Marcus & Millichap, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Acquisitions, Goodwill and Other Intangible Assets

Acquisitions, Goodwill and Other Intangible Assets

3 Months Ended

Jun. 30, 2020

Acquisitions, Goodwill and Other Intangible Assets

6.	Acquisitions, Goodwill and Other Intangible Assets

Through acquisitions, the Company expanded its network of its real estate sales professionals and provided further diversification to its real estate brokerage services.

Acquisitions are accounted for as a business combination, and the results are included in the condensed consolidated financial statements beginning on the acquisition date. The aggregate consideration generally includes: (i) cash paid at closing and (ii) the fair value of contingent and deferred consideration using a probability-weighted, discounted cash flow estimate on achieving certain financial metrics or service and time requirements. Contingent and deferred consideration are included in accounts payable and other liabilities and other liabilities captions in the condensed consolidated balance sheets.

The goodwill recorded as part of the acquisitions primarily arises from the acquired assembled workforce and commercial sales platform. The Company expects all of the goodwill to be tax deductible, with the

tax-deductible

amount of goodwill related to the contingent and deferred consideration to be determined once the cash payments are made to settle any contingent and deferred consideration. The goodwill resulting from acquisitions is allocated to the Company’s one reporting unit.

Goodwill and intangible assets, net consisted of the following (in thousands):


	March 31, 2020							December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Goodwill and intangible assets:
Goodwill (1)	$	19,062	$	—		$	19,062	$	15,072	$	—		$	15,072
Intangible assets (2)		14,851		(2,659	)		12,192		9,050		(1,810	)		7,240

	$	33,913	$	(2,659	)	$	31,254	$	24,122	$	(1,810	)	$	22,312

(1)	Represents additions from acquisitions.

(2)	Total weighted average amortization period was 5.00 years and 4.37 years as of March 31, 2020 and December 31, 2019, respectively.

The changes in the carrying amount of goodwill consisted of the following (in thousands):


	Three Months Ended March 31,
	2020		2019
Beginning balance	$	15,072	$	11,459
Additions from acquisitions		3,990		—
Impairment losses		—		—

Ending balance	$	19,062	$	11,459

Estimated amortization expense for intangible assets by year for the next five years and thereafter consisted of the following (in thousands):


	March 31, 2020
Remainder of 2020	$	2,589
2021		2,594
2022		2,212
2023		2,209
2024		1,622
Thereafter		966

	$	12,192

The Company evaluates goodwill and intangible assets for impairment annually in the fourth quarter. In addition to the annual impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the period subsequent to the annual impairment testing which indicate that it is more likely than not an impairment loss has occurred. As of March 31, 2020, the Company considered the

COVID-19

pandemic as a triggering event and evaluated its goodwill and intangible

assets for impairment testing. The Company considered the impact from the

COVID-19

induced economic slowdown and current projected recovery timeframes and their impact on goodwill and intangible assets. The Company concluded that as of March 31, 2020, there was no impairment of its goodwill and intangible assets.