Note 3 - Business Combinations |
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Business Combination Disclosure [Text Block] |
Note 4. Business Combinations December 2018 acquisition of CPHOn December 6, 2018, the Company consummated the Business Combination. This acquisition qualifies as a business combination under ASC 805. Accordingly, the Company will record all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill recorded from the transaction represents the value provided by the Company’s leading market share in a highly-fragmented industry.The following table represents the preliminary allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition-date fair values:
Note: Cash in table above is net of $1.0 million in cash acquiredIdentifiable intangible assets acquired consist of customer relationships of $168.7 million and trade names of $52.0 million. The customer relationships were valued using the multi-period excess earnings method. The Company determined the useful life of the customer relationships to be 15 years. The trade names were valued using the relief-from-royalty method. The Company determined the useful life of the trade name associated with Camfaud to be 10 years. The Company determined the trade names associated with Brundage-Bone and Eco-Pan to be indefinite.CPH incurred transaction costs of $14.2 million and debt extinguishment costs of $16.4 million independently prior to the Business Combination. Industrea incurred transaction costs of $18.8 million independently prior to the Business Combination, i.e. before December 5, 2018, of which $8.1 million was related to the payment of deferred underwriting commissions, and Industrea’s Pre-Business Combination financial results are not consolidated with the Predecessor (Note 2 ), these costs are not reflected in the Predecessor Financial Statements.Additional costs consisting of stock option and other compensation related expenses were recorded in connection with the Business Combination. These costs were solely contingent upon the completion of the Business Combination and did not include any future service requirements. As such, these costs will be presented “on the line” and are not reflected in either Predecessor or Successor financial statements. “On the line” describes those expenses triggered by the consummation of a business combination that were incurred by the acquiree, i.e. CPH, that are not recognized in the Statement of Operations of either the Predecessor or Successor as they are not directly attributable to either period but instead were contingent on the Business Combination.In conjunction with the Business Combination, there were $20.1 million of transaction bonuses and, as a result of change in control provision for stock-based awards, certain unvested stock-based awards immediately vested, resulting in the recognition of compensation expense of approximately $0.6 million. These expenses were not reflected in either the Predecessor or Successor consolidated statements of operations and comprehensive income (loss) periods, but instead are presented “on the line.” April 2018 acquisition of O’Brien (Predecessor)In April 2018, Brundage-Bone entered into an asset purchase agreement to acquire substantially all assets of Richard O’Brien Companies, Inc., O’Brien Concrete Pumping-Arizona, Inc., O’Brien Concrete Pumping-Colorado, Inc. and O’Brien Concrete Pumping, LLC (collectively, “O’Brien” or the O’Brien Companies”) for cash.This acquisition qualified as a business combination under ASC 805. Accordingly, the Predecessor recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill represents expected synergies from combining operations and the assembled workforce. The acquisition was part of the Predecessor’s strategic plan to expand their presence in the Colorado and Arizona markets. The following table represents the total consideration transferred and its allocation to the assets acquired and liabilities assumed at their acquisition-date fair values:
Acquisition-related expenses incurred by the Predecessor amounted to $1.1 million of which $0.0 million was recognized in the Consolidated Statements of Income for the period November 1, 2017 through January 31, 2018 ( Predecessor) as the acquisition occurred after the aforementioned Predecessor period.Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the combined results of operations for the Company gives effect to the Business Combination and the acquisition of the O’Brien as if it had occurred on November 1, 2017. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the Business Combination and the acquisition of the O’Brien had been completed on November 1, 2017, nor does it purport to project the results of operations of the combined company in future periods. The unaudited pro forma financial information does not give effect to any anticipated integration costs related to the acquired company.The unaudited pro forma financial information is as follows:
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Note 3. Business CombinationsO’Brien Companies: In April 2018, Brundage-Bone entered into an asset purchase agreement to acquire substantially all assets of Richard O’Brien Companies, Inc., O’Brien Concrete Pumping-Arizona, Inc., O’Brien Concrete Pumping-Colorado, Inc. and O’Brien Concrete Pumping, LLC (collectively, the O’Brien Companies) for cash.This acquisition qualifies as a business combination under ASC 805. Accordingly, the Company will record all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill represents expected synergies from combining operations and the assembled workforce. Goodwill is not amortized for book purposes but is expected to be deductible for tax purposes. The acquisition was part of the Company’s strategic plan to expand their presence in the Colorado and Arizona markets.The following table represents the total consideration transferred and its allocation to the assets acquired and liabilities assumed at their acquisition-date fair values:
Identifiable intangible assets acquired consist of customer relationships of $2,810,000. The customer relationships were valued using the multi-period excess earnings method. The Company determined the useful life of the customer relationships to be 15 years.Acquisition-related expenses incurred by the Company amounted to $1,068,653, which have been recognized in the consolidated statements of income for the year ended October 31, 2018.
Reilly: In July 2017, Camfaud entered into a share purchase agreement to acquire all outstanding shares of Reilly, a UK-based concrete pumping company, in exchange for cash and seller notes.This acquisition qualifies as a business combination under ASC 805. Accordingly, the Company has recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill represents expected synergies from combining operations and the assembled workforce. Goodwill is not amortized for book purposes nor is it deductible for tax purposes. The acquisition was part of the Company’s strategic plan to expand the Camfaud footprint in the United Kingdom.The following table represents the total consideration transferred and its allocation to the assets acquired and liabilities assumed at their acquisition-date fair values:
Identifiable intangible assets acquired consist of customer relationships of $552,581 and a trade name of $641,873. The customer relationships were valued using the multi-period excess earnings method. The Company determined the useful life of the customer relationships to be 15 years. The trade name was valued using the relief-from-royalty method. The Company determined the useful life of the trade name to be 20 years.The Company also entered into loans with the former owners that are discussed in Note 8.
Acquisition-related expenses incurred by the Company amounted to $594,039, of which $0 and $594,039 have been recognized in transaction costs in the consolidated statements of income for the years ended October 31, 2018 and 2017, respectively.Camfaud: In November 2016, Camfaud acquired two concrete pumping companies based in the UK.This acquisition qualifies as a business combination under ASC 805. Accordingly, the Company has recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill represents expected synergies from combining operations and the assembled workforce. Goodwill is not amortized for book purposes nor is it deductible for tax purposes. The acquisition was part of the Company’s strategic plan to broaden their global presence. The acquisition was financed through additional Senior Secured Notes, a revolving loan and the seller notes.The following table represents the total consideration transferred and its allocation to the assets acquired and liabilities assumed at their acquisition-date fair values:
The contingent consideration is based on average EBITDA over the 3 -year period following the acquisition date and has a maximum payout of approximately $3,100,000. The Company has recorded the contingent consideration initially at fair value based on a probability-weighted approach, discounted to present value at an annual rate of 7.5 percent. The contingent consideration is presented as deferred consideration in the accompanying consolidated balance sheets and will be adjusted to fair value each reporting period until the contingency is resolved (see Note 4 ).Identifiable intangible assets acquired consist of customer relationships of $15,933,225 and trade names of $2,641,437. The customer relationships were valued using the multi-period excess earnings method.The Company determined the useful life of the customer relationships to be 15 years. The trade name was valued using the relief-from-royalty method. The Company determined the useful life of the trade names to be 10 years.The Company also entered into loans with the former owners that are discussed in Note 8.
Acquisition-related expenses incurred by the Company amounted to $6,608,456, of which $0, $3,566,407, $3,042,049 have been recognized in the consolidated statements of income for the years ended October 31, 2018,
2017, and 2016, respectively.Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the combined results of operations for the Company and the O'Brien, Reilly and Camfaud acquisitions for the fiscal years ended October 31, 2018,
2017 and 2016, respectively. The unaudited pro forma financial information gives effect to the O'Brien acquisition as if it had occurred on November 1, 2016 and November 1, 2015 for Reilly and Camfaud. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the O'Brien, Reilly and Camfaud acquisition had been completed on November 1, 2016 for O'Brien and November 1, 2015 for Reilly and Camfaud, nor does it purport to project the results of operations of the combined company in future periods. The unaudited pro forma financial information does not give effect to any anticipated integration costs related to the acquired company.The unaudited pro forma financial information is as follows:
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