What is the nature of the contingent consideration included in the Management Recruiters' acquisition of Dental Power?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
On December 6, 2021 we completed the acquisition of the Dental Power Staffing division ("Dental Power") from Dental Power International, Inc. ("DPI") for $1.9 million, inclusive of $382 thousand of contingent consideration.
The contingent consideration consists of estimated future payments based on the achievement of performance metrics over the following 3 years.
We determined the Dental Power transaction was an asset acquisition for accounting purposes as substantially all of the fair value of the gross assets acquired was concentrated in the customer list. Accordingly, no pro forma financial information is presented.
The contingent consideration consists of estimated future payments based on the achievement of performance metrics over the following 3 years.
The asset acquired related to the operations of the acquiree have not been sold and as of December 31, 2022 and are classified as held-for-sale. The operating results are reported as "Income from discontinued operations, net of tax." On March 1, 2023, we agreed to sell the assets we acquired in the Dental Power acquisition to an MRI franchisee, who will continue to operate the business as part of their franchise. The sale agreement calls for proceeds of $2 million payable over 5 years with a market rate of interest. We expect to recognize an estimated gain of approximately $340 thousand in the first quarter of 2023 upon completion of the transaction. In the meantime, Dental Power remains company-owned.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, the company acquired the Dental Power Staffing division on December 6, 2021, for $1.9 million, which included $382,000 in contingent consideration. The Dental Power Staffing division is a 46-year-old dental staffing company located in Carrboro, North Carolina.
The FDD states that the contingent consideration consists of estimated future payments that are based on the achievement of performance metrics over the following 3 years. Management Recruiters determined that the Dental Power transaction was an asset acquisition for accounting purposes because substantially all of the fair value of the gross assets acquired was concentrated in the customer list.
On March 1, 2023, Management Recruiters agreed to sell the assets acquired in the Dental Power acquisition to an MRI franchisee, who will continue to operate the business as part of their franchise. The sale agreement calls for proceeds of $2 million payable over 5 years with a market rate of interest. Management Recruiters expected to recognize an estimated gain of approximately $340,000 in the first quarter of 2023 upon completion of the transaction. Until the sale was finalized, Dental Power remained company-owned.