Note 18. Acquisitions

2016

During the year ended December 31, 2016, we acquired substantially all of the non-attest assets of six businesses; Millimaki Eggert, L.L.P. (“Millimaki”), The Savitz Organization (“Savitz”), Flex-Pay Business Services, Inc. (Flex-Pay”), Ed Jacobs & Associates, Inc. (“EJ&A”), Actuarial Consultants, Inc. (“ACI”) and The Seff Group, P.C. (“Seff”). Aggregate consideration for such acquisitions was approximately $40.0 million in cash, $2.1 million in CBIZ common stock, and $21.1 million in contingent consideration.

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 we could be required to make under the contingent arrangements is $23.5 million. We are required to record the fair value of this obligation at the acquisition date. Utilizing a probability weighted income approach, we determined that the fair value of the contingent consideration arrangement was $21.1 million, of which $6.6 million was recorded in “Contingent purchase price liability — current” and $14.5 million was recorded in “Contingent purchase price liability — non-current” in the accompanying Consolidated Balance Sheets at December 31, 2016.

Annualized revenue for these acquisitions is estimated to be approximately $41.2 million. Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in aggregate, were not material to our “Income from continuing operations before income taxes.”

First Quarter 2016

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The acquisition of Millimaki, located in San Diego, California, was effective January 1, 2016. Millimaki provides professional tax, accounting, and financial services, with a specialty niche practice in the real estate sector, to closely held businesses, their owners, and mid-to-high net worth individuals. Operating results are reported in the Financial Services practice group.

Second Quarter 2016

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The acquisition of Savitz, headquartered in Philadelphia, Pennsylvania, with offices in Atlanta, Georgia, and Newton, Massachusetts, was effective April 1, 2016. Savitz is an employee retirement and health and welfare benefits firm that provides actuarial, consulting and administration outsourcing services. Operating results are reported in the Benefit and Insurance Services practice group.

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The acquisition of Flex-Pay, located in Winston-Salem, North Carolina, was effective June 1, 2016. Flex-Pay provides payroll processing, Affordable Care Act fulfillment, and human resource solutions to more than 3,600 clients primarily in the Southeast. Operating results are reported in the Benefit and Insurance Services practice group.

Third Quarter 2016

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The acquisition of EJ&A, an employee benefits consulting business located in Cleveland, Tennessee, was effective July 1, 2016. Operating results are reported in the Benefit and Insurance Services practice group.

Fourth Quarter 2016

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The acquisition of ACI, based in Torrance, California, was effective November 1, 2016. ACI provides design, consultation and administration of 401(k) plans, profit-sharing plans, nonqualified plan administration and traditional defined benefit plans. Operating results are reported in the Benefit and Insurance Services practice group.

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The acquisition of Seff, a full service accounting, tax, compliance and financial consulting firm located in Denver, Colorado, was effective November 1, 2016. Operating results attributable to Seff are reported in the Financial Services practice group.

2015

During the year ended December 31, 2015, we acquired substantially all of the assets of three businesses; Model Consulting, Inc. (“Model”), Pension Resource Group, Inc. (“PRG”) and Cottonwood Group, Inc. (“Cottonwood”). Aggregate consideration for these acquisitions consisted of approximately $10.5 million in cash, $1.4 million in CBIZ common stock, and $8.5 million in contingent consideration.

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 we could be required to make under the contingent arrangements is $8.7 million. We are required to record the fair value of this obligation at the acquisition date. Utilizing a probability weighted income approach, we determined that the fair value of the contingent consideration arrangement was $8.5 million, of which $2.9 million was recorded in “Contingent purchase price liability — current” and $5.6 million was recorded in “Contingent purchase price liability — non-current” in the accompanying Consolidated Balance Sheets at December 31, 2015.

Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in aggregate, were not material to our “Income from continuing operations before income taxes.”

First Quarter 2015

The acquisition of Model, located in Trevose, Pennsylvania, was effective March 1, 2015. Model provides employee benefit consulting services to mid-sized companies in the Philadelphia and Southern New Jersey markets. Operating results are reported in the Benefit and Insurance Services practice group.

Fourth Quarter 2015

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The acquisition of PRG, located in Woodstock, Georgia, was effective October 1, 2015. PRG provides pension administration solutions including defined benefit administration, data warehousing, benefit communication, compensation statement and human capital services to clients ranging in size from 500 to over 60,000 participants. Operating results are reported in the Benefits and Insurance Services practice group.

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The acquisition of Cottonwood, located in Overland Park, Kansas, was effective December 1, 2015. Cottonwood provides pension plan consulting, actuarial and investment services for institutional pension plans, retirement funds, endowment funds and foundations. Operating results are reported in the Benefits and Insurance Services practice group.

2014

During the year ended December 31, 2014, we acquired substantially all of the assets of six businesses; Centric Insurance Agency (“Centric”), Clearview National Partners, LLC (“Clearview”), Lewis Birch & Ricardo, LLC (“LBR”), Tegrit Group (“Tegrit”), Rognstad’s Inc. d.b.a. Sattler Insurance Agency (“Sattler”) and Weekes & Callaway (“W&C”). 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.

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 we could be required to make under the contingent arrangements is $20.9 million. We are required to record the fair value of this obligation at the acquisition date. Utilizing a probability weighted income approach, we 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.

First Quarter 2014

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The acquisition of Centric, located in New Providence, New Jersey, was effective January 1, 2014. Centric is an insurance broker providing property and casualty insurance, with a specialty in education and public schools. Operating results are reported in the Benefit and Insurance Services practice group.

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The acquisition of Clearview, a specialized employee benefits broker focused on providing employee benefit solutions to clients with more than 100 employees, located in Waltham, Massachusetts, was effective January 1, 2014. Operating results are reported in the Benefit and Insurance Services practice group.

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The acquisition of LBR, located in Tampa Bay, Florida, was effective February 1, 2014. LBR 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. Operating results are reported in the Financial Services practice group.

Second Quarter 2014

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The acquisition of Tegrit, a national provider of actuarial consulting and retirement plan administration based in Akron, Ohio, was effective June 1, 2014. Operating results are reported in the Benefit and Insurance Services practice group.

Third Quarter 2014

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The acquisition of Sattler, based in Lewiston, Idaho, was effective September 1, 2014. Sattler provides property and casualty, personal, and life insurance services, with a specialty in outdoor recreation insurance, to businesses across the United States. Operating results are reported in the Benefit and Insurance Services practice group.

Fourth Quarter 2014

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The acquisition of W&C, located in Delray Beach, Florida, was effective November 1, 2014. W&C is a full service insurance brokerage firm offering clients a complete line of services including commercial lines, personal lines, risk management, and employee benefits. Operating results are reported in the Benefit and Insurance Services practice group.

The following table summarizes the amounts of identifiable assets acquired, liabilities assumed and aggregate purchase price for the acquisitions in 2016, 2015 and 2014 (in thousands):

	2016			2015			2014
Cash	$	10		$	—		$	1,381
Accounts receivable, net		6,649			1,501			4,204
Funds held for clients		37,230			—			—
Property and equipment		440			—			—
Other assets		294			52			464
Identifiable intangible assets		22,177			7,037			17,952
Accounts payable		—			(62	)		(3,319	)
Accrued liabilities		(1,133	)		(1,552	)		(3,513	)
Income taxes payable		—			—			(1,058	)
Deferred taxes		—			—			(1,834	)
Client fund obligations		(37,230	)		—			—
Total identifiable net assets	$	28,437		$	6,976		$	14,277
Goodwill		34,803			13,471			51,873
Aggregate purchase price	$	63,240		$	20,447		$	66,150

The goodwill of $34.8 million, $13.5 million and $51.9 million arising from the acquisitions in 2016, 2015 and 2014, respectively, 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 our Financial Services group and the Benefit and Insurance Services group, to help strengthen our existing service offerings and expand our market position. All of the goodwill is deductible for income tax purposes for 2016 and 2015, while substantially all of the goodwill is deductible for 2014.

Client Lists

In 2016, we purchased seven client lists, one of which is recorded in the Financial Services practice group and six of which are reported in the Benefit and Insurance Services practice group. Total consideration for these client lists was $1.2 million cash paid at closing and an additional $1.2 million in guaranteed future consideration, and $1.5 million which is contingent upon future financial performance of the client list.

We purchased six client lists in 2015, all of which are reported in the Benefit and Insurance Services practice group. Total consideration for these client lists was $2.8 million cash paid at closing and an additional $0.8 million in guaranteed future consideration, and $0.1 million which is contingent upon future financial performance of the client list.

In 2014, we purchased four client lists, three of which are reported in the Financial Services practice group and one of which is recorded in the Benefit and Insurance 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.

Contingent Earnouts for Previous Acquisitions

Under the terms of the acquisition agreements, we pay cash consideration and issue shares of CBIZ common stock as contingent earnout for previous acquisitions. In 2016, we paid $7.1 million in cash and issued approximately 0.4 million shares of common stock. In 2015, we paid $12.0 million in cash and issued approximately 0.3 million shares of common stock and in 2014, we paid $4.6 million in cash and issued approximately 0.1 million shares of common stock.

Change in Contingent Purchase Price Liability for Previous Acquisitions

In accordance with FASB ASC Topic 805, “Business Combinations,” we are required to evaluate in subsequent reporting periods the fair value of contingent consideration related to previous acquisitions. We decreased the fair value of the contingent purchase price liability related to prior acquisitions in 2016, by $1.3 million, due to lower than originally projected future results of the acquired businesses. In 2015 and 2014, we decreased the fair value of the contingent purchase price liability by $2.9 million and $3.9 million, respectively. These decreases are included as income in “Other income, net” in the accompanying Consolidated Statements of Comprehensive Income. For further discussion on contingent purchase price liabilities, refer to Note 6, Fair Value Measurements, to the accompanying consolidated financial statements.