What was the value allocated to customer relationships in the Management Recruiters purchase price allocation?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
em, "Other miscellaneous income (expense)," in our consolidated statement of income for the year ended December 31, 2022.
The Dubin Group, Inc., and Dubin Workforce Solutions
On February 21, 2022 we completed our acquisition of the staffing operations of The Dubin Group, Inc., and Dubin Workforce Solutions, Inc. (collectively "Dubin") in accordance with the terms of an Asset Purchase Agreement dated January 19, 2022 for approximately $2.5 million, inclusive of a prescribed amount of working capital. Dubin provides executive placement services and commercial staffing in the Philadelphia metro area. The acquisition of Dubin will help expedite growth into a new staffing vertical, expand our national footprint, and grow our franchise base.
The fair values of the assets acquired were determined based on information available to us. From the date of acquisition through December 31, 2022, the fair value of assets acquired were adjusted in conjunction with a third-party valuation. These adjustments included an increase in customer relationships of approximately $972 thousand, a decrease in customer lists of approximately $772 thousand, and the recognition of approximately $200 thousand of goodwill. The following table summarizes the revised values of the identifiable assets acquired as of the acquisition date (in thousands):
| Cash consideration | $ 2,100 |
|---|---|
| Note payable & net working capital payable | 362 |
| Total consideration | $ 2,462 |
| Customer relationships | $ 1,600 |
| Customer lists | 200 |
| Accounts receivable | 462 |
| Goodwill | 200 |
| Purchase price allocation | $ 2,462 |
Goodwill represents the expected synergies with our existing business, the acquired assembled workforce, potential new customers, and future cash flows after the acquisition of Dubin. Goodwill is deductible for income tax purposes.
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 Dubin Group, Inc., and Dubin Workforce Solutions on February 21, 2022. As part of this acquisition, the fair values of the assets acquired were determined based on available information and adjusted with a third-party valuation. These adjustments included an increase in customer relationships of approximately $972,000, a decrease in customer lists of approximately $772,000, and the recognition of approximately $200,000 of goodwill. The total consideration for this acquisition was approximately $2.5 million.
Additionally, Management Recruiters acquired LINK Staffing and affiliates on March 22, 2021. In this transaction, the value allocated to customer relationships was $7,700,000 as part of a total consideration of $11,428,000. This also included a trade name valued at $1,400,000 and goodwill of $500,000.
Finally, the document also provides a table summarizing the purchase price allocation for an unspecified acquisition, showing customer relationships valued at $1,600,000 as part of a total consideration of $2,462,000. This allocation also includes customer lists valued at $200,000 and goodwill at $200,000. These figures are relevant for prospective Management Recruiters franchisees as they provide insight into how the company values intangible assets like customer relationships when making acquisitions, which can impact the overall financial health and strategy of the company.