Business Acquisitions

The Company’s business acquisitions are accounted for under the purchase method of accounting in accordance with the FASB’s accounting guidance on the accounting for business combinations. Accordingly, the consideration paid by the Company for the businesses it purchases is allocated to the assets and liabilities acquired based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. Recognized goodwill pertains to the value of the expected synergies to be derived from combining the operations of the businesses we acquire including the value of the acquired workforce.

The Company's consistent practice is that immediately after a business acquisitions made all functions including infrastructure, sales and marketing, administrative, product development, are integrated tightly to ensure that efficiencies are maximized and redundancies eliminated. The company integrates all and where appropriate centralizes certain key functions such as product development, information technology, marketing, sales, administration after an acquisition, to also ensure that the Company can rapidly leverage cross-selling opportunities and to realize cost efficiencies. While doing so, the Company's resources and infrastructure is leveraged to work across multiple functions making it neither practical nor feasible to accurately and separately track and disclose the earnings from the business combinations we have executed after they have been acquired.

2011 Acquisitions

Health Connect Systems. — Effective November 15, 2011, Ebix acquired Health Connect Systems, Inc. (“Health Connect”). Health Connect, with operations based out of Fresno, California, is leading online Exchange for buyers and sellers of health insurance and employee benefits. Ebix acquired all of the outstanding stock of Health Connect for aggregate cash consideration in the amount of $18.0 million, which was funded with internal resources using available cash reserves. The former shareholders of Health Connect retain the right to earn up to an additional $4.0 million if certain incremental revenue targets are achieved over the two-year anniversary date subsequent to the effective date of the acquisition. In summary in regards to the Health Connect acquisition the Company recorded goodwill in the amount of $20.4 million, and definite lived assets with respect to acquired customer relationships in the amount of $1.2 million and acquired developed technology in the amount of $256 thousand.

ADAM, Inc. —Effective February 7, 2011 Ebix closed the merger of Atlanta, Georgia based ADAM, Inc. ("ADAM") with a wholly owned subsidiary of Ebix. Under the terms of the merger agreement, all of the ADAM shareholders received, at a fixed exchange ratio, 0.3122 shares of Ebix common stock for each share of ADAM common stock. Ebix issued approximately 3.65 million shares of Ebix common stock with a fair value of $87.5 million pursuant to the merger agreement. This issuance of shares increased the Company's diluted common share count to approximately 42.07 million shares as of acquisition date. In addition Ebix paid approximately $944 thousand in cash for unexercised ADAM stock options. ADAM is a leading provider of health information and benefits technology solutions in the United States. $23.1 million of Adam's operating revenues recognized since February 7, 2011 are included in the Company's revenues reported in its consolidated statement of income for the year ended December 31, 2011. The revenue derived from ADAM's portfolio of products and services is included in the Company's Exchange division. The Company accounted for this acquisition by recording $15.4 million of intangible assets pertaining to customer relationships, $2.1 million of intangible assets pertaining to acquired technology, and $2.0 million of intangible assets pertaining to acquired trademarks and the remaining portion of the purchase price consideration paid to goodwill in the amount of $60.1 million.

2010 Acquisitions

During the year ended December 31, 2010, Ebix completed several relatively small business acquisitions which are detailed further in the following paragraphs.

During the Company’s third quarter ending September 30, 2010, Ebix: (a) acquired all of the stock of Brazilian-based USIX Technology, S.A. (“USIX”), a provider of broker systems and related services for insurance carriers across Latin America; and, (b) acquired all of the stock of Singapore based E-Trek Solutions PTE Ltd, (“E-Trek”) a provider of underwriting and claims processing services for the insurance industry in Singapore.

During the Company’s second quarter ending June 30, 2010, Ebix: (a) acquired all of the assets of Houston, Texas based Connective Technologies, Inc. (“Connective Technologies”) a premier provider of on-demand software solutions for property and casualty insurance carriers in the United States; and, (b) acquired all of the stock of Australian based Trades Monitor a provider of insurance related software services for the Australian insurance industry.

During the Company’s first quarter ending March 31, 2010, Ebix acquired all of the stock of Brazilian based MCN Technology & Consulting (“MCN”) a provider of software development and consulting services for insurance companies, insurance brokers, and financial institutions in Brazil.

The aggregate net cash consideration paid by Ebix for all of these acquisitions was $15.2 million and the former shareholders or owners of the acquired companies retained the right to earn up to an additional $12.9 million if certain incremental revenue targets were achieved over the two-year anniversary date subsequent to their respective effective dates of the acquisition. The Company had originally accrued $8.7 million upon analysis of the fair value of the contingent liabilities and the expected performance of the operating units. Since then $381 thousand of the accrued earnout liability has been paid, and as of December 31, 2011 $7.6 million of the estimated contingent liability remains included in the Company's consolidated balance sheet. The results of operations for each of the business combinations described in the preceding paragraphs have been included in the Company’s consolidated financial statements as of and since each of their respective effective dates of the acquisition.

2009 Acquisitions

E-Z Data, Inc. — Effective October 1, 2009, the Company acquired E-Z Data, Inc. ("E-Z Data'), with principal offices in Pasadena, CA, a provider of on-demand customer relationship management (“CRM”) solutions for insurance companies, brokers, agents, investment dealers, and financial advisers. The Company acquired the business operations and intellectual property of E-Z Data for an aggregate purchase price of $50.53 million paid to E-Z Data’s shareholders consisting of cash consideration in the amount of $25.53 million paid at closing and $25.00 million in shares of our common stock valued at the average market closing price for the three most recent days prior to September 30, 2009. Furthermore, under the terms of the agreement the E-Z Data sellers held a put option exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would have enabled them to sell the underlying shares of common stock back to the Company at a price of $15.11 per share, which represented a 10% discount off of the per-share value established on the effective date of the closing of the acquisition. This put option is described in more detail in Note 11. The Company funded the cash portion of the purchase price using the proceeds from the Company’s two convertible promissory notes issued in August 2009. The Company added the E-Z Data’s product line to its Exchange division. In summary in regards to the E-Z Data acquisition the Company recorded goodwill in the amount of $43.8 million, an indefinite-life intangible asset of $14.2 million with respect to existing contractual relationships with corporate clients, definite lived intangible assets with respect to acquired retail customer relationships in the amount of $3.8 million , $418 thousand with respect and to non-compete agreements, and $2.3 million with respect to acquired developed technology.

Peak Performance Solutions, Inc. — Effective October 1, 2009, Ebix acquired Peak Performance Solutions, Inc. ("Peak"). Pursuant to the terms of the stock purchase agreement, the Company paid Peak’s shareholders $8.0 million in cash for all of Peak’s outstanding stock. Peak, with operations based out of Columbus, OH, provides comprehensive, end-to-end insurance software and technology solutions to insurance companies and self-insured entities for workers’ compensation claims processing, risk management administration, and managed care tracking. The acquisition agreement also provided for additional contingent consideration up to an amount of $1.5 million if certain revenue targets were achieved over the one-year period subsequent to the effective date of the acquisition. At the acquisition date management estimated that the full $1.5 million earn out would be achieved and paid out, and therefore the amount was accrued and included in the original purchase price allocation. The Company funded this acquisition with internal resources using available cash reserves. In summary in regards to the Peak acquisition the Company recorded goodwill in the amount of $7.5 million, and intangible assets with respect to acquired customer relationships in the amount of $2.1 million and acquired developed technology in the amount of $509 thousand. During 2010 the Company recognized a $1.5 million reduction to reported general and administrative expenses associated with the reversal of the previously recorded contingent liability earnout obligation because during the subsequent 2010 earnout period the defined revenue targets were not achieved by the Peak operations.

Facts Services, Inc. — Effective May 1, 2009, Ebix, Inc. acquired Facts Services, Inc. ("Facts"), a Miami, Florida based provider of fully automated software solutions for health care payers specializing in claims processing, employee benefits, and managed care. Facts’ products are available in either an ASP or self-hosted model. The Company paid the Facts shareholders $7.0 million for all of Facts’ stock. The Company included Facts’ operations with its Pittsburgh health services division operating under the name of EbixHealth, which includes operating results of Facts starting with the second quarter of 2009. Ebix financed this acquisition with internal resources using available cash reserves. The Company recognized $4.7 million of goodwill and $2.2 million of intangible assets, primarily customer relationships in connection with the acquisition of Facts.

The following table summarizes the net assets acquired as a result of the acquisitions that occurred during 2011 and 2010:



	December 31,
(In thousands)	2011			2010
Current assets	$	9,710		$	1,511
Property and equipment	1,626			411
Intangible assets	20,970			5,028
Deferred tax asset, (net)	9,294			—
Goodwill	80,516			19,194
Total assets acquired	122,116			26,144
Less: liabilities assumed	(15,696		)	(10,427		)
Net assets acquired	$	106,420		$	15,717

The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2011 and 2010:



	December 31,
	2011			2010
			Weighted Average			Weighted Average
Intangible asset Category	Fair Value		Useful Life	Fair Value		Useful Life
	(in thousands)		(in years)	(in thousands)		(in years)
Customer relationships	$	16,594	11.7	$	3,778	13.2
Developed technology	2,406		5.3	1,058		7.6
Non-compete agreements	—		—	192		10
Trademarks	1,970		13.4	—		—
Total acquired intangible assets	$	20,970	11.2	$	5,028	11.9

Estimated aggregate future amortization expense for the intangible assets recorded as part of the business acquisitions described above and other prior acquisitions is as follows:




Estimated Amortization Expenses (in thousands):
For the year ended December 31, 2012	$	4,741
For the year ended December 31, 2013	4,687
For the year ended December 31, 2014	4,380
For the year ended December 31, 2015	3,713
For the year ended December 31, 2016	3,395
For the years ended after December 31, 2017	17,470

	$	38,386

The Company recorded $4.8 million, $3.7 million, and $2.4 million of amortization expense related to acquired intangible assets for the year ended December 31, 2011, 2010, and 2009, respectively.