Groupon 2011 Annual Report Download - page 82

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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company up to an aggregate of 90% of the outstanding capital stock of Qpod.
In January 2011, the Company entered into a Stock Purchase Agreement (the "SPA") with the other shareholders, whereby the Company purchased an
additional percentage of the shares of Qpod from the other shareholders, increasing the Company's ownership in Qpod to 90%. Under the terms of the SPA, the
Company acquired 21,812 shares of the total issued and outstanding capital stock of Qpod, on a fully-
diluted basis, in exchange for $25.0 million in cash and
$10.0 million of contingent consideration which will be paid over the next three years in equal installments if specified future operating objectives and financial
results are met. As of the date of the SPA and December 31, 2011, the Company concluded that the operational and financial result targets were not met for 2011
and the likelihood of achieving the remaining targets is remote for the final two years. The additional investment was accounted for as an equity transaction in
accordance with the guidance on accounting for changes in a parent's ownership interest in a subsidiary in consolidated financial statements. In conjunction with
the SPA, the Company has call rights that allow it to buy all of the remaining shares of Qpod. Exercising the call rights would give the Company 100%
ownership of the outstanding capital stock of Qpod. Additionally, the remaining Qpod shareholders have put rights to sell their outstanding capital stock to the
Company, including any shares of capital stock issuable upon exercise of options, which would give the Company 100% of the outstanding capital stock of
Qpod.
Other Acquisitions
Throughout the year ended December 31, 2011, the Company acquired certain entities and the results of each of the entities have been included in the
consolidated financial statements since the respective acquisitions dates. The primary purpose of these acquisitions was to utilize these entities' collective buying
power businesses to further grow the Company's subscriber base and provide strategic entries into new and expanding markets in India, Malaysia, South Africa,
Indonesia and the Middle East. In addition, the Company acquired certain businesses that specialize in developing mobile technology and marketing services to
expand and advance the Company's product offerings. The aggregate acquisition-
date fair value of the consideration transferred and noncontrolling interests
("NCI") for other acquisitions totaled $47.7 million, which consisted of the following (in thousands):
The value of the noncontrolling interest represents the fair value of the ownership of the remaining shareholders after Groupon's purchase assuming a
discount on that remaining ownership due to the limited control of minority shareholders. The fair value of the remaining shareholders prior to the discount was
derived assuming Groupon's purchase price represents the fair value of the ownership acquired.
As of the respective acquisition dates, the Company had obligations to transfer additional cash and stock contingent consideration of $16.3 million and
$1.5 million, respectively, to the former owners of certain acquirees as part of the exchange for control of these acquirees, if specified future operational
objectives and financial results are met over the next three years.
The Company determined the acquisition-date fair value of these contingent liabilities, based on the likelihood of paying the contingent cash earn-
outs
and stock issuances of contingent earn-
out payments and stock issuances, as part of the consideration transferred. For contingent consideration to be settled in
common stock, the Company used private market data to determine the fair value of the shares as of the acquisition date. For contingent consideration to be
settled in cash, the Company used an income approach that is primarily determined based on the present value of future cash flows using internal models. See
Note 12
“ Fair Value Measurements" for subsequent measurements of these contingent liabilities.
76
Fair Value of Consideration Transferred and NCI Fair Value
Cash
$
18,313
Issuance of shares of the Company's non-voting common stock
11,067
Contingent consideration
17,755
NCI
593
Total
$
47,728