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 in part 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 practice is that, immediately after a business acquisition is consummated, to tightly integrate all functions including infrastructure, sales and marketing, administration, product development, so as to ensure that efficiencies are maximized and redundancies eliminated. Furthermore the Company centralizes certain key functions such as product development, information technology, marketing, sales, human resources, finance, and other general administrative functions after an acquisition, in order to rapidly leverage cross-selling opportunities and to quickly realize cost efficiencies. By executing this integration strategy it becomes 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.

A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earnout based on reaching certain specified future revenue targets. The Company recognizes these potential obligations as contingent liabilities as reported on its Consolidated Balance Sheets. As discussed in more detail in Note 1, these contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. As of December 31, 2013, the total of these contingent liabilities was $14.4 million, of which $10.3 million is reported in long-term liabilities, and $4.1 million is included in current liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2012 the total of these contingent liabilities was $17.5 million of which $14.2 million is reported in long-term liabilities, and $3.3 million is included in current liabilities in the Company's Consolidated Balance Sheet.

During 2012 the Company received a termination fee in connection with a failed business acquisition. In this regard the Company recorded a reduction to general and administrative expense in the approximate amount of $971 thousand (net of directly related internal operating costs incurred by the Company and a portion of the fee that was paid to our investment banker).

2013 Acquisitions

During 2013 the Company executed and completed one business acquisition, Qatarlyst. The Company accounted for this acquisition by recording $11.1 million of goodwill, $4.8 million of intangible assets pertaining to customer relationships, and $635 thousand of intangible assets pertaining to acquired technology.

2012 Acquisitions

During 2012 the Company executed and completed five business acquisitions including PlanetSoft, Inc. which is discussed in more detail below; the other acquisitions were not material individually or in the aggregate. The Company accounted for these other four immaterial business acquisitions by recording in the aggregate $23.3 million of goodwill, $7.6 million of intangible assets pertaining to customer relationships, $1.8 million of intangible assets pertaining to acquired technology, $436 thousand of intangible assets for acquired trade names, and $118 thousand of intangible assets for non-compete agreements.

PlanetSoft — Effective June 1, 2012, Ebix closed the merger of California based PlanetSoft Holdings, Inc. ("PlanetSoft"). Under the terms of the merger agreement the former PlanetSoft shareholders received $35.0 million cash and 296,560 shares of Ebix common stock valued at $16.86 per share or $5.0 million in the aggregate. The cash portion of the cash purchase consideration was funded using internal cash reserves and available capacity from the Company's commercial bank revolving line of credit. Furthermore, under the terms of the agreement the PlanetSoft shareholders hold a put option exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying shares of common stock back to the Company at a price of $16.86 per share, which represents the per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. The initial fair value of this put option liability was determined to be $1.4 million. This put option is described in more detail in Note 10. PlanetSoft is in the business of powering data exchanges that streamline core insurance operations in the areas of client acquisition, underwriting, and distribution management. $11.4 million of PlanetSoft's operating revenues recognized since June 2012 were included in the Company's revenues reported in its Consolidated Statement of Income for the year ended December 31, 2012. The Company's operating revenues as reported in its Consolidated Statement of Income for the year ended December 31, 2013 include $17.2 million of revenue generated by PlanetSoft operations. The revenue derived from PlanetSoft's operations is included in the Company's Exchange division. The Company accounted for this acquisition by recording $44.1 million of goodwill, $9.8 million of intangible assets pertaining to customer relationships, and $540 thousand of intangible assets pertaining to acquired technology. The former shareholders of PlanetSoft retain the right to earn up to an additional cash consideration if certain incremental revenue targets are achieved over the two-year anniversary date subsequent to the effective date of the acquisition. The currently determined approximate fair value of this contingent consideration liability is $992 thousand.

The following table summarizes the fair value of the consideration transferred, net assets acquired and liabilities assumed as a result of the acquisitions that occurred during 2013 and 2012:



	December 31,
(in thousands)	2013			2012
Fair value of total consideration transferred
Cash	$	5,025		$	56,112
Equity instruments	—			5,000
Contingent earn-out consideration arrangement	9,425			16,450
Secured promissory note issued	—			3,000
Total	$	14,450		$	80,562

Fair value of assets acquired and liabilities assumed
Cash	$	285		$	1,049
Other current assets	485			5,213
Property, plant, and equipment	144			1,328
Other long term assets	507			331
Intangible assets	5,396			20,246
Deferred tax liability	(947		)	(6,018		)
Current and other liabilities	(2,556		)	(7,586		)
Put option liability	—			(1,377		)
Net assets acquired, excludes goodwill	3,314			13,186

Goodwill	11,136			67,376

Total net assets acquired	$	14,450		$	80,562

In addition, during 2012 the Company recorded a $25 thousand increase to goodwill, in connection to a 2009 acquisition, for an earn-out payment not previously recognized.

The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2013 and 2012:



	December 31,
	2013			2012
			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	$	4,761	11.0	$	17,365	10.9
Developed technology	635		5.0	2,327		4.5
Non-compete agreements	—		0.0	118		5.0
Trademarks	—		0.0	436		10.0
Total acquired intangible assets	$	5,396	10.3	$	20,246	10.1

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 ending December 31, 2014	$	7,244
For the year ending December 31, 2015	6,589
For the year ending December 31, 2016	6,202
For the year ending December 31, 2017	5,791
For the year ending December 31, 2018	5,198
Thereafter	19,710

	$	50,734

The Company recorded $7.3 million, $6.1 million, and $4.8 million of amortization expense related to acquired intangible assets for the years ended December 31, 2013, 2012, and 2011, respectively.