v3.26.1
Business Combinations – Endstate Authentic LLC
 12 Months Ended
Jun. 30, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combinations – Endstate Authentic LLC

Note 22: Business Combinations – Endstate Authentic LLC

 

On December 31, 2025, Alliance Entertainment Holding Corporation (the “Company”), through a wholly owned subsidiary, completed the acquisition of substantially all of the assets of Endstate (the “Acquisition”). The Acquisition was accounted for as a business combination under ASC 805, Business Combinations.

 

The Acquisition was completed to enhance the Company’s technology capabilities and expand its digital and direct-to-consumer product offerings. The results of operations of the acquired business were included in the Company’s consolidated financial statements at June 30, 2026, since the acquisition date was not material.

 

Purchase Consideration

 

The total consideration transferred in connection with the Acquisition was $7.9 million, which consisted of the following (in thousands):

  

   Amount 
Cash paid at closing  $1,150 
Deferred payment payable one year after closing   1,300 
Fair value of contingent consideration   5,500 
Total consideration transferred  $7,950 

 

Certain payments to the founders, including guaranteed payments and sign-on bonuses that were not contingent on continued employment, were determined to represent consideration transferred in exchange for the acquired business and were included in purchase consideration. Payments contingent on continued employment were excluded from purchase consideration and will be recognized as compensation expense over the requisite service period.

 

Preliminary Purchase Price Allocation

 

The allocation of the purchase consideration is preliminary and subject to adjustment during the measurement period which ends on December 31, 2026. The Company is finalizing its valuation of acquired assets and assumed liabilities. The preliminary allocation of the consideration transferred is as follows (in thousands):

  

Asset / (Liability)  Amount 
Identifiable intangible assets:     
Technology  $1,550 
Trademarks   800 
Customer relationships   900 
Total identifiable intangible assets   3,250 
Goodwill   4,965 
Net liabilities assumed   (265)
Total consideration transferred  $7,950 

 

Identifiable intangible assets are being amortized on a straight-line basis over an estimated useful life of ten years.

 

Goodwill represents the excess of the consideration transferred over the estimated fair value of the identifiable net assets acquired and reflects expected synergies, future technology enhancements, and the assembled workforce. Goodwill is deductible through amortization over 15 years for income tax purposes.

 

 

Contingent Consideration

 

The Acquisition includes contingent consideration arrangements consisting of earnout payments based on future financial performance during the 2026 through 2028 periods.

 

The contingent consideration was recorded at an estimated fair value of $5.5 million as of the acquisition date and is included in accrued liabilities on the accompanying consolidated balance sheets. The fair value was determined using a probability-weighted discounted cash flow model and includes significant unobservable inputs. Accordingly, the contingent consideration liability is classified as Level 3 within the fair value hierarchy.

 

Contingent consideration is remeasured at each reporting date, with changes in fair value recognized in earnings.

 

Acquisition-Related Costs

 

Transaction costs incurred in connection with the Acquisition were expensed as incurred and included in transaction costs.