Wednesday, December 28, 2005
Digital River Business Purchase Prices
If you are like me, you probably are curious to know what Digital River actually paid for many of their acquisitions. I did a little digging and have posted what I found. When reviewing the figures bear in mind that some of the negotiated companies mentioned earn-out figures are likely not integrated into the actual purchase price. The figures are not integrated into the actual purchase price. In other words if the sellers continue to perform and reach targeted sales figures they will likely receive bonuses that were negotiated at the time of purchase.
Of course the summaries below do not include the intricacies of each deal. Nearly all of the purchases involved some level of non-compete agreement. In fact many of the earlier deals had complex earn-out periods and conditions. I would encourage anyone interested in the complete details to refer to the Securities and Exchange Commission website. The excerpts that I included are from the SEC website and are publicly available.
The excerpts listed are from the Securities Exchange Commission websites and public filings.
April 1999
Maagnum Internet Group (aka Digibuy) -
In April 1999, pursuant to an Agreement and Plan of Merger by and among the Company, Maagnum Internet Group, a Connecticut corporation ("Maagnum"), and Cyrus Maaghul, the sole shareholder of Maagnum, Maagnum merged with and into the Company (the "Merger"). At the effective time of the Merger, Mr. Maaghul's shares of Maagnum common stock converted into the right to receive from the Company $2.5 million in cash, 88,809 shares of Common Stock of the Company, and up to an additional 320,161 shares of Common Stock that may be earned by Mr. Maaghul upon the achievement of certain business goals over the 24-month period following the closing date of the Merger.
In addition, pursuant to a Stock Purchase Agreement dated April 1, 1999 by and between the Company and Meiman Kentjana, a key employee of Maagnum, in consideration for Mr. Kentjana's agreement to waive certain rights with respect to Maagnum, the Company issued to Mr. Kentjana on the closing date of the Merger 22,841 shares of Common Stock and gave him the right to receive up to an additional 192,374 shares of Common Stock that may be earned by Mr. Kentjana upon the achievement of certain business goals over the 24-month period following the closing date of the Merger.
April 1999
Public Software Library (aka PSL)
Also in April 1999, pursuant to an Asset Purchase Agreement by and among the Company, Public Software Library Ltd., a Texas limited partnership ("Seller"), and the partners of Seller, the Company purchased substantially all of the assets and assumed certain liabilities of Seller in exchange for an aggregate of 161,842 shares of Common Stock of the Company.
June 1999
Universal Commerce (aka RegNow)
In June 1999, pursuant to an Agreement and Plan of Merger and Reorganization by and among the Company, Universal Commerce, Incorporated, a Delaware corporation ("RegNow"), certain stockholders of RegNow (the "Stockholders"), RegNow merged with and into the Company (the "RegNow Merger"). At the effective time of the RegNow Merger, the Stockholders received from the Company $2.0 million in cash and 306,884 shares of Common Stock of the Company in exchange for all outstanding RegNow shares. In addition, the Stockholders may receive additional shares of Common Stock upon the achievement of certain revenue goals over the 12-month period following the closing date of the RegNow Merger. In addition, certain individuals who are Stockholders are also eligible to receive up to an additional $2 million in cash if they remain employees of the Company for a period of 12 months following the closing date of the RegNow Merger.
October 1999
Walnut Creek CD ROM (aka Simtel)
On October 7, 1999, pursuant to an Asset Purchase Agreement dated October 7, 1999 by and among Digital River, Walnut Creek CDROM, Inc., a California corporation, and Robert Bruce, the sole shareholder of Walnut Creek, we purchased those assets of Walnut Creek related to its business of providing Internet downloads of its Windows and DOS-based software library, including the simtel.net archives. In exchange for these assets, we made a cash payment to Walnut Creek of $1.0 million and issued to Walnut Creek 143,885 shares of our common stock.
August 2000
NetSales, Inc.
On August 24, 2000, pursuant to an Asset Purchase Agreement dated as of August 24, 2000 (the "Purchase Agreement") by and between the Registrant and NetSales, Inc. ("NetSales"), in exchange for 1,000,000 shares of common stock, the Registrant purchased those assets and assumed those liabilities of NetSales related to NetSales' software services business. The Purchase Agreement includes a contingent earnout whereby NetSales can receive up to an additional 350,000 shares of common stock based on performance over the 180 day period following August 24, 2000. Of the 1,000,000 shares of common stock issued at closing, 100,000 shares were placed in escrow to secure certain indemnification obligations contained in the Purchase Agreement. Subject to outstanding claims, the escrow will terminate 9 months following the closing.
December 2001
Freemerchant.com
On December 28, 2001, pursuant to an asset purchase agreement dated as of December 28, 2001 among Digital River, Network Commerce Inc., and Freemerchant.com, Inc., we purchased certain assets and assumed certain liabilities of Network Commerce related to the Freemerchant.com business line in exchange for cash in the amount of $875,000. The asset purchase agreement includes a contingent earn-out whereby Network Commerce can receive additional cash earn-out payments of up to $870,000 based upon the revenue generated by the Freemerchant.com business over the 10 month period following the closing.
August 2001
RegSoft.com
On August 2, 2001, pursuant to a Stock Purchase Agreement dated as of August 2, 2001 by and among Digital River, RegSoft.com, Inc., a Georgia corporation ("RegSoft"), and the following individuals (collectively, the "RegSoft Selling Stockholders"): Jason Foodmen, Robert Verzera, Ken White (also serving as Stockholders' Agent), Charles Zino and Robert Zino, we purchased all of the issued and outstanding shares of RegSoft in exchange for $750,000 in cash and a note for $2,500,000 that is payable in full on February 2, 2002. The Stock Purchase Agreement includes a contingent earn-out whereby the RegSoft Selling Stockholders can receive up to an additional $2,100,000 in cash based upon the revenue generated by RegSoft over the 12 months following the closing, and up to an additional $650,000 based on the number of RegSoft clients converted to our platform on or before the fifteen month anniversary of the closing.
November 2003
GameZone, Inc.
In November 2003, we acquired substantially all of the assets and assumed certain liabilities of GameZone, Inc., a provider of computer gaming resources and download destination sites on the Web, for the purchase price of $1.1 million in cash, of which $934,000 has been paid as of December 31, 2003. Additional goodwill of $821,000 was recorded as a result of this acquisition. We will amortize other intangible assets acquired, consisting of non-compete agreements and technology/tradename, over a three-year period. The agreement also provides GameZone the opportunity for additional cash or stock earn-outs based on our achieving certain revenue metrics related to computer gaming resources and download destination sites on the Web over the course of the thirty-six months and, at our sole discretion, the sixty months following the close of the acquisition. Such earn-out amounts, if paid, will be recorded as goodwill as they are considered incremental to the purchase price.
April 2004
Element 5 AG (ShareIt)
On April 19, 2004 we announced that we signed a definitive agreement to acquire element 5 AG, a privately held company based in Germany. Under the terms of the agreement, we paid $120 million in cash to acquire all of the outstanding shares of capital stock of element 5. We also may pay up to an additional $2.5 million in cash based on element 5's operating performance over the first 24 months subsequent to the acquisition. Such earn-out amounts, if paid, will be recorded as goodwill as they are considered incremental to the purchase price. In the second quarter of 2004, in connection with our acquisition of element 5, we began implementation of a plan intended to eliminate duplication of resources within the consolidated company. The plan includes the elimination of customer service positions at element 5's Greenburg, Pennsylvania customer service center and the termination of the Greenburg facility lease by the end of third quarter 2004. As of June 30, 2004, we have included $0.9 million towards the acquisition cost of element 5 related to this plan.
June 2004
FireClick
On June 1, 2004, we announced that we acquired substantially all of the assets and assumed certain liabilities of Fireclick, Inc., a leading provider of Web-analysis solutions for online retailers. Under the terms of the agreement, we paid $7.5 million in cash. The agreement also provides Fireclick the opportunity for an earn-out based on our achieving certain revenue and profitability targets attributable to Fireclick over the course of the three years following the closing of the acquisition. Such earn-out amounts, if paid, will be recorded as goodwill as they are considered incremental to the purchase price.
Of course the summaries below do not include the intricacies of each deal. Nearly all of the purchases involved some level of non-compete agreement. In fact many of the earlier deals had complex earn-out periods and conditions. I would encourage anyone interested in the complete details to refer to the Securities and Exchange Commission website. The excerpts that I included are from the SEC website and are publicly available.
Date | Company Purchased | Stocks | Cash |
| 04/1999 | Maagnum | 88,809 | 2.5 Million |
| 04/1999 | Public Software Library | 161,842 |
|
| 06/1999 | Universal Commerce | 306,884 | 2 Million |
| 10/1999 | Walnut Creek CD ROM | 143,885 | 1 Million |
| 08/2000 | NetSales | 1,000,000 |
|
| 12/2001 | Freemerchant |
| 875 K |
| 12/2001 | RegSoft |
| 750 K + 2.5 Million |
| 11/2004 | GameZone |
| 1.1 Million with conditions + earnout options |
| 04/2004 | Element 5 |
| 120 Million |
| 04/2004 | FireClick | | 7.5 Million (+ earnout) |
The excerpts listed are from the Securities Exchange Commission websites and public filings.
April 1999
Maagnum Internet Group (aka Digibuy) -
In April 1999, pursuant to an Agreement and Plan of Merger by and among the Company, Maagnum Internet Group, a Connecticut corporation ("Maagnum"), and Cyrus Maaghul, the sole shareholder of Maagnum, Maagnum merged with and into the Company (the "Merger"). At the effective time of the Merger, Mr. Maaghul's shares of Maagnum common stock converted into the right to receive from the Company $2.5 million in cash, 88,809 shares of Common Stock of the Company, and up to an additional 320,161 shares of Common Stock that may be earned by Mr. Maaghul upon the achievement of certain business goals over the 24-month period following the closing date of the Merger.
In addition, pursuant to a Stock Purchase Agreement dated April 1, 1999 by and between the Company and Meiman Kentjana, a key employee of Maagnum, in consideration for Mr. Kentjana's agreement to waive certain rights with respect to Maagnum, the Company issued to Mr. Kentjana on the closing date of the Merger 22,841 shares of Common Stock and gave him the right to receive up to an additional 192,374 shares of Common Stock that may be earned by Mr. Kentjana upon the achievement of certain business goals over the 24-month period following the closing date of the Merger.
April 1999
Public Software Library (aka PSL)
Also in April 1999, pursuant to an Asset Purchase Agreement by and among the Company, Public Software Library Ltd., a Texas limited partnership ("Seller"), and the partners of Seller, the Company purchased substantially all of the assets and assumed certain liabilities of Seller in exchange for an aggregate of 161,842 shares of Common Stock of the Company.
June 1999
Universal Commerce (aka RegNow)
In June 1999, pursuant to an Agreement and Plan of Merger and Reorganization by and among the Company, Universal Commerce, Incorporated, a Delaware corporation ("RegNow"), certain stockholders of RegNow (the "Stockholders"), RegNow merged with and into the Company (the "RegNow Merger"). At the effective time of the RegNow Merger, the Stockholders received from the Company $2.0 million in cash and 306,884 shares of Common Stock of the Company in exchange for all outstanding RegNow shares. In addition, the Stockholders may receive additional shares of Common Stock upon the achievement of certain revenue goals over the 12-month period following the closing date of the RegNow Merger. In addition, certain individuals who are Stockholders are also eligible to receive up to an additional $2 million in cash if they remain employees of the Company for a period of 12 months following the closing date of the RegNow Merger.
October 1999
Walnut Creek CD ROM (aka Simtel)
On October 7, 1999, pursuant to an Asset Purchase Agreement dated October 7, 1999 by and among Digital River, Walnut Creek CDROM, Inc., a California corporation, and Robert Bruce, the sole shareholder of Walnut Creek, we purchased those assets of Walnut Creek related to its business of providing Internet downloads of its Windows and DOS-based software library, including the simtel.net archives. In exchange for these assets, we made a cash payment to Walnut Creek of $1.0 million and issued to Walnut Creek 143,885 shares of our common stock.
August 2000
NetSales, Inc.
On August 24, 2000, pursuant to an Asset Purchase Agreement dated as of August 24, 2000 (the "Purchase Agreement") by and between the Registrant and NetSales, Inc. ("NetSales"), in exchange for 1,000,000 shares of common stock, the Registrant purchased those assets and assumed those liabilities of NetSales related to NetSales' software services business. The Purchase Agreement includes a contingent earnout whereby NetSales can receive up to an additional 350,000 shares of common stock based on performance over the 180 day period following August 24, 2000. Of the 1,000,000 shares of common stock issued at closing, 100,000 shares were placed in escrow to secure certain indemnification obligations contained in the Purchase Agreement. Subject to outstanding claims, the escrow will terminate 9 months following the closing.
December 2001
Freemerchant.com
On December 28, 2001, pursuant to an asset purchase agreement dated as of December 28, 2001 among Digital River, Network Commerce Inc., and Freemerchant.com, Inc., we purchased certain assets and assumed certain liabilities of Network Commerce related to the Freemerchant.com business line in exchange for cash in the amount of $875,000. The asset purchase agreement includes a contingent earn-out whereby Network Commerce can receive additional cash earn-out payments of up to $870,000 based upon the revenue generated by the Freemerchant.com business over the 10 month period following the closing.
August 2001
RegSoft.com
On August 2, 2001, pursuant to a Stock Purchase Agreement dated as of August 2, 2001 by and among Digital River, RegSoft.com, Inc., a Georgia corporation ("RegSoft"), and the following individuals (collectively, the "RegSoft Selling Stockholders"): Jason Foodmen, Robert Verzera, Ken White (also serving as Stockholders' Agent), Charles Zino and Robert Zino, we purchased all of the issued and outstanding shares of RegSoft in exchange for $750,000 in cash and a note for $2,500,000 that is payable in full on February 2, 2002. The Stock Purchase Agreement includes a contingent earn-out whereby the RegSoft Selling Stockholders can receive up to an additional $2,100,000 in cash based upon the revenue generated by RegSoft over the 12 months following the closing, and up to an additional $650,000 based on the number of RegSoft clients converted to our platform on or before the fifteen month anniversary of the closing.
November 2003
GameZone, Inc.
In November 2003, we acquired substantially all of the assets and assumed certain liabilities of GameZone, Inc., a provider of computer gaming resources and download destination sites on the Web, for the purchase price of $1.1 million in cash, of which $934,000 has been paid as of December 31, 2003. Additional goodwill of $821,000 was recorded as a result of this acquisition. We will amortize other intangible assets acquired, consisting of non-compete agreements and technology/tradename, over a three-year period. The agreement also provides GameZone the opportunity for additional cash or stock earn-outs based on our achieving certain revenue metrics related to computer gaming resources and download destination sites on the Web over the course of the thirty-six months and, at our sole discretion, the sixty months following the close of the acquisition. Such earn-out amounts, if paid, will be recorded as goodwill as they are considered incremental to the purchase price.
April 2004
Element 5 AG (ShareIt)
On April 19, 2004 we announced that we signed a definitive agreement to acquire element 5 AG, a privately held company based in Germany. Under the terms of the agreement, we paid $120 million in cash to acquire all of the outstanding shares of capital stock of element 5. We also may pay up to an additional $2.5 million in cash based on element 5's operating performance over the first 24 months subsequent to the acquisition. Such earn-out amounts, if paid, will be recorded as goodwill as they are considered incremental to the purchase price. In the second quarter of 2004, in connection with our acquisition of element 5, we began implementation of a plan intended to eliminate duplication of resources within the consolidated company. The plan includes the elimination of customer service positions at element 5's Greenburg, Pennsylvania customer service center and the termination of the Greenburg facility lease by the end of third quarter 2004. As of June 30, 2004, we have included $0.9 million towards the acquisition cost of element 5 related to this plan.
June 2004
FireClick
On June 1, 2004, we announced that we acquired substantially all of the assets and assumed certain liabilities of Fireclick, Inc., a leading provider of Web-analysis solutions for online retailers. Under the terms of the agreement, we paid $7.5 million in cash. The agreement also provides Fireclick the opportunity for an earn-out based on our achieving certain revenue and profitability targets attributable to Fireclick over the course of the three years following the closing of the acquisition. Such earn-out amounts, if paid, will be recorded as goodwill as they are considered incremental to the purchase price.
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