2. Acquisitions

Fiscal 2015 Acquisitions

PAY.ON

On November 4, 2015, the Company completed the acquisition of PAY.ON for $186.1 million in cash and stock. PAY.ON is a leader in eCommerce payments gateway solutions to payment service providers globally. Their advanced platform-based solution complements and strengthens the Company’s Merchant Retail Omni-Channel Universal Payments offerings. The combined entities provides customers the ability to deliver a seamless omni-channel customer payment experience in store, mobile, and online.

Under the terms of the agreement, the Company acquired 100% of the equity of PAY.ON in a combination of cash and stock. The Company used approximately $181.0 million from its Revolving Credit Facility. See Note 5, Debt, for terms of the Credit Facility.

The purchase price of PAY.ON was comprised of (in thousands):


	Amount
Cash payments to PAY.ON shareholders	$	180,994
Issuance of ACI common stock		5,379
Working capital adjustment		(232	)

Total purchase price	$	186,141

The aggregate purchase price of PAY.ON was $186.1 million, after working capital adjustments in accordance with the terms of the acquisition agreement. The consideration paid by the Company has been allocated to specific assets and liabilities based on the relative fair value of all assets and liabilities.

The Company incurred approximately $0.9 million in transaction related expenses during the year ended December 31, 2015, including fees to the investment bank, legal and other professional fees, which are included in general and administrative expenses in the accompanying consolidated financial statements.

Under the terms of the PAY.ON acquisition agreement, the Company issued 476,750 shares of ACI common stock to two key PAY.ON employees (“PAY.ON RSAs”) with a fair value of $11.3 million on the date of grant. The awards have requisite service periods of two years and vest in increments of 25% every six months from the date of the acquisition. The PAY.ON RSA grants provide for the payment of dividends on the Company’s common stock, if any, to the participant during the requisite service period (vesting period) and the participant has voting rights for each share of common stock. The Company recognizes compensation expense for the PAY.ON RSAs on a straight-line basis over the requisite service period.

PAY.ON contributed approximately $16.5 million and $2.9 million in revenue and an operating loss of $17.1 million and $2.1 million for the years ended December 31, 2016 and 2015, respectively.

In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of December 31, 2016.


(in thousands, except weighted average useful lives)	Weighted-Average Useful Lives		PAY.ON
Current assets:
Cash and cash equivalents			$	1,627
Receivables				2,649
Other current assets				502

Total current assets acquired				4,778

Noncurrent assets:
Property and equipment				332
Goodwill				140,526
Software		5 years		34,150
Customer relationships		15 years		21,718
Trademarks		5 years		2,300
Other noncurrent assets				28

Total assets acquired				203,832

Current liabilities:
Accounts payable				1,058
Employee compensation				681
Other current liabilities				866

Total current liabilities acquired				2,605

Noncurrent liabilities:
Deferred income taxes				15,086

Total liabilities acquired				17,691

Net assets acquired			$	186,141

Factors contributing to the purchase price that resulted in the goodwill (which is not tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced product capabilities, complementary products and customers. Pro forma results for PAY.ON are not presented because they are not material.

Fiscal 2014 Acquisitions

Retail Decisions

On August 12, 2014, the Company completed the acquisition of ReD for $205.1 million in cash. As a leader in fraud prevention solutions, the acquisition of ReD enhanced the Company’s Universal Payments strategy and further strengthened the Company’s leadership position in the fast-growing payments risk management space.

To fund this acquisition and related transaction fees, the Company drew an additional $60.5 million on the Revolving Credit Facility and increased the Term portion of the Credit Agreement by an additional $150.0 million. See Note 5, Debt, for terms of the financing arrangement.

The Company incurred approximately $2.7 million in transaction related expenses during the year ended December 31, 2014, including fees to the investment bank, legal and other professional fees, which are included in general and administrative expenses in the accompanying consolidated financial statements.

ReD contributed approximately $42.7 million and $17.9 million in revenue and $6.8 million and $1.9 million of operating income for the years ended December 31, 2015 and 2014, respectively, which includes severance expense related to the integration activities. The consideration paid by the Company to complete the acquisition has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition.

In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of December 31, 2015.


(in thousands, except weighted average useful lives)	Weighted-Average Useful Lives		Retail Decisions
Current assets:
Cash and cash equivalents			$	795
Receivables				10,106
Other current assets				10,282

Total current assets acquired				21,183

Noncurrent assets:
Property and equipment				3,354
Goodwill				137,915
Software		5-7 years		33,136
Customer relationships		18 years		50,480
Trademarks		5 years		3,980
Deferred income taxes				565
Other noncurrent assets				416

Total assets acquired				251,029

Current liabilities:
Accounts payable				4,624
Employee compensation				6,046
Other current liabilities				11,683

Total current liabilities acquired				22,353

Noncurrent liabilities:
Deferred income taxes				23,427
Other noncurrent liabilities				164

Total liabilities acquired				45,944

Net assets acquired			$	205,085

Factors contributing to the purchase price that resulted in the goodwill (which is not tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced product capabilities, complementary products and customers. Pro forma results for ReD are not presented because they are not material.