19. Acquisitions

During the year ended December 31, 2014, CBIZ acquired substantially all of the assets of six businesses:

First quarter 2014

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Centric Insurance Agency (“Centric”), located in New Providence, New Jersey, is an insurance broker providing property and casualty insurance, with a specialty in education and public schools.

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Clearview National Partners, LLC (“Clearview”), located in Waltham, Massachusetts, is a specialized employee benefits broker focused on providing employee benefit solutions to clients with more than 100 employees.

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Lewis Birch & Richardo, LLC (“LBR”), located in Tampa Bay, Florida, is a professional tax, accounting and consulting service provider with significant experience and expertise in matrimonial and family law litigation support, not-for-profit entities and health care provider services.

Second quarter 2014

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Tegrit Group (“Tegrit”), based in Akron, Ohio, is a national provider of actuarial consulting and retirement plan administration.

Third quarter 2014

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Rognstad’s Inc. d.b.a. Sattler Insurance Agency (“Sattler”), based in Lewiston, Idaho, provides property and casualty, personal, and life insurance services, with a specialty in outdoor recreation insurance, to businesses across the United States.

Fourth quarter 2014

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Weekes & Callaway (“W&C”), located in Delray Beach, Florida, is a full service insurance brokerage firm offering clients a complete line of services including commercial lines, personal lines, risk management, and employee benefits.

Pro forma results of operations have not been presented because the effects of the acquisitions were insignificant to the Company’s income from continuing operations before income taxes. The operating results of Centric, Clearview, Tegrit, Sattler, and W&C are reported in the Employee Services practice group and the operating results of LBR are reported in the Financial Services practice group. Aggregate consideration for these acquisitions consisted of approximately $43.9 million in cash, $2.9 million in CBIZ common stock, and $19.4 million in contingent consideration.

The aggregate purchase price for these acquisitions was allocated as follows (in thousands):


Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	1,381
Accounts receivable, net		4,204
Other assets		464
Identifiable intangible assets		17,952
Accounts payable		(3,319	)
Accrued liabilities		(3,513	)
Income taxes payable		(1,058	)
Deferred taxes		(1,834	)

Total identifiable net assets	$	14,277
Goodwill		51,873

Aggregate purchase price	$	66,150

Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired. The maximum potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is $20.9 million. CBIZ is required to record the fair value of this obligation at the acquisition date. Utilizing a probability weighted income approach, CBIZ determined that the fair value of the contingent consideration arrangement was $19.4 million, of which $5.0 million was recorded in “Contingent purchase price liability – current” and $14.4 million was recorded in “Contingent purchase price liability – non-current” in the accompanying Consolidated Balance Sheets at December 31, 2014.

The goodwill of $51.9 million arising from the acquisitions in 2014 consists largely of expected future earnings and cash flows from the existing management team, as well as the synergies created by the integration of the new businesses within the CBIZ organization, including cross-selling opportunities expected with the Company’s Financial Services group and the Employee Services group, to help strengthen the Company’s existing service offerings and expand the Company’s market position. Substantially all of the goodwill is deductible for income tax purposes.

During the year ended December 31, 2014, CBIZ purchased four client lists, three of which are reported in the Financial Services practice group and one of which is recorded in the Employee Services practice group. Total consideration for these client lists was $1.0 million cash paid at closing and an additional $0.2 million in cash, which is contingent upon future financial performance of the client list.

In addition, CBIZ paid $4.6 million in cash and issued approximately 67,000 shares of common stock during the year ended December 31, 2014 as contingent earnouts for previous acquisitions. During the year ended December 31, 2014, CBIZ also decreased the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $3.9 million due to lower than originally projected future results of the acquired businesses. This decrease of $3.9 million is included in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income. Refer to Note 6 for further discussion of contingent purchase price liabilities.

During the year ended December 31, 2013, CBIZ acquired substantially all of the assets of two companies:

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Associated Insurance Agents (“AIA”), an insurance brokerage agency specializing in property and casualty insurance, located in Minneapolis, Minnesota.

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Knight Field Fabry LLP (“Knight”), an accounting and financial services company located in Denver, Colorado. The operating results of AIA are reported in the Employee Services practice group and the operating results of Knight are reported in the Financial Services practice group.

Aggregate consideration for these acquisitions consisted of $4.9 million in cash paid at closing, $0.4 million in guaranteed future consideration, and $5.5 million net present value in contingent consideration to be settled in cash, subject to the acquired operations achieving certain performance targets.

The aggregate purchase price for these acquisitions was allocated as follows (in thousands):


Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	202
Accounts receivable, net		578
Other assets		137
Identifiable intangible assets		3,002
Accounts payable		(835	)
Accrued liabilities		(416	)
Deferred taxes		(1,165	)

Total identifiable net assets	$	1,503
Goodwill		9,278

Aggregate purchase price	$	10,781

Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired. The maximum potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is $6.1 million. CBIZ is required to record the fair value of this obligation at the acquisition date. CBIZ determined, utilizing a probability weighted income approach, that the fair value of the contingent consideration arrangement was $5.5 million, of which $1.2 million was recorded in “Contingent purchase price liability – current” and $4.3 million was recorded in “Contingent purchase price liability – non-current” in the accompanying Consolidated Balance Sheets at December 31, 2013.

The goodwill of $9.3 million arising from the acquisitions in 2013 consists largely of expected future earnings and cash flows from the existing management team, as well as the synergies created by the integration of the new businesses within the CBIZ organization, including cross-selling opportunities expected with the Company’s Financial Services group and the Employee Services group, to help strengthen the Company’s existing service offerings and expand the Company’s market position. Goodwill totaling $1.4 million is expected to be deductible for income tax purposes.

During the year ended December 31, 2013, CBIZ purchased three client lists, two of which are reported in the Employee Services practice group and one reported in the Financial Services practice group. Total consideration for these client lists was $0.3 million cash paid at closing and an additional $0.3 million in cash, which is contingent upon future financial performance of the client list.

In addition, CBIZ paid $10.1 million in cash and issued approximately 184,000 shares of common stock during the year ended December 31, 2013 as contingent earnouts for previous acquisitions. During the year ended December 31, 2013, CBIZ also increased the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $1.1 million due to higher than originally projected future results of the acquired businesses. This increase of $1.1 million is included in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income. Refer to Note 6 for further discussion of contingent purchase price liabilities.

During the year ended December 31, 2012, CBIZ acquired substantially all of the assets of eight companies:

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Meridian Insurance Group, LLC (“Meridian”)

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Primarily Care, Inc. (“PCI”)

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Stoltz and Company, LTD., L.L.P (“Stoltz”)

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Trinity Risk Advisors, Inc.(“Trinity”)

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Strategic Employee Benefit Services – The Pruett Group, Inc. (“SEBS-Pruett”)

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The employee benefit division of Leavitt Pacific Insurance Brokers, Inc. (“Leavitt”)

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Diversified Industries, Inc. d/b/a Payroll Control Systems (“PCS”)

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PHBV Partners, L.L.P. (“PHBV”).

Meridian, with offices in Boca Raton, Florida and Atlanta, Georgia, is an insurance brokerage specializing in multiple insurance products and services including property and casualty, bonding, personal lines and employee benefits. PCI, located in Cranston, Rhode Island, is an employee benefits brokerage firm that offers long-term health care cost reduction strategies through a unique system comprised of technology, innovative plan design, educational tools and tangible financial health incentives. Stoltz, with offices in Midland, San Antonio and Amarillo, Texas, is an insurance brokerage offering multiple insurance products and services including property and casualty, personal lines and employee benefits with specialization in oil and gas related risk management. Trinity, located in Atlanta, Georgia, is a specialty property and casualty brokerage firm focused primarily on medical malpractice insurance to the health care industry and specialized insurance to the transportation industry. SEBS-Pruett, with offices in Nashville, Chattanooga, Johnson City and Knoxville, Tennessee, is an employee benefit and consulting firm for mid-sized businesses. Leavitt, located in Campbell, California, provides employee benefits, retirement plan services and ancillary business support and services to clients in the San Jose region. PCS, located in Brooklyn Center, Minnesota, provides payroll, payroll tax, time and labor and human resources solutions to small and mid-sized clients. PHBV, with offices in Richmond, Virginia; Baltimore, Maryland; Indianapolis, Indiana; Austin, Texas; Cranford, New Jersey; and Raleigh, North Carolina, is a professional consulting and accounting service provider specializing in health care compliance on behalf of federal and state government agencies. The operating results of Meridian, Primarily Care, Stoltz, Trinity, SEBS-Pruett, Leavitt and PCS are reported in the Employee Services practice group, and the operating results of PHBV are reported in the Financial Services practice group.

During the year ended December 31, 2012, CBIZ also acquired substantially all of the assets of ProMedical, Inc. (“ProMedical”), a full-service provider of medical billing and practice management services for hospital-based anesthesiology practices, located in Ocala, Florida. This acquired unit was subsequently sold on August 30, 2013 as part of the sale of the MMP. Accordingly, the disclosures below have been restated to exclude the acquisition of ProMedical. As part of the acquisition of ProMedical, CBIZ assumed a $2.2 million contingent liability.

Aggregate consideration for these acquisitions consisted of approximately $74.2 million in cash, $3.6 million in CBIZ Common Stock, $4.5 million in short-term notes payable, $1.7 million in guaranteed future consideration, and $15.4 million in contingent consideration.

The aggregate purchase price for these acquisitions was allocated as follows (in thousands):


Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	422
Funds held for clients		39,193
Accounts receivable, net (as adjusted)		7,618
Fixed assets and other		1,300
Identifiable intangible assets		39,300
Accrued liabilities		(5,113	)
Client fund obligations		(39,193	)
Deferred tax liability		(1,236	)

Total identifiable net assets	$	42,291
Goodwill (as adjusted)		57,190

Aggregate purchase price	$	99,481

Under the terms of the acquisition agreements, a portion of the purchase price is contingent on future performance of the businesses acquired. The maximum potential undiscounted amount of all future payments that CBIZ could be required to make under the contingent arrangements is $18.5 million. CBIZ is required to record the fair value of this obligation at the acquisition date. CBIZ determined, utilizing a probability weighted income approach, that the fair value of the contingent consideration arrangement was $15.4 million, of which $4.6 million was recorded in “Contingent purchase price liability – current” and $10.8 million was recorded in “Contingent purchase price liability – non-current” in the accompanying Consolidated Balance Sheet at December 31, 2012.

The goodwill of $57.2 million arising from the acquisitions for the year ended December 31, 2012 consists largely of expected future earnings and cash flow from the existing management team, as well as the synergies created by the integration of the new business within the CBIZ organization, including cross-selling opportunities expected with the Company’s Financial Services group and the Employee Services group, to help strengthen the Company’s existing service offerings and expand the Company’s market position. Goodwill totaling $53.0 million is expected to be deductible for income tax purposes.

On February 1, 2012, CBIZ also purchased an employee benefits and consulting client list which is reported in the Employee Services practice group. Aggregate consideration for this client list consisted of up to $2.5 million in cash, which is contingent upon future financial performance of the client list.

In addition, CBIZ paid $25.6 million in cash and issued approximately 402,000 shares of Common Stock and 41,314 shares of Common Stock became issuable during the year ended December 31, 2012 as contingent earnouts for previous acquisitions. During the year ended December 31, 2012, CBIZ also reduced the fair value of the contingent purchase price liability related to CBIZ’s prior acquisitions by $1.1 million due to lower than originally projected future results of the acquired businesses. This reduction of $1.1 million is included in “Other (expense) income, net” in the accompanying Consolidated Statements of Comprehensive Income. Refer to Note 6 for further discussion of contingent purchase price liabilities.

The operating results of all acquired businesses are included in the accompanying consolidated financial statements since the dates of acquisition. Client lists and non-compete agreements are recorded at fair value at the time of acquisition. The excess of purchase price over the fair value of net assets acquired, (including client lists and non-compete agreements) is allocated to goodwill.