Acquisitions

12 Months Ended

Dec. 31, 2019

We account for acquisitions using the acquisition method of accounting, and, accordingly, the assets and liabilities acquired are recorded at their estimated fair values and the results of operations for each acquisition have been included in our consolidated results from their respective acquisition dates.

a. Acquisitions Completed During the Year Ended December 31, 2019

During the year ended December 31, 2019, in order to enhance our existing operations in the United States, Colombia, Germany, Hong Kong, Latvia, Slovakia, Switzerland, Thailand and the United Kingdom and to expand our operations into Bulgaria, we completed the acquisition of 10 storage and records management companies and one art storage company for total cash consideration of approximately $51,000. The individual purchase prices of these acquisitions ranged from approximately $700 to $12,500.

b. Acquisitions Completed During the Year Ended December 31, 2018

Acquisition of IO Data Centers

On January 10, 2018, we completed the acquisition of the United States operations of IODC, a leading data center colocation space and solutions provider based in Phoenix, Arizona, including the land and buildings associated with four data centers in Phoenix and Scottsdale, Arizona; Edison, New Jersey; and Columbus, Ohio (the “IODC Transaction”). At the closing of the IODC Transaction, we paid approximately $1,347,000. In February 2019, we paid approximately $31,000 in additional purchase price associated with the execution of customer contracts from the closing through the one-year anniversary of the IODC Transaction, which was accrued at December 31, 2018. This amount, net of amortization, is reported as a third-party commissions asset as a component of Other within Other assets, net, in our Consolidated Balance Sheets at December 31, 2019 and 2018.

The unaudited consolidated pro forma financial information (the "Pro Forma Financial Information") below summarizes the combined results of us and IODC on a pro forma basis as if the IODC Transaction had occurred on January 1, 2017. The Pro Forma Financial Information is presented for informational purposes and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2017. The Pro Forma Financial Information for the period presented includes purchase accounting adjustments (including amortization expenses from acquired intangible assets and depreciation of acquired property, plant and equipment). We and IODC collectively incurred $28,064 of operating expenditures to complete the IODC Transaction (including advisory and professional fees). These operating expenditures have been reflected within the results of operations in the Pro Forma Financial Information as if they were incurred on January 1, 2017.



	(Unaudited)
	Year Ended December 31,
	2018		2017
Total Revenues	$	4,229,251	$	3,983,016
Income from Continuing Operations	$	377,510	$	110,677
Per Share Income from Continuing Operations - Basic	$	1.32	$	0.39
Per Share Income from Continuing Operations - Diluted	$	1.31	$	0.39

In addition to our IODC Transaction, we completed certain other acquisitions in 2019, 2018 and 2017. The Pro Forma Financial Information does not reflect these acquisitions due to the insignificant impact of these acquisitions on our consolidated results of operations.

Other Noteworthy Acquisitions

On May 25, 2018, in order to further expand our data center operations in Europe, we acquired EvoSwitch Netherlands B.V. and EvoSwitch Global Services B.V. (collectively, "EvoSwitch"), a data center colocation space and solutions provider with a data center in Amsterdam (the "EvoSwitch Transaction"), for (i) cash consideration of 189,000 Euros (or approximately $222,000, based upon the exchange rate between the Euro and the United States dollar on the closing date of the EvoSwitch Transaction) and (ii) $25,000 of additional consideration in the form of future services we will provide to the seller, which is included in purchase price holdbacks and other in the allocation of the purchase price paid table below.

On March 8, 2018, in order to expand our data center operations into Europe and Asia, we acquired the operations of two data centers in London and Singapore from Credit Suisse International and Credit Suisse AG (together, "Credit Suisse") for a total of (i) 34,600 British pounds sterling and (ii) 81,000 Singapore dollars (or collectively, approximately $111,400, based upon the exchange rates between the United States dollar and the British pound sterling and Singapore dollar on the closing date of the Credit Suisse transaction) (the “Credit Suisse Transaction”). As part of the Credit Suisse Transaction, Credit Suisse entered into a long-term lease with us to maintain existing data center operations.

In addition to the transactions noted above, during 2018, in order to enhance our existing operations in the United States, Brazil, China, India, Ireland, Philippines, South Korea and the United Kingdom and to expand our operations into Croatia, we completed the acquisition of 11 storage and records management companies and three art storage companies for total consideration of approximately $98,100. The individual purchase prices of these acquisitions ranged from approximately $1,000 to $34,100.

c. Acquisitions Completed During the Year Ended December 31, 2017

In December 2017, we acquired the storage and information management assets and operations of Santa Fe in China (the “Santa Fe China Transaction”) for approximately $16,800. The purchase price for the Santa Fe China Transaction was not paid until January 2018 and, therefore, we accrued for the purchase price of the Santa Fe China Transaction in our Consolidated Balance Sheet as of December 31, 2017.

In September 2017, in order to expand our existing entertainment storage and services operations in the United States and to expand our entertainment storage and services operations into Canada, the United Kingdom, France, the Netherlands and Hong Kong, we completed the acquisition of Bonded Services of America, Inc. and Bonded Services Acquisition, Ltd. (together, "Bonded") (the "Bonded Transaction"), providers of media asset storage and management services for global entertainment and media companies, for approximately 62,000 British pounds sterling (or approximately $83,000, based upon the exchange rate between the British pound sterling and the United States dollar on the closing date of the Bonded Transaction).

In September 2017, in order to expand our data center operations in the United States, we acquired Mag Datacenters LLC, which operated Fortrust, a private data center business with operations in Denver, Colorado (the “Fortrust Transaction”). At the closing of the Fortrust Transaction, we paid approximately $54,500 in cash (the "Fortrust Cash Consideration") and issued 2,193,637 shares of our common stock (the "Fortrust Stock Consideration"). The shares of our common stock issued to the former owners of Fortrust in connection with the Fortrust Transaction contain certain restrictions that impact the marketability of such shares for a period of six months following the closing date of the Fortrust Transaction (the “Lack of Marketability Restriction”). The 2,193,637 shares issued as part of the Fortrust Stock Consideration were valued at approximately $37.84 per share, which reflects a discount related to the Lack of Marketability Restriction, resulting in a total purchase price (including the Fortrust Cash Consideration and the Fortrust Stock Consideration) of approximately $137,500.

In addition to the transactions noted above, during 2017, in order to enhance our existing operations in the United States, India, Greece, Peru and South Africa and to expand our operations into Cyprus, Macau, South Korea and the United Arab Emirates, we completed the acquisition of 12 records and information management companies and one art storage company for total consideration of approximately $98,200. The individual purchase prices of these acquisitions ranged from approximately $100 to $28,500.

d. Purchase Price Allocation

A summary of the cumulative consideration paid and the allocation of the purchase price paid for all of our acquisitions in each respective year is as follows:



	2019			2018									2017
	Total			IODC Transaction			Other Fiscal Year 2018 Acquisitions			Total			Total
Cash Paid (gross of cash acquired)(1)	$	53,230		$	1,347,046		$	432,078		$	1,779,124		$	234,314
Purchase Price Holdbacks and Other(2)	4,135			—			35,218			35,218			20,093
Fair Value of Common Stock Issued	—			—			—			—			83,014
Fair Value of Noncontrolling Interests	—			—			—			—			1,507
Total Consideration	57,365			1,347,046			467,296			1,814,342			338,928
Fair Value of Identifiable Assets Acquired:
Cash	2,260			34,307			10,227			44,534			14,746
Accounts Receivable, Prepaid Expenses and Other Assets	3,102			7,070			17,662			24,732			24,379
Property, Plant and Equipment(3)	5,396			863,027			225,848			1,088,875			150,878
Customer Relationship Intangible Assets(4)	22,071			—			44,622			44,622			116,028
Operating Lease Right-of-Use Assets	16,956			—			—			—			—
Data Center In-Place Leases(5)	—			104,340			36,130			140,470			6,300
Data Center Tenant Relationships(6)	—			77,362			18,410			95,772			—
Data Center Above-Market Leases(7)	—			16,439			2,381			18,820			—
Other Intangible Assets	—			—			—			—			14,487
Debt Assumed	—			—			(12,312		)	(12,312		)	(5,287		)
Accounts Payable, Accrued Expenses and Other Liabilities	(3,233		)	(36,230		)	(17,206		)	(53,436		)	(24,869		)
Operating Lease Liabilities	(16,956		)	—			—			—			—
Deferred Income Taxes	(1,813		)	—			(43,218		)	(43,218		)	(18,122		)
Data Center Below-Market Leases(7)	—			(11,421		)	(694		)	(12,115		)	—
Total Fair Value of Identifiable Net Assets Acquired	27,783			1,054,894			281,850			1,336,744			278,540
Goodwill Initially Recorded(8)	$	29,582		$	292,152		$	185,446		$	477,598		$	60,388

_______________________________________________________________________________

(1)

Included in cash paid for acquisitions in our Consolidated Statement of Cash Flows for the year ended December 31, 2019 is net cash acquired of $2,260 and contingent and other payments, net of $7,267 related to acquisitions made in years prior to 2019. Included in cash paid for acquisitions in our Consolidated Statement of Cash Flows for the year ended December 31, 2018 is net cash acquired of $44,534 and contingent and other payments, net of $23,967 related to acquisitions made in years prior to 2018. Included in cash paid for acquisitions in our Consolidated Statement of Cash Flows for the year ended December 31, 2017 is net cash acquired of $14,746 and contingent and other payments, net of $137 related to acquisitions made in years prior to 2017.


(2)	Purchase price holdbacks and other includes $18,824 purchase price accrued for the EvoSwitch Transaction in 2018 and $16,771 purchase price accrued for the Santa Fe China Transaction in 2017.


(3)	Consists primarily of buildings, building improvements, leasehold improvements, data center infrastructure, racking structures, warehouse equipment and computer hardware and software.


(4)	The weighted average lives of customer relationship intangible assets associated with acquisitions in 2019, 2018 and 2017 was 16 years, 10 years and 12 years, respectively.


(5)	The weighted average lives of data center in-place leases associated with acquisitions in 2018 was six years.


(6)	The weighted average lives of data center tenant relationships associated with acquisitions in 2018 was nine years.


(7)	The weighted average lives of data center above-market leases associated with acquisitions in 2018 was three years and the weighted average lives of data center below-market leases associated with acquisitions in 2018 was seven years.


(8)	The goodwill associated with acquisitions, including IODC, is primarily attributable to the assembled workforce, expanded market opportunities and costs and other operating synergies anticipated upon the integration of the operations of us and the acquired businesses.

Allocations of the purchase price for acquisitions made in 2019, 2018 and 2017 were based on estimates of the fair value of the net assets acquired and are subject to adjustment upon the finalization of the purchase price allocations. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The estimates and assumptions underlying the initial valuations are subject to the collection of information necessary to complete the valuations within the measurement periods, which are up to one year from the respective acquisition dates. The preliminary purchase price allocations that are not finalized as of December 31, 2019 primarily relate to the final assessment of the fair values of intangible assets (primarily customer relationship intangible assets), property, plant and equipment (primarily racking structures) and income taxes (primarily deferred income taxes) associated with the acquisitions we closed in 2019.

As the valuation of certain assets and liabilities for purposes of purchase price allocations are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances regarding these assets and liabilities that existed at the acquisition date. Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition dates. Adjustments recorded during the fourth quarter of 2019 were not material to our results from operations.