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BUSINESS ACQUISITION
 12 Months Ended
Dec. 31, 2024
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
BUSINESS ACQUISITION

3. BUSINESS ACQUISITION

 

The Company accounted for its acquisition in accordance with ASC 805, “Business Combination” (“ASC 805”). The result of the acquiree’s operation has been included in the consolidated financial statements since the acquisition date. The excess of the fair value of the consideration transferred over the fair value of net tangible and intangible assets acquired was recorded as goodwill, which is not deductible for corporate income taxation purposes.

 

a) Acquisition of EliteCRM

 

On March 10, 2021, the Company entered into a definitive agreement to acquire all the equity interests of EliteCRM in exchange for RMB180 million consideration in cash. EliteCRM was a customer relationship management software provider, and the Group expected to generate synergy with the Cloud-based CC service line after the closing of acquisition. The Group obtained the control of EliteCRM business on March 22, 2021, and paid off the cash consideration for the year ended December 31, 2021.

 

The acquisition was recorded as a business combination. The Group determined the fair values of assets acquired and liabilities assumed for this acquisition with assistance of an independent appraiser. The goodwill resulting from the acquisition is primarily attributable to the assembled workforce and established network of customers around China. The acquired goodwill is not deductible for tax purposes. A summary of identifiable assets acquired and liabilities assumed in connection with the acquisition is as follows:

 

Purchase consideration:  RMB 
cash   180,000 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:  March 22,2021 
Cash   3,986 
Accounts receivable   6,455 
Prepaid expenses and other current assets   765 
Property and equipment, net   4,944 
Intangible assets     
Trademark   4,632 
Non-compete arrangements   85 
Customer relationship   15,000 
Technology   4,588 
Accounts payable   (5,215)
Contract liabilities   (568)
Accrued expenses and other current liabilities   (8)
Deferred income tax liability   (1,665)
Total identifiable assets acquired and liabilities assumed   32,999 
Goodwill   147,001 

 

The intangible assets consist of trademark, non-compete arrangements, customer relationship and Technology. The fair values of trademark of RMB4,632, non-competition arrangements of RMB85, customer relationship of RMB15,000 and Technology of RMB 4,588 are amortized over 8 years, 2 years, 10 years and 6 years, respectively on a straight-line basis.

 

Intangible assets and goodwill arising from the above acquisition was subjected to annual impairment assessment, and impairment loss of RMB8,691, nil and nil from intangible assets, and impairment loss of RMB10,107, nil and nil from goodwill was recorded for the year ended December 31 2022, 2023 and 2024, respectively (refer to Note 10, and 11).

 

 

b) Acquisition of Zhuge Inc.

 

On December 8, 2021, the Company entered into a share purchase agreement with all of the selling shareholders of Zhuge Inc. to acquire 100% equity interests of Zhuge Inc. in exchange for RMB93.5 million consideration in cash and 30,463 ordinary shares of the Company. Zhuge Inc. mainly provided professional data intelligence solutions, and the Group expected to generate synergy with the Cloud-based CC service line after the closing of acquisition. The Group obtained the control of Zhuge Inc. on December 22, 2021 and paid off the cash consideration of RMB93.5 million as of December 31, 2023.

 

The acquisition was recorded as a business combination. The Group determined the fair values of assets acquired and liabilities assumed for this acquisition with assistance of an independent appraiser. The goodwill resulting from the acquisition is primarily attributable to the assembled workforce and established network of customers around China. The acquired goodwill is not deductible for tax purposes. A summary of identifiable assets acquired and liabilities assumed in connection with the acquisition is as follows:

 

Purchase consideration:  RMB 
cash   93,511 
Fair value of 30,463 ordinary shares   300 
    93,811 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:  December 31, 2021 
Cash   6,551 
Accounts receivable   815 
Prepaid expenses and other current assets   635 
Property and equipment, net   19 
Intangible assets     
Trademark   2,840 
Non-compete arrangements   720 
Order backlogs   8,560 
Customer relationship   - 
Technology   6,400 
Short-term loan   (5,500)
Accounts payable   (1,220)
Contract liabilities   (4,129)
Accrued expenses and other current liabilities   (12,780)
Deferred income tax liability   (4,630)
Long-term borrowings   (9,144)
Total identifiable assets acquired and liabilities assumed   (10,863)
Goodwill   104,674 

 

The intangible assets consist of trademark, non-compete arrangements, order backlogs, customer relationship and Technology. The fair values of trademark of RMB2,840, non-competition arrangements of RM720, order backlogs of RMB8,560, and Technology of RMB6,400 are amortized over 10 years, 4 years, 4 years and 7 years, respectively on a straight-line basis.

 

Intangible assets and goodwill arising from the above acquisition was subjected to the annual impairment assessment, and impairment loss of RMB15,002 and RMB57,271 from intangible assets and goodwill was recorded for the year ended December 2022, respectively (refer to Note 10, and 11).

 

The acquisition above did not have a material impact on the Group’s consolidated financial statements, and, therefore, pro forma disclosures have not been presented.

 

 

c) Acquisition of Molun SCRM

 

On January 26, 2022, the Company entered into a definitive agreement to acquire all the equity interests of Molun SCRM business with the cash consideration of RMB31.8 million, which was the private domain social customer relationship management (“SCRM”) software provider targeting car OEMs and dealers. The Group expected to generate synergy with the Cloud-based CC service line after the closing of acquisition. The Group obtained the control of Molun SCRM business in March, 2022 and paid off the cash consideration of RMB31.8 million as of December 31, 2022.

 

The transaction was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. The acquisition was recorded as a business combination. The Group determined the fair values of assets acquired and liabilities assumed for this acquisition with assistance of an independent appraiser. The goodwill resulting from the acquisition is primarily attributable to the assembled workforce and established network of customers around China. The acquired goodwill is not deductible for tax purposes. A summary of identifiable assets acquired and liabilities assumed in connection with the acquisition is as follows:

 

Purchase consideration:  RMB 
cash   31,800 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:  March,2022 
Prepaid expenses and other current assets   150 
Intangible assets     
Order backlogs   100 
Trademark   1,000 
Technology   3,730 
Contract liabilities   (12,002)
Deferred income tax liability   (1,207)
Total identifiable assets acquired and liabilities assumed   (8,229)
Goodwill   40,029 

 

The intangible assets consist of non-compete arrangements, customer relationship and Technology. The fair values of order backlogs of RMB100, trademark of RMB1,000 and Technology of RMB3,730 are amortized over 1 year, 10 years and 9 years, respectively on a straight-line basis.

 

Intangible assets and goodwill arising from the above acquisition was subjected to the annual impairment assessment, and impairment loss of RMB4,318 and RMB40,029 from intangible assets and goodwill was recorded for the year ended December 31, 2022, respectively (refer to Note 10, and 11).

 

The acquisition above did not have a material impact on the Group’s consolidated financial statements, and, therefore, pro forma disclosures have not been presented.