Acquisitions of and Investments in Businesses and Technologies

12 Months Ended

Jan. 31, 2019

Acquisitions of and Investments in Businesses and Technologies



NOTE 6	ACQUISITIONS AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES

Fiscal year 2019 acquisition

On January 1, 2019, the Company completed the acquisition of substantially all of the assets ("AgSync Acquisition") of AgSync Inc. (AgSync), an Indiana corporation, headquartered in Wakarusa, Indiana. This acquisition was aligned under the Company’s Applied Technology Division and is expected to enhance its Slingshot® platform by delivering a more seamless logistics solution for ag retailers, aerial applicators, custom applicators and enterprise farms. The AgSync Acquisition constitutes a business and as such was accounted for as a business combination; however, the business combination was not significant enough to warrant pro-forma financial information.

The purchase price was approximately $9,400 which includes potential earn-out payments with an estimated fair value of $1,742. The earn-out is contingent upon achieving certain revenue milestones. Based on the initial acquisition accounting the purchase price of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed is reflected as goodwill, which is fully tax deductible. The estimated goodwill and identifiable intangible assets recorded as part of the purchase price allocation at January 31, 2019, were $4,559 and $5,400, respectively. The Company expects to complete the purchase price allocation by the end of fiscal 2020.

Fiscal year 2018 acquisition

On September 1, 2017, the Company completed the acquisition of substantially all of the assets ("CLI Acquisition") of Colorado Lining International, Inc. (CLI), a Colorado corporation headquartered in Parker, CO. This acquisition was aligned under the Company’s Engineered Films Division. The acquisition enhanced the Company’s geomembrane market position through extended service and product offerings with the addition of new design-build and installation service components, and advanced Engineered

Films’ business model into a vertically-integrated, full-service solutions provider for the geomembrane market. The CLI Acquisition constitutes a business and as such was accounted for as a business combination; however, the business combination was not significant enough to warrant pro-forma financial information.

The CLI Acquisition included a working capital adjustment that was settled in January 2018. The final working capital adjustment was $566 which brought the total purchase price to $14,938. This purchase price included potential earn-out payments with an estimated fair value of $1,256 which are contingent upon achieving certain revenues and operational synergies.

The fair value of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed was reflected as goodwill. Goodwill recorded as part of the purchase price allocation was $5,714, all of which is tax deductible.

Acquisition-related contingent consideration

The Company has contingent liabilities related to the current fiscal year acquisition of AgSync, as well as the prior acquisitions of CLI in September 2017, SBG in May 2014 and ATS in January 2012. The fair value of such contingent consideration is estimated as of the acquisition date, and subsequently at the end of each reporting period, using forecasted cash flows. Projecting future cash flows requires the Company to make significant estimates and assumptions regarding future events, conditions or revenues being achieved under the subject contingent agreement as well as the appropriate discount rate. Such valuation techniques include one or more significant inputs that are not observable (Level 3 fair value measures).

Changes in the fair value of the liability for acquisition-related contingent consideration are as follows:



	For the years ended January 31,
	2019			2018
Beginning balance	$	3,046		$	1,741
Fair value of contingent consideration acquired	1,742			1,256
Change in fair value of the liability	708			457
Contingent consideration earn-out paid	(1,324		)	(408		)
Ending balance	$	4,172		$	3,046

Classification of liability in the Consolidated Balance Sheets
Accrued Liabilities	$	1,796		$	1,036
Other Liabilities, long-term	2,376			2,010
Ending balance	$	4,172		$	3,046

As part of the AgSync Acquisition in the current fiscal year, the Company entered into a contingent earn-out agreement, not to exceed $3,500. The earn-out is to be paid annually over three years after the purchase date, contingent upon achieving certain revenue milestones. The Company has made no payments on this potential earn-out liability as of January 31, 2019.

Related to the CLI Acquisition in the prior fiscal year, the Company entered into a contingent earn-out agreement, not to exceed $2,000. The earn-out is paid annually for three years after the purchase date, contingent upon achieving certain revenues and operational synergies. As of January 31, 2019, the Company has paid a total of $667 of this potential earn-out liability.

In connection with the acquisition of SBG, Raven is committed to making additional earn-out payments, not to exceed $2,500 calculated and paid quarterly for ten years after the purchase date contingent upon achieving certain revenues. As of January 31, 2019, the Company has paid a total of $1,336 of this potential earn-out liability.

Related to the acquisition of ATS in 2012, the Company is committed to making annual payments based upon earn-out percentages on specific revenue streams for seven years after the purchase date. To date, the Company has paid a total of $1,783 of this contingent liability and will make its final annual payment in first quarter of fiscal 2020.