Business Combinations

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Business Combinations

3. Business Combinations

LDR Acquisition

On July 13, 2016, we completed our acquisition of LDR Holding Corporation (“LDR”). We paid cash of $1,138.0 million. The total amount of merger consideration utilized for the acquisition method of accounting, as reduced by the merger consideration paid to holders of unvested LDR stock options and LDR stock-based awards of $24.1 million, was $1,113.9 million. The addition of LDR provides us with an immediate position in the growing cervical disc replacement (“CDR”) market. The combination positions us to accelerate the growth of our Spine business through the incremental revenues associated with entry into the CDR market and cross-portfolio selling opportunities to both Zimmer Biomet and LDR customer bases. The goodwill is generated from the operational synergies and cross-selling opportunities we expect to achieve from our combined operations. None of the goodwill is expected to be deductible for tax purposes.

The purchase price allocation as of March 31, 2017 is preliminary. The primary tasks to be completed related to our purchase price accounting are finalizing tax accounts, including, but not limited to, the allocation of acquired intangible assets and goodwill on a jurisdictional basis. There may be differences between the preliminary estimates of fair value and the final acquisition accounting, which differences could be material. The final estimates of fair value are expected to be completed as soon as possible, but no later than July 13, 2017.

The following table summarizes the preliminary estimates of fair value of the assets acquired and liabilities assumed in the LDR acquisition (in millions):

	As of July 13, 2016 (as adjusted as of December 31, 2016)		Adjustments			As of July 13, 2016 (as adjusted as of March 31, 2017)
Cash	$	92.8	$	—		$	92.8
Accounts receivable, net		31.2		(0.7	)		30.5
Inventory		99.6		(2.6	)		97.0
Other current assets		5.6		—			5.6
Property, plant and equipment		24.7		—			24.7
Intangible assets not subject to amortization:
In-process research and development (IPR&D)		2.0		—			2.0
Intangible assets subject to amortization:
Technology		452.0		(5.0	)		447.0
Customer relationships		118.0		4.0			122.0
Trademarks and trade names		71.0		3.0			74.0
Other assets		76.8		0.2			77.0
Goodwill		482.4		(24.0	)		458.4
Total assets acquired		1,456.1		(25.1	)		1,431.0
Current liabilities		75.9		—			75.9
Long-term debt		0.5		—			0.5
Deferred taxes		265.5		(27.8	)		237.7
Other long-term liabilities		0.3		2.7			3.0
Total liabilities assumed		342.2		(25.1	)		317.1
Net assets acquired	$	1,113.9	$	—		$	1,113.9

We have not included pro forma information and certain other information under GAAP for the LDR acquisition because it did not have a material impact on our financial position or results of operations.

Other acquisitions

During the year ended December 31, 2016, we completed individually immaterial acquisitions of companies including Cayenne Medical, Inc. (“Cayenne Medical”), a sports medicine company, Compression Therapy Concepts, Inc. (“CTC”), a provider of non-invasive products for the prevention of deep vein thrombosis, CD Diagnostics, Inc. (“CD Diagnostics”), a medical diagnostic testing company, and MedTech SA (“MedTech”), a designer and manufacturer of robotic equipment for brain and spine surgeries. The total aggregate cash consideration was $441.7 million. These acquisitions were completed primarily to expand our product offerings. We have assigned a preliminary fair value of $58.0 million for settlement of preexisting relationships and additional payments related to these acquisitions that are contingent on the respective acquired companies’ product sales, commercial milestones and certain cost savings. The estimated fair value of the aggregate contingent payment liabilities was calculated based on the probability of achieving the specified sales growth, cost savings and commercial milestones and discounting to present value the estimated payments. The goodwill is generated from the operational synergies and cross-selling opportunities we expect to achieve from the technologies acquired. None of the goodwill related to these acquisitions is expected to be deductible for tax purposes.

The purchase price allocations as of March 31, 2017 are preliminary. The primary tasks to be completed related to our purchase price accounting are refinements to certain intangible assets, finalizing tax accounts, including, but not limited to, the allocation of acquired intangible assets and goodwill on a jurisdictional basis, and finalizing the estimated fair values of contingent liabilities. There may be differences between the preliminary estimates of fair value and the final acquisition accounting. The final estimates of fair value are expected to be completed as soon as possible, but no later than one year after the respective acquisition dates.

The following table summarizes the aggregate preliminary estimates of fair value of the assets acquired and liabilities assumed related to the Cayenne Medical, CTC, CD Diagnostics, MedTech, and other immaterial acquisitions that occurred during the year ended December 31, 2016 (in millions):

Current assets	$	64.2
Property, plant and equipment		4.5
Intangible assets		200.1
Goodwill		344.1
Other assets		7.8
Total assets acquired		620.7
Current liabilities		14.2
Long-term liabilities		106.8
Total liabilities assumed		121.0
Net assets acquired	$	499.7

We have not included pro forma information and certain other information under GAAP for the Cayenne Medical, CTC, CD Diagnostics, or MedTech acquisitions because, individually and in aggregate, they did not have a material impact on our financial position or results of operations.

Goodwill

The following table summarizes the changes in the carrying amount of our goodwill (in millions):

	Americas		EMEA			Asia Pacific		Product Category Operating Segments			Total
Balance at December 31, 2016
Goodwill	$	7,634.5	$	1,263.7		$	487.3	$	1,631.4		$	11,016.9
Accumulated impairment loss		—		—			—		(373.0	)		(373.0	)
		7,634.5		1,263.7			487.3		1,258.4			10,643.9
LDR purchase accounting		—		—			—		(24.0	)		(24.0	)
Other acquisitions		8.4		(4.3	)		—		—			4.1
Currency translation		18.1		31.1			8.6		3.3			61.1
Balance at March 31, 2017
Goodwill		7,661.0		1,290.5			495.9		1,610.7			11,058.1
Accumulated impairment loss		—		—			—		(373.0	)		(373.0	)
	$	7,661.0	$	1,290.5		$	495.9	$	1,237.7		$	10,685.1