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Business Acquisitions
12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
Business Acquisitions Business Acquisitions
2021 Acquisitions
During the fourth quarter of 2021, we completed the acquisitions of Neustar, Inc. (“Neustar”) and Sontiq, Inc. (“Sontiq”). These transactions were accounted for as business combinations under the acquisition method of accounting. The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination generally be recognized at their fair values as of the acquisition date. The determination of fair value requires management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets has been recorded as goodwill. The results of operations of these acquisitions are included in our consolidated financial statements from the dates of acquisition.
Neustar
On December 1, 2021, we completed our previously announced acquisition of Neustar, pursuant to a Securities Purchase Agreement dated as of September 11, 2021 (the “Neustar Agreement”), by and between Trans Union LLC and Aerial Investors LLC.
Neustar, a premier identity resolution company with leading solutions in Marketing, Risk and Communications, enables customers to build connected consumer experiences by combining decision analytics with real-time identity resolution services driven by its OneID platform. The acquisition of Neustar provides immediate scale to our identity resolution services through
their large, well-established customer base as well as accelerates the future growth of our identity-based solutions and expands our powerful digital identity capabilities through the addition of distinctive data and analytics, enabling consumers and businesses to transact online with greater confidence.
We acquired 100% of the equity interests of Neustar for $3,106.6 million in cash, subject to certain customary purchase price adjustments as set forth in the Neustar Agreement. The transaction was primarily funded with the proceeds from the issuance of our Incremental Term B-6 Loan, which closed concurrently with the closing of the transaction. See Note 12, “Debt,” for additional information about our Incremental Term B-6 Loan. There was no contingent consideration resulting from this transaction.
We engaged in business activities with Neustar prior to the acquisition that were not material. The results of operations of Neustar subsequent to the acquisition date and the acquired assets and assumed liabilities, including the preliminary allocation of goodwill and intangible assets, are included in the U.S. Markets segment, including revenue of $51.0 million and a net loss of $11.7 million in 2021.
Sontiq
On December 1, 2021, we completed our previously announced acquisition of Sontiq, pursuant to a Securities Purchase Agreement dated as of October 22, 2021 (the “Sontiq Agreement”), by and among TransUnion Interactive, Inc., EZShield Group Holdings, LLC and EZS Parent Inc.
Sontiq provides solutions including identity monitoring, restoration, and response products and services to help empower consumers and businesses to proactively protect against identity theft and cyber threats. The acquisition of Sontiq enables access to an attractive new base of customers and consumers through a highly recurring subscription-based revenue model and also complements and expands our Consumer Interactive solutions portfolio by providing valuable identity protection services for consumers. Sontiq’s identity security monitoring products incorporate our credit data, are highly complementary to our capabilities and are expected to significantly increase our opportunities for growth.
We acquired 100% of the equity interests of Sontiq for $642.8 million in cash, subject to certain customary purchase price adjustments as set forth in the Sontiq Agreement. The transaction was primarily funded with the proceeds from the issuance of our Second Lien Term Loan, which closed concurrently with the closing of the transaction. The Second Lien Term Loan was repaid in full prior to December 31, 2021. See Note 12, “Debt,” for additional information about our Second Lien Term Loan. There was no contingent consideration resulting from this transaction.
The results of operations of Sontiq subsequent to the acquisition date and the acquired assets and assumed liabilities, including the preliminary allocation of goodwill and intangible assets, are included within the Consumer Interactive segment. The results of operations of Sontiq subsequent to the acquisition date are not material to our consolidated financial results.
Acquisition Costs
We recognized transaction costs related to the acquisitions of Neustar and Sontiq of $38.8 million for the year ended December 31, 2021. These costs include investment banker fees, legal, due diligence, and other external costs that we have recorded within other income and expense.
Purchase Price Allocations
The purchase price for the acquisitions are preliminary, pending final customary purchase price adjustments. The valuations of the assets acquired and liabilities assumed have not yet been finalized as of December 31, 2021. The purchase price allocations are preliminary and subject to change, including the valuation of intangible assets, income taxes and goodwill, among other items. The purchase price allocations for both of the acquisitions will be finalized as the information necessary to complete the analysis is obtained, which we expect to complete within one year from the acquisition date.
The fair values assigned to assets acquired and liabilities assumed as of December 31, 2021 are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of the valuation analysis. Further, we have not yet allocated goodwill to reporting units.
The table below summarizes the preliminary allocation of fair value of assets acquired and liabilities assumed as of December 1, 2021:
December 1, 2021
(in millions)NeustarSontiqTotal
Purchase price:$3,106.6 $642.8 $3,749.4 
Assets acquired:
Cash and cash equivalents$122.7 $17.8 $140.4 
Trade accounts receivable118.7 10.4 129.1 
Other current assets24.9 1.4 26.3 
Right of use lease assets83.2 2.4 85.6 
Property, plant and equipment42.5 5.2 47.7 
Identifiable intangible assets1,513.0 237.2 1,750.2 
Goodwill1
1,900.3 445.8 2,346.0 
Other assets5.4 0.2 5.6 
Total assets acquired$3,810.7 $720.3 $4,531.0 
Liabilities assumed:
Accounts payable$29.1 $7.0 $36.1 
Other current liabilities157.6 4.7 162.3 
Deferred revenue49.3 19.1 68.5 
Operating lease liabilities88.3 2.4 90.7 
Other liabilities14.7 0.1 14.8 
Deferred tax liabilities365.1 44.2 409.3 
Total liabilities assumed$704.1 $77.5 $781.6 
Net assets acquired:$3,106.6 $642.8 $3,749.4 
(1) For tax purposes, we estimate that $326.6 million of the goodwill, which originated from previous acquisitions of Neustar and Sontiq, is tax deductible.
Identifiable Intangible Assets
The following table sets forth the components of identifiable intangible assets acquired and the weighted average amortization period as of the acquisition date:
December 1, 2021
NeustarSontiq
(dollars in millions)Fair ValueWeighted-Average Amortization PeriodFair ValueWeighted-Average Amortization Period
Customer relationships$1,183.0 18 years$184.1 17 years
Technology and software320.0 10 years49.3 10 years
Trade names and trademarks10.0 1 year1.5 1 year
Non-compete agreements— — 2.3 2 years
Total identifiable intangible assets$1,513.0 16 years$237.2 15 years
In determining the fair value of the identifiable intangible assets, we utilized various forms of the income approach, depending on the asset being valued. The estimation of fair value requires significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Other inputs included historical data, current and anticipated market conditions, and growth rates.
The intangible assets were valued using the following valuation approaches:
Customer Relationships
We valued customer relationships using the multi-period excess-earnings method, a form of the income approach, which required the application of judgment for significant assumptions. Significant assumptions include customer attrition rates, EBITDA margins, and discount rates.
Technology and software
We valued the developed technology using the relief-from-royalty method, a form of the income approach, which required the application of judgment for significant assumptions. Significant assumptions include the royalty rate, economic depreciation factors, and discount rates.
Other identifiable intangible assets
Other identifiable intangible assets include trade names and trademarks and non-compete agreements for key employees, which are not material. Trade names and trademarks were valued using the relief from royalty method, and non-compete agreements were valued using the lost income method.
We recorded the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed as goodwill. The purchase price of both acquisitions exceeded the fair value estimate of the net assets acquired primarily due to expected future revenue growth opportunities, synergies, operating efficiencies and the assembled workforce. The acquisition of Neustar is expected to accelerate growth through both material revenue synergies and increased participation in the fast-growing digital marketing and identity verification marketplaces. The acquisition of Sontiq is expected to result in a more comprehensive set of offerings which are expected to significantly increase growth opportunities for the Company.
Unaudited pro-forma financial information
The supplemental pro-forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of TransUnion and Neustar, assuming the transaction occurred on January 1, 2020. The pro-forma revenues and results of operations of Sontiq are not included because the impact on our consolidated financial statements is immaterial. The supplemental pro-forma financial information does not necessarily represent what the combined companies' revenue or results of operations would have been had the acquisition of Neustar been completed on January 1, 2020, nor is it intended to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining TransUnion and Neustar.
The unaudited supplemental pro-forma financial information has been calculated after applying TransUnion’s accounting policies and adjusting the results of the combined company to reflect incremental amortization expense resulting from the fair value adjustments for acquired intangible assets as well as the net decrease to interest expense resulting from the elimination of the historical interest expense on Neustar debt that was paid off at closing partially offset by incremental interest expense resulting from the external debt borrowed by TransUnion to fund the acquisition, and the corresponding income tax impact of these adjustments.
Also, during the year ended December 31, 2021, TransUnion and Neustar incurred $29.7 million and $88.2 million of acquisition-related costs, respectively. These expenses are reflected in Pro-forma net income from continuing operations attributable to TransUnion for the year ended December 31, 2020, in the table below and the acquisition related expenses incurred by TransUnion are included in other income (expense), net, in our consolidated statement of income for the year ended December 31, 2021..
There are no other material non-recurring pro-forma adjustments directly attributable to the acquisition included in the reported pro-forma revenue and pro-forma net income.
(Unaudited)
TransUnion and Neustar combined
For the Year Ended
(in millions)December 31,
2021
December 31,
2020
Pro-forma revenue$3,493.2 $3,064.5 
Pro-forma net income from continuing operations attributable to TransUnion$247.6 $72.9 
2020 and 2019 Acquisitions
During 2020 and 2019, we acquired 100% of the equity of several businesses, including Tru Optik Data Corp (“Tru Optik”) and Signal Digital, Inc. (“Signal”) in 2020, and TruSignal, Inc. (“TruSignal”) in 2019. The results of operations of Tru Optik, Signal and TruSignal, which are not material to our consolidated financial statements, have been included as part of our U.S. Markets reportable segment in our consolidated statements of income since the date of each of the acquisitions. During 2021, we finalized the purchase accounting for Tru Optik and Signal, with no material changes to our previous estimates.