Business Combinations

12 Months Ended

Dec. 31, 2020

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.

Zenuity, Inc and Zenuity GmbH

On April 2, 2020, the Company entered into a non-binding agreement with Volvo Cars Corporation (VCC) to separate Zenuity, a 50% ownership joint venture with VCC in order for each company to more effectively drive their respective strategies. The parties entered into definitive agreements and effected the separation on July 1, 2020. As part of the transaction the Company paid approximately $37 million to Zenuity for 200 software engineers and two business units located in Germany and the US.

The Company applied the acquisition method of accounting to the Zenuity, Inc and Zenuity GmbH entities, whereby the excess of the fair value of the business over the fair value of identifiable net assets was allocated to goodwill. The goodwill reflects the workforce. The recognized goodwill of $23 million recorded as part of this acquisition is included in the Electronics reportable segment and is not deductible for tax purposes. The preliminary opening balance sheet is subject to adjustment based on final assessment of the fair values of certain acquired assets, principally intangibles, and certain assumed liabilities. The Company used the historical carrying value of the assets and liabilities on acquisition date as they were determined to approximate fair value based on the age and nature of the assets and liabilities acquired. This represents a Level 3 fair value measurements, to assess the purchase price allocation. As the Company finalizes the fair value of the acquired assets and assumed liabilities, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments occur.

Total Zenuity, Inc and Zenuity GmbH acquisition related costs were approximately $1 million for the period ended December 31, 2020. These costs were reflected in Selling, general and administrative expenses in the Consolidated Statements of Operations for the year ended December 31, 2020.

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


(Dollars in millions)
Assets	As of July 1, 2020
Cash and cash equivalents	$	4
Receivable, net	12
Property, plant and equipment, net	3
Operating lease right-of-use assets	10
Goodwill	23
Total assets	$	52
Tax payable	2
Accrued liabilities	3
Operating lease non-current liabilities	10
Total liabilities	$	15
Net assets acquired	$	37

Intellectual property

In addition, the Company acquired the right to use VCC intellectual property in exchange for a payment of $10 million in a transaction outside of the business combination. The acquired intangible asset will be assigned a useful life of 8 years and amortized over the useful life on a straight-line basis.

Separately, the Company has licensed intellectual property for $10 million to VCC with zero cost base in a transaction outside of the business combination and recognized this amount as Other Income in the Consolidated Statements of Operations for the year ended December 31, 2020.