Acquisitions

12 Months Ended

Sep. 30, 2011

Acquisitions

Acquisitions

NOTE 2. ACQUISITIONS

Liko Distributor Acquisition

On September 8, 2011, we acquired the distribution companies for our patient mobility products in France and Switzerland (collectively referred to as "Liko Distributors").  The acquisition represents another step in our strategy for international expansion, leveraging and increasing our direct channel presence, especially in key European markets.  The purchase price for the Liko Distributors was $22.5 million ($15.5 million net of cash acquired).

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

	Amount
Goodwill	$	6.1
Customer relationships		7.9
Non-compete agreements		0.6
Net assets acquired		10.6
Deferred tax liabilities		(2.7	)
Total purchase price	$	22.5

Goodwill is not deductible for tax purposes and was allocated entirely to our International segment.  The useful lives assigned to intangibles identified as part of the Liko Distributor acquisition are as follows:

	Useful Life
Customer relationships		5
Non-compete agreements		2

If the Liko Distributors had been acquired at the beginning of our 2009 fiscal year, the impact to revenues and net income on an unaudited pro forma basis would not have been significant to our financial results in any of the periods presented.

Encompass Joint Venture

On November 9, 2009, we entered into a joint venture with Encompass Group, LLC ("Encompass Group"), a leader in health care textiles and therapeutic and prevention surfaces, to form Encompass TSS, LLC ("Encompass").  This joint venture included contributed former assets of Encompass Therapeutic Support Systems ("ETSS"), a division of Encompass Group and was 60 percent owned by us and 40 percent owned by Encompass Group.  Encompass Group, through its ETSS business unit, traditionally focused on providing surface replacement systems.  For our 60 percent ownership interest in the Encompass JV we paid $7.5 million to Encompass Group, contributed cash and entered into license and distribution agreements with Encompass JV.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of formation.

	Amount
Goodwill	$	8.0
Trade Name		1.5
Customer relationships		7.7
Technology		2.4
Net liabilities assumed		(0.7	)
Noncontrolling interest		(7.5	)
Additional paid-in-capital		(3.9	)
Total purchase price	$	7.5

The Encompass JV agreements contained both a put option for Encompass Group and a call option for us, requiring or allowing us to purchase the remaining 40 percent interest based on predetermined earnings multiples.  Changes to the value of the put were accreted to noncontrolling interest in our Consolidated Balance Sheet with the offset being recorded as a component of retained earnings.

The goodwill of $8.0 million arising from the Encompass JV consisted largely of the synergies created from combining ETSS's focus on customer replacement surfaces with our platform brands.  The goodwill is deductible for tax purposes and was allocated entirely to our North America Acute Care segment.

The useful lives assigned to intangibles identified as part of the Encompass JV were as follows:

	Useful Life
Trade name		7
Customer relationships		7
Technology		5

On November 30, 2010, we exercised our call option and purchased the remaining 40 percent of Encompass for $10.6 million, plus a variable earn-out with a minimum of $1.2 million and a maximum of $1.6 million per year over five years.  We have a total of $5.3 million accrued in other current liabilities and other long-term liabilities on our Consolidated Balance Sheet at September 30, 2011 related to the earn-out.

If Encompass had been wholly-owned at the beginning of our 2009 fiscal year, the impact to revenues and net income on an unaudited pro forma basis would not have been significant to our financial results in any of the periods presented.

Liko Acquisition

On October 1, 2008, we acquired two related companies (the "Liko Acquisition"): Liko Vårdlyft AB ("Liko Sweden") and Liko North America Corporation ("Liko North America" and, together with Liko Sweden, "Liko").  Liko, headquartered in Lulea, Sweden, is a leading supplier and developer of patient lifts, slings and other patient transfer technology.  The acquisition of Liko represents a direct connection to our mission of enhancing outcomes for patients and their caregivers and is in line with our strategy to add complementary technologies that leverage our global business and presence across the continuum of care.  The purchase price for Liko was $190.4 million, including direct acquisition costs of $3.6 million and the payment of outstanding Liko debt of $9.8 million ($187.2 million net of cash acquired).  The results of Liko are included in the Consolidated Financial Statements since the date of acquisition.

The following table summarizes the allocation of the purchase price of Liko based on estimated fair values as of the acquisition date:

	Amount
Goodwill	$	139.5
Trade name		15.8
Customer relationships		15.1
Developed technology		7.3
Non-compete agreements		1.7
Net assets acquired		18.9
Deferred tax liabilities		(7.9	)
Total purchase price	$	190.4

The purchase price remains subject to adjustment based on claims related to provisions contained in the purchase agreements, which are currently being contested and expected to go to arbitration. Any such adjustment is expected to be favorable and not material and would be recorded in our Consolidated Statement of Income (Loss) as a reduction of the goodwill impairment charge that we recorded during fiscal 2009.  See Note 4 for further details.

Goodwill is not deductible for tax purposes and has been allocated to reporting units included in all three of our reportable segments based on projected cash flows.  The useful lives assigned to intangibles identified as part of the acquisition are as follows:

	Useful Life
Trade name	Indefinite
Developed technology	7
Customer relationships	7
Non-compete agreements	5