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Annual Report & Accounts 2014 - NOTES
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management originally estimated the deferred consideration payable to be €8,963k, and the discount to be €4,076k, resulting in the discounted value being €4,887k. the revised earn out results in total deferred consideration increasing to €18,530k and the discount to €8,588k resulting in the new discounted value being €9,942k. the fair values of the revised earn out has been estimated using cash flow projections for the 4 years to 31 December 2014, and discounted using the estimated weighted average cost of capital of 21%. on 1 october 2013 the Betboo business migrated to the sportingbet trading platform, the payments terms of the earn-out changed from this date to the following. • Four consecutive monthly payments, with the first being in october 2013, of one quarter of 25 per cent of the net gaming Revenue for the period commencing 1 January 2013 and ending on 30 september 2013. • From 1 october 2013 there will be 9 monthly payments of €227,625 with the final payment in June 2014. • An earn-out dependent on certain revenue shares with a floor of €200,000 per month for the 40 months ending 31 January 2017. there are also further earn-out payments that stretch to the earlier of: (a) the date on which the total earn-outs reach €21,381,227 (b) 40 months after 31 January 2017 • the total earn-out cap remains at €21,381,227 the above changes did not constitute a significant modification. the fair values of the intangible assets acquired in the transaction and the impact of the revised earn-out are as follows: 2014 €000's acquisition price of Betboo initial consideration 2,840 Deferred consideration 18,541 total consideration 21,381 Acquisition costs 289 fair value 21,670 the deferred consideration has been discounted to reflect its fair value at the date of acquisition. the effect of this discount will be unwound over the period of the deferral with a charge to the income statement contained within interest expense. the expected impact of this over the earn-out period is shown below: prior periods 2013 2014 2015 2016 total €000's €000's €000's €000's €000's €000's Balance at 1 January - 12,283 7,582 3,953 1,606 - Fair value of deferred consideration 9,942 - - - - 9,942 unwinding of discount charged to income statement 6,147 1,677 710 54 11 8,599 payments made (3,806) (6,378) (4,339) - - (14,524) payments anticipated - - - (2,400) (1,617) (4,017) Balance at 31 December 12,283 7,582 3,953 1,606 - - total payments to date and anticipated are as follows: total €000's At acquisition 2,840 up to 31 December 2014 14,524 Anticipated future payments 4,017 total (cap = €21,381,227) 21,381 GVC HOLDINGS PLC ANNUAL REPORT 2014 47 notes to the consolidated financial statements