the acquired intangible assets were as follows: customer list/relationships – 8 years; internal-use software – 5 years; and trade name – 2 years.

During 2015, we also acquired the operations of 8 small business distributors, 6 of which are included within our Small Business Services segment and 2 of which are included in our Financial Services segment, as their customers consist primarily of financial institutions. The assets acquired consisted primarily of customer list intangible assets. The acquired Financial Services distributors and all but 2 of the acquired Small Business Services distributors were previously part of our distributor network. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $9,285 related to one of the Small Business Services distributors. This acquisition resulted in goodwill as we expected to accelerate revenue growth in business and marketing communications solutions by adding an established customer base that gives us a larger presence in the western United States.

2014 acquisitions – During 2014, we completed the following acquisitions which are included within our Small Business Services segment:

• In January 2014, we acquired all of the outstanding capital stock of NetClime, Inc., a provider of website development software. The allocation of the purchase price based upon the estimated fair value of the assets acquired and liabilities assumed resulted in goodwill of $1,615. The acquisition resulted in goodwill as we expected to drive future revenue as we incorporated NetClime's software solution into our technology platform and the marketing solutions services we offer our customers.

• In May 2014, we acquired selected assets of Gift Box Corporation of America (GBCA), a supplier of retail packaging solutions, including gift boxes, bags, bows, ribbons and wraps. We are operating this business under the name WholeStyle Packaging^TM.  

• During 2014, we acquired the operations of several small business distributors, 1 of which was classified as held for sale upon acquisition. Further information regarding net assets held for sale can be found in Note 2.

During 2014, we completed the following acquisition which is included within our Financial Services segment:

• In October 2014, we acquired all of the outstanding capital stock of Wausau Financial Systems, Inc. (Wausau), a provider of software-based solutions for receivables management, lockbox processing, remote deposit capture and paperless branch solutions to financial institutions, utilities, government agencies and telecommunications companies. The allocation of the purchase price based upon the estimated fair value of the assets acquired and liabilities assumed resulted in goodwill of $44,807. This acquisition resulted in goodwill as Wausau provides new access into the commercial and treasury side of financial institutions through a strong software-as-a-service (SaaS) technology offering.

Aggregate information – Information regarding the useful lives of acquired intangibles and goodwill by reportable business segment can be found in Note 2. As our acquisitions were immaterial to our reported operating results both individually and in the aggregate, pro forma results of operations are not provided. The following illustrates the allocation of the aggregate purchase price for the above acquisitions to the assets acquired and liabilities assumed, reduced for any cash or cash equivalents acquired with the acquisitions.

(in thousands)	2016 acquisitions(1)			2015 acquisitions(2)			2014 acquisitions(3)
Net tangible assets acquired and liabilities assumed	$	3,533		$	4,124		$	(17,091	)
Identifiable intangible assets:
Customer lists/relationships	118,415			101,946			45,022
Technology-based intangible	28,000			—			—
Internal-use software	10,450			4,902			1,300
Software to be sold	6,200			—			28,500
Trade names	3,800			1,400			2,000
Other	—			—			50
Total intangible assets	166,865			108,248			76,872
Goodwill	129,326			109,200			46,422
Total aggregate purchase price	299,724			221,572			106,203
Liabilities for holdback payments and contingent consideration(4)	(28,299		)	(7,450		)	(1,600		)
Non-cash consideration(5)	(2,020		)	(5,419		)	(371		)
Net cash paid for current year acquisitions	269,405			208,703			104,232
Holdback payments for prior year acquisitions	1,534			4,287			797
Payments for acquisitions, net of cash acquired	$	270,939		$	212,990		$	105,029

⁽¹⁾ Net tangible assets acquired and liabilities assumed for 2016 included funds held for customers of $12,532 and the corresponding liability for the same amount related to the acquisition of Payce, Inc.

⁽²⁾ Includes adjustments recorded in 2016 for the finalization of purchase accounting for the Datamyx and FISC Solutions acquisitions. These adjustments increased Datamyx goodwill $172 from the preliminary amount recorded as of December 31, 2015, with the offset to to various assets and liabilities, primarily property, plant and equipment and other current assets. Acquisition measurement-period adjustments recorded in 2016 for the acquisition of FISC Solutions consisted of recording an asset for funds held for customers of $18,743 and the corresponding liability for the same amount, as well as an increase of $79 in the value of the acquired customer list.

⁽³⁾ Includes adjustments recorded in 2015 for the finalization of purchase accounting for the Wausau acquisition. These adjustments decreased goodwill $714 from the preliminary amount recorded as of December 31, 2014, with the offset to certain income and sales tax accounts. Net tangible assets acquired and liabilities assumed for the 2014 acquisitions consisted primarily of a liability for deferred revenue of $14,200 related to the Wausau acquisition. Further information regarding the calculation of the estimated fair value of this liability can be found in Note 7. The amount of intangible assets acquired includes assets classified as held for sale upon acquisition of $1,353.

⁽⁴⁾ Consists of holdback payments due at future dates and liabilities for contingent consideration. Further information regarding liabilities for contingent consideration can be found in Note 7.

⁽⁵⁾ Consists of pre-acquisition amounts owed to us by certain of the acquired businesses.