XML 21 R10.htm IDEA: XBRL DOCUMENT v3.19.2
ACQUISITIONS
6 Months Ended
Jun. 30, 2019
Business Combinations [Abstract]  
ACQUISITIONS ACQUISITIONS

Pending Merger with TSYS

In connection with the proposed Merger, we have determined that Global Payments would be the acquirer of TSYS for accounting purposes. In the proposed Merger, holders of TSYS common stock would receive 0.8101 shares of Global Payments common stock for each share of TSYS common stock they own at the effective time of the Merger ("Exchange Ratio").

The preliminary estimated Merger consideration to be transfered to TSYS shareholders is $23.7 billion based on the number of TSYS common shares outstanding and the closing price of our common stock on July 25, 2019. Merger consideration will include the amount of TSYS' unsecured revolving credit facility that we are required to repay upon consummation of the Merger. During the three and six months ended June 30, 2019, we incurred transaction costs related to the Merger of $12.2 million. We expect the Merger to close in the fourth quarter of 2019, subject to customary closing conditions, regulatory approvals and shareholder approval for both companies. See "Note 7—Long-Term Debt and Lines of Credit" for a description of related debt financing activities.

Business Combinations

The transactions described below were accounted for as business combinations, which requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date.

SICOM

On October 17, 2018, we acquired SICOM Systems, Inc. ("SICOM") for total purchase consideration of $410.2 million, which we funded with cash on hand and by drawing on our Revolving Credit Facility (described in "Note 7—Long-Term Debt and Lines of Credit"). SICOM is a provider of end-to-end enterprise, cloud-based software solutions and other technologies to quick service restaurants and food service management companies. 

The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of June 30, 2019, including a reconciliation to the total purchase consideration, were as follows (in thousands):
Cash and cash equivalents
 
$
7,540

Property and equipment
 
5,838

Identified intangible assets
 
188,294

Other assets
 
22,275

Deferred income taxes
 
(48,560
)
Other liabilities
 
(31,350
)
Total identifiable net assets
 
144,037

Goodwill
 
266,164

Total purchase consideration
 
$
410,201



During the six months ended June 30, 2019, we made an adjustment of $1.0 million to reflect an increase in the total purchase consideration. As of June 30, 2019, we considered these balances to be provisional because we were still in the process of gathering and reviewing information to support the valuations of the assets acquired and liabilities assumed.

Goodwill arising from the acquisition of $266.2 million, included in the North America segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining our existing businesses. We expect that approximately $40 million of the goodwill from this acquisition will be deductible for income tax purposes.

The following table reflects the estimated fair values of the identified intangible assets of SICOM and the respective aggregated weighted-average estimated amortization periods:
 
Estimated Fair Values
 
Weighted-Average Estimated Amortization Periods
 
 
 
 
 
(in thousands)
 
(years)
Customer-related intangible assets
$
104,900

 
14
Acquired technologies
65,312

 
6
Trademarks and trade names
11,202

 
3
Contract-based intangible assets
6,880

 
5
Total estimated identified intangible assets
$
188,294

 
10


AdvancedMD

On September 4, 2018, we acquired AdvancedMD, Inc. ("AdvancedMD") for total purchase consideration of $706.9 million, which we funded with cash on hand and by drawing on our Revolving Credit Facility. AdvancedMD is a provider of cloud-based enterprise software solutions to small-to-medium sized ambulatory care physician practices.

The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of June 30, 2019, including a reconciliation to the total purchase consideration, were as follows (in thousands):
Cash and cash equivalents
 
$
7,657

Property and equipment
 
5,672

Identified intangible assets
 
419,500

Other assets
 
11,785

Deferred income taxes
 
(93,372
)
Other liabilities
 
(15,647
)
Total identifiable net assets
 
335,595

Goodwill
 
371,290

Total purchase consideration
 
$
706,885



During the six months ended June 30, 2019, we made measurement period adjustments, including a $5.6 million reduction to deferred income tax liabilities, which resulted in a corresponding reduction to goodwill. As of June 30, 2019, we considered these balances to be provisional because we were still in the process of gathering and reviewing information to support the valuation of the assets acquired and liabilities assumed.

Goodwill arising from the acquisition of $371.3 million, included in the North America segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining our existing businesses. We expect that substantially all of the goodwill from this acquisition will not be deductible for income tax purposes.

The following table reflects the estimated fair values of the identified intangible assets of AdvancedMD and the respective aggregated weighted-average estimated amortization periods:
 
Estimated Fair Values
 
Weighted-Average Estimated Amortization Periods
 
 
 
 
 
(in thousands)
 
(years)
Customer-related intangible assets
$
303,100

 
11
Acquired technologies
83,700

 
5
Trademarks and trade names
32,700

 
15
Total estimated identified intangible assets
$
419,500

 
10


Valuation of Identified Intangible Assets

For the acquisitions discussed above, the estimated fair values of customer-related intangible assets were determined using the income approach, which was based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rates used represented the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Acquired technologies were valued using the replacement cost method, which required us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital.