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 tangible and intangible 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 to immediately tightly integrate all functions including infrastructure, sales and marketing, administration, product development after a business acquisition is consummated, so as to ensure that synergistic efficiencies are maximized and redundancies eliminated, and to rapidly leverage cross-selling opportunities. Furthermore the Company centralizes certain key functions such as information technology, marketing, sales, human resources, finance, and other general administrative functions after an acquisition, in order 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 terms for the contingent earn-out payments in most of the Company's business acquisitions typically address the GAAP recognizable revenues achieved by the acquired entity over a one, two, and/or three year period subsequent to the effective date of their acquisition by Ebix. These terms typically establish a minimum threshold revenue target with achievement of revenues recognized over that target being awarded in the form of a specified cash earn-out payment. The Company applies these terms in its calculation and determination of the fair value of contingent earn-out liabilities for purchased businesses as part of the related valuation and purchase price allocation exercise for the corresponding acquired assets and liabilities. 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. During each of the years ending December 31, 2016, 2015 and 2014, respectively, these aggregate contingent accrued earn-out business acquisition consideration liabilities, were reduced by $1.3 million, $1.5 million and $10.2 million, respectively, due to remeasurements as based on the then assessed fair value and changes in the amount and timing of anticipated future revenue levels. These reductions to the contingent accrued earn-out liabilities resulted in corresponding reduction to general and administrative expenses as reported on the Consolidated Statements of Income. As of December 31, 2016, the total of these contingent liabilities was $8.5 million, of which $6.6 million is reported in long-term liabilities, and $1.9 million is included in current liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2015 the total of these contingent liabilities was $4.3 million of which $2.6 million was reported in long-term liabilities, and $1.7 million was included in current liabilities in the Company's Consolidated Balance Sheet.

2016 Acquisitions

Wdev Solucoes em Technologia SA - Effective November 1, 2016 Ebix acquired Wdev Solucoes em Technologia SA ("Wdev"), a Brazilian company that provides IT services and software development for the Latin American insurance industry. Ebix acquired Wdev for upfront cash consideration in the amount of $10.5 million, plus possible future contingent earn-out payments of up to $15.7 million based on earned revenues over the subsequent thirty-eight month period following the effective date of the acquisition. $2.9 million of the upfront cash consideration is being held in an escrow account for the thirty-eight month period following the effective date of the acquisition to ensure that the acquired business achieves the minimum specified annual net revenue threshold, which if not achieved will result in said funds being returned to Ebix. The valuation and purchase price allocation for the Wdev acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year.

EbixHealth JV - Effective July 1, 2016 Ebix and IHC jointly executed a Call Notice agreement, whereby Ebix purchased additional common units in the EbixHealth JV from IHC constituting eleven percent (11%) of the EbixHealth JV for $2.0 million cash which resulted in Ebix holding an aggregate fifty-one percent (51%) controlling equity interest in the EbixHealth JV. Previously, effective September 1, 2015 Ebix and Independence Holdings Corporation ("IHC") formed a joint venture named Ebix Health Exchange Holdings, LLC ("EbixHealth JV"). Ebix paid $6.0 million and contributed a license to use certain CurePet software and systems valued by the EbixHealth JV at $2.0 million, for its initial 40% membership interest in the EbixHealth JV. The valuation and purchase price allocation for the EbixHealth JV acquisition remains preliminary and will be finalized prior to June 30, 2017.

IHAC, Inc. - Effective November 1, 2016 Ebix acquired the assets of IHAC, Inc., d.b.a Hope Health ("Hope"), a Michigan corporation and publisher of health and wellness continuing education products. Ebix acquired the assets and intellectual property of Hope for $1.72 million. The valuation and purchase price allocation for the Hope acquisition remains preliminary and will be finalized prior to June 30, 2017.

2015 Acquisitions

Via Media Health - The Company acquired Via Media Health Communications Private Limited ("Via Media Health"), effective March 1, 2015. Via Media Health is one of India’s leading health content and communication companies. Ebix acquired Via Media Health for upfront cash consideration in the amount of $1.0 million, plus a possible future one time contingent earn- out payment of up to $372 thousand based on earned revenues over the subsequent twelve month period following the effective date of the acquisition, and an additional possible one time future performance bonus of up to $1.0 million depending upon revenue growth realized in the business over the subsequent twenty-four month period following the effective date of the acquisition. The Company accounted for this acquisition by recording $2.0 million of goodwill, $383 thousand of intangible assets pertaining to customer relationships, and $101 thousand of intangible assets pertaining to acquired technology. The Company has determined that the fair value of the contingent earn-out consideration was zero as of December 31, 2016.

PB Systems - The Company acquired PB Systems, Inc. and PB Systems Private Limited (together being "PB Systems"), effective June 1, 2015. PB Systems develops and implements software solutions for insurance clients. Ebix acquired PB Systems for upfront cash consideration in the amount of $12.4 million, plus possible future contingent earn-out payments of up to $8.0 million based on earned revenues over the subsequent twenty-four month period following the effective date of the acquisition. The Company initially accounted for this acquisition by recording $6.8 million of goodwill, and $10.3 million of intangible assets pertaining to customer relationships. In the Company's Form 10-K for the year ended December 31, 2015, the Company had disclosed that the valuation and purchase price allocation for the PB Systems acquisition was preliminary because all of the information necessary to determine the fair value of the acquired customer relationship intangible asset and fair value of the revenue-based earn-out contingent liability was still in the process of being evaluated by management and the Company's external valuation firms. This evaluation was completed during the second quarter ended June 30, 2016 and based on this the final goodwill and intangible assets pertaining to customer relationships recorded were $11.2 million and $2.1 million, respectively. The changes that resulted were a $(8.2) million reduction to the customer relationship intangible asset, a $(3.2) million reduction to the deferred tax liability, a $(664) thousand reduction to the revenue-based earn-out contingent liability, and a corresponding and offsetting $4.3 million increase to goodwill. The Company has determined that the fair value of the contingent earn-out consideration is zero as of December 31, 2016.

2014 Acquisitions

CurePet - On January 27, 2014, Ebix acquired CurePet. CurePet was a developmental-stage enterprise that developed an insurance exchange that connects pet owners, referring veterinarians, animal hospitals, academic institutes, and suppliers of medical and general pet supplies, while providing a wide variety of services related to pet insurance to each constituent including practice management, electronic medical records, and billing. Previously Ebix had a $2.0 million minority investment in CurePet. Ebix acquired the entire business of CurePet in an asset purchase agreement with total purchase consideration being $6.35 million which included a possible future one time contingent earnout payment of up to $5.0 million based on earned revenues over the subsequent thirty-six month period following the effective date of the acquisition. This contingent earnout liability is currently estimated to have a fair value of zero. Additional required cash consideration of $1.35 million was offset against open accounts receivable balances due to the Company from CurePet, and no actual cash outlay was made by the Ebix for full acquisition of CurePet. Ebix contributed certain portions of its CurePet investment, valued by the EbixHealth JV at $2.0 million; see Note 18, "Investment in Joint Venture".

HealthCare Magic - On May 21, 2014, Ebix acquired HealthCare Magic Private Limited ("HealthCare Magic"), a medical advisory service with an online network of approximately fifteen thousand General Physicians and Surgeons spread across fifty specialties including alternative medicine. The Company acquired HealthCare Magic for aggregate cash consideration in the amount of $6.0 million plus a possible future one time contingent earnout payment of up to $12.36 million based on earned revenues over the subsequent twenty-four month period following the effective date of the acquisition. This contingent earnout liability is currently estimated to have a zero fair value. The Company funded the HealthCare Magic acquisition from available cash reserves on hand. The Company accounted for this acquisition by recording $5.6 million of goodwill, $452 thousand of intangible assets pertaining to customer relationships, $100 thousand of intangible assets pertaining to acquired technology, $59 thousand on intangible assets pertaining to trademarks and tradenames, and $226 thousand of intangible assets pertaining to non-compete agreements.

Vertex - On November 3, 2014, Ebix acquired Vertex, Incorporated ("Vertex"), with an effective date of October 1, 2014, in a share purchase agreement for total cash purchase consideration in the amount of $27.25 million and a possible contingent earnout of $2 million based on earned revenues over the subsequent twenty-four month period following the date of the acquisition. Vertex is a specialized software and services firm focused primarily on the life and annuity insurance marketplace since 1991. Ebix acquired all of the outstanding capital stock of Vertex and funded the purchase using a mix of internal cash reserves and the bank credit line available to Ebix. The Company accounted for this acquisition by recording $27.7 million of goodwill, $2.5 million of intangible assets pertaining to customer relationships, and $235 thousand of intangible assets pertaining to acquired technology. The Company has determined that the fair value of the contingent earn-out consideration is zero as of December 31, 2016.

Oakstone - Effective December 1, 2014, Ebix acquired Oakstone Publishing, LLC ("Oakstone") in a membership interest purchase agreement for total net cash consideration in the amount of $23.72 million ($31.37 million less a closing net working capital adjustment of $7.65 million). Oakstone is leading provider of continuing education, certification materials for physicians, dentists and allied healthcare professionals, as well as wellness resources for various organizations. Ebix acquired all of the outstanding membership interests of Oakstone and funded the purchase using a mix of internal cash reserves and the bank credit line available to Ebix. The Company accounted for this acquisition by recording $28.8 million of goodwill, $1.7 million of intangible assets pertaining to customer relationships, $501 thousand of intangible assets pertaining to acquired technology, and a $6.5 million deferred revenue liability.

i3 - On December 1, 2014, Ebix acquired the DCM Group Inc. (d.b.a. i3 Software) ("i3") in an asset purchase agreement for total cash consideration in the amount of $2 million and a possible contingent earnout of up to $4 million based on earned revenues over the subsequent twenty-four month period following the date of the acquisition. i3 is a provider of software services and solutions to the insurance industry. Ebix acquired all of the assets of i3 and funded the purchase using internal cash reserves. The Company accounted for this acquisition by recording $1.6 million of goodwill, $310 thousand of intangible assets pertaining to customer relationships, and $48 thousand of intangible assets pertaining to acquired technology. The contingent earnout liability is currently estimated to have a zero fair value.

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 2016 and 2015:



	December 31,
(in thousands)	2016			2015
Fair value of total consideration transferred
Cash	$	10,992		13,380
Equity instruments	2,763			—
Contingent earn-out consideration arrangement (net)	5,785			516
Previous cash and other consideration in investment of EbixHealth JV	8,000			—
Total consideration transferred	$	27,540		$	13,896

Fair value of equity components recorded (not part of consideration)
Gain on previously carried 40% equity interest in the EbixHealth JV	1,162			—
Recognition of noncontrolling interest of EbixHealth JV	11,223			—
Total equity components recorded	12,385			—

Total consideration transferred and equity components recorded	39,925			13,896

Fair value of assets acquired and liabilities assumed
Cash	$	2,333		$	905
Restricted cash	8,175			—
Other current assets	6,282			3,509
Property, plant, and equipment	842			312
Other long term assets	7			11
Intangible assets	(3,184		)	10,836
Deferred tax liability	1,972			(4,015		)
Current and other liabilities	(16,587		)	(4,431		)
Net assets acquired, excludes goodwill	(160		)	7,127

Goodwill	40,085			6,769

Total net assets acquired	$	39,925		$	13,896

The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2016 and 2015:



	December 31,
	2016				2015
				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	$	3,929		9.7	$	10,762	8.9
Developed technology	1,056			5.0	74		2.3
Purchase accounting adjustments for prior year acquisition (PB Systems)	(8,169		)	0.0	—		0.0
Total acquired intangible assets	$	(3,184	)	8.7	$	10,836	8.9

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



Estimated Amortization Expenses (in thousands):
For the year ending December 31, 2017	$	7,049
For the year ending December 31, 2018	6,315
For the year ending December 31, 2019	6,078
For the year ending December 31, 2020	5,648
For the year ending December 31, 2021	5,081
Thereafter	11,165

	$	41,336

The Company recorded $6.8 million, $7.2 million, and $7.4 million of amortization expense related to acquired intangible assets for the years ended December 31, 2016, 2015, and 2014, respectively.