Business Combinations

Business combinations generally take place to either gain key technology or strengthen Veoneer’s position in a certain geographical area or with a certain customer. The results of operations and cash flows from the Company’s acquisitions have been included in the Company’s consolidated financial statements prospectively from their date of acquisition.

Fotonic i Norden dp AB

On November 1, 2017, Veoneer completed the acquisition of all the shares in Fotonic i Norden dp AB (Fotonic), headquartered in Stockholm and Skellefteå in Sweden. The acquisition date fair value of the total consideration transferred was $17 million, consisting of a $15 million cash payment and $2 million of deferred purchase consideration, payable at the 18-month anniversary of the closing date. The deferred purchase consideration reflects the holdback amount as stipulated in the share purchase agreement. The transaction has been accounted for as a business combination, with the purchase price allocation reflecting the final valuation results.

Fotonic provides Lidar and Time of Flight camera expertise and the acquisition included 35 Lidar and Time of Flight engineering experts, in addition to defined tangible and intangible assets. The strength of the acquired competence is on the Lidar and Time of Flight camera hardware side which form a complement to Veoneer’s skillset in the Lidar software and algorithms area. Lidar technology is an enabling technology for Highly Automated Driving and considered the primary sensor by all system developers. Fotonic is being reported in the Electronics segment.

The net assets acquired as of the acquisition date amounted to $17 million. The fair values of identifiable assets acquired consisted of Intangible assets of $4 million and Goodwill of $13 million, and the fair value of liabilities assumed consisted of Other current liabilities was less than a $1 million. Acquired Intangibles consisted of the fair value of background IP (patent & technical know-how). The useful life of the IP is five years and will be amortized on a straight-line basis. The recognized goodwill which is tax deductible primary reflects the valuation of the acquired workforce of specialist engineers.

Veoneer-Nissin Brake Systems

On March 31, 2016, the Company acquired a 51% interest in the entities that formed Veoneer-Nissin Brake Systems (Brake Systems) for approximately $263 million in cash. This entity comprises the Company’s Brake Systems Segment. Brake Systems designs, manufactures and sells products in the brake control and actuation systems business. Nissin Kogyo retained a 49% interest in the entities that formed Brake Systems. The Company has management and operational control of Brake Systems and has consolidated the results of operations and balance sheet from Brake Systems from the date of the acquisition forward. The transaction was accounted for as a business combination.

The acquisition combined Nissin Kogyo’s expertise and technology in brake control and actuation systems with the Company’s global reach and customer base to create a global competitive offering in the growing global Brake Systems market. Brake Systems is expected to further strengthen the Company’s role as a system supplier of products and systems for autonomous driving vehicles. From the date of the acquisition through December 31, 2016, the Brake Systems business reported net sales of $391 million and a net loss attributable to controlling interest of $5 million. The net loss attributable to the non-controlling interest was $7 million. The operating loss from the date of the acquisition through December 31, 2016 included $1 million of purchase accounting inventory fair value step-up adjustments in cost of sales upon the sale of acquired inventory.

Total Brake Systems acquisition related costs were approximately $2 million for consolidated the year ended December 31, 2016. These costs were reflected in Selling, general and administrative expenses in the Consolidated Statements of Operations.

The acquisition date fair value of the consideration transferred for the Company’s 51% interest in the entities that formed Brake Systems was $263 million in a cash transaction.

The following table summarizes the finalized fair values of identifiable assets acquired and liabilities assumed:



Assets:	As of March 31, 2016
Cash and cash equivalents	$	38
Receivables	2
Inventories	33
Other current assets	8
Property, plant and equipment	139
Other non-current assets	—
Intangibles	112
Goodwill	235
Total assets	$	566
Liabilities:
Accounts payable	$	6
Other current liabilities	23
Pension liabilities	9
Other non-current liabilities	13
Total liabilities	$	51
Net assets acquired	$	515
Less: Non-controlling interest	$	(252	)
Controlling interest	$	263

Acquired Intangibles primarily consisted of the fair value of customer contracts of $51 million and certain technology of $61 million. The customer contracts will be amortized straight-line over 7 years and the technology will be amortized straight-line over 10 years.

The recognized goodwill of $235 million reflects expected synergies from combining the Company's global reach and customer base with Nissin Kogyo’s expertise (including workforce) and technology in brake control and actuation systems. A portion of the goodwill is deductible for tax purposes.

Veoneer recognized related party short term debt of $4 million as of December 31, 2016, due to financing at Veoneer Nissin Brake Systems China Zhongshan (a 51% owned subsidiary). This $4 million debt facility was wholly repaid as of December 31, 2017.