Annual report [Section 13 and 15(d), not S-K Item 405]

Note 3 - Acquisition

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Note 3 - Acquisition
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Business Combination [Text Block]

3.  Acquisition

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Acquisition of Douglas Stewart Software & Services, LLC

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On July 31, 2024, Climb Global Solutions DSS, LLC, a wholly-owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) and purchased the entire share capital of Douglas Stewart Software & Services, LLC (“DSS”), a Florida limited liability company, for an aggregate purchase price of approximately $20.3 million (subject to certain adjustments) plus a potential post-closing earnout payment. DSS distributes software to VARs and campus stores across North America in both the K-12 and higher education markets, furthering the Company's reach into these markets. The Purchase Agreement contains customary representations, warranties, covenants and indemnities. The acquisition was funded utilizing cash from the Company’s balance sheet.

 

The financial position and operating results of DSS is included in the Company’s consolidated financial statements from the date of the acquisition. The Company recorded net revenue for DSS of approximately $11.8 million and net income of approximately $0.8 million during the year ended  December 31, 2024.

 

Intangible assets are comprised of approximately $13.6 million of vendor relationships with a weighted average amortization period of 11 years, representing the expected period of benefits. Goodwill, which was allocated to the Distribution segment, is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. The DSS transaction was structured as an asset acquisition and as such the goodwill resulting from the transaction will be deductible for income tax purposes.

 

The Company used the income approach to value the intangible assets, representing acquired vendor relationships. The fair value measurements were primarily based on significant inputs that are not observable, which are categorized as a Level 3 measurement in the fair value hierarchy (See Note 13 – Fair Value Measurements). Inputs used to value these intangible assets include the discount rate, projection of all future cash flows, long-term growth rates in revenue and earnings before interest, tax, depreciation and amortization, vendor attrition rates and applicable income tax rates. The excess purchase price recorded to goodwill primarily represents the future economic benefits the Company expects to achieve as a result of combining operations and expanding vendor relationships.

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The purchase consideration included approximately $1.7 million fair value for potential earn-out consideration if certain targets were achieved by September 30, 2025, payable in cash. During the year  December 31, 2024, the Company reassessed the earn-out liability and increased the fair value of the earn out liability to approximately $1.9 million, with $0.1 million adjustment recognized within change in fair value of acquisition contingent consideration during the year ended December 31, 2024. The earn-out liability was included in current liabilities as of  December 31, 2024. During the year ended  December 31, 2025, the Company reassessed the earn-out liability with $1.4 million adjustment recognized within change in fair value of acquisition contingent consideration. The ending $3.2 million earn-out was paid in cash during the year ended December 31, 2025 and no liability remains as of December 31, 2025. 

 

(in thousands)

  

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Prepaid expenses and other current assets

   $ 773  

Inventory

     18  

Right-of-use asset

     291  

Other assets

     8  

Accounts payable and accrued expenses

     (636 )

Lease liability, current portion

     (88 )

Lease liability, non-current portion

     (249 )

Intangibles - Vendor Relationships

     13,627  

Goodwill

     8,401  

Net assets

   $ 22,145  

 

(in thousands)

  

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Supplementary information:

 

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Cash paid to sellers

   $ 20,420  

Contingent earn-out

     1,725  

Total purchase consideration

   $ 22,145  

 

Acquisition of Data Solutions Holdings Limited

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On  October 6, 2023, the Company entered into a Share Purchase Agreement and purchased the entire share capital of Data Solutions Holdings Limited (“Data Solutions”) for an aggregate purchase price of approximately €15.0 million (equivalent to $15.9 million USD), subject to certain working capital and other adjustments, paid at closing plus a potential post-closing earn-out. The allocation of the purchase price was based on the estimated fair value of Data Solutions’ net tangible and identifiable intangible assets as of the date of the acquisition. The transaction was accounted for under the purchase method of accounting.

 

The purchase consideration included approximately $2.2 million fair value for potential earn-out consideration if certain targets are achieved, payable in cash. During the year  December 31, 2024, the Company reassessed the earn-out liability and increased the fair value of the earn out liability to approximately $3.4 million, with $1.2 million adjustment recognized within change in fair value of acquisition contingent consideration during the year ended December 31, 2024. The earn-out was paid in cash during the year ended December 31, 2024 and no liability remains as of December 31, 2024. The earn-out liability was included in current liabilities as of  December 31, 2023.

 

In connection with the acquisition of Data Solutions on  October 6, 2023, the Company acquired an invoice discounting facility (“IDF”) that was with recourse to the Company (See Note 8 – Credit Facilities). The IDF had no outstanding balance as of  December 31, 2025 and 2024,as the Company terminated the IDF during the year ended December 31, 2024.

 

During the years ended December 31, 2025, 2024 and 2023, the Company recognized acquisition related costs of $0.8 million, $2.3 million and $0.6 million, respectively. These acquisition related costs are reflected in the accompanying consolidated statements of earnings. The costs incurred during the year ended  December 31, 2025  relate to our continued acquisition initiatives, while the costs incurred during the year ending  December 31, 2024 relate to the DSS acquisition and the costs incurred during the year ended December 31, 2023 relate to the Data Solutions acquisition.