Acquisition

6 Months Ended

Jul. 03, 2022

Business Combination and Asset Acquisition [Abstract]

SYNETIQ Ltd.

On October 26, 2021, IAA, through its indirect wholly owned subsidiary, IAA International Holdings Limited, acquired 100% of SYNETIQ Ltd. ("SYNETIQ"), a leading integrated salvage and vehicle dismantling company in the United Kingdom, to expand its footprint in the United Kingdom. The cash purchase price for SYNETIQ, including working capital and other adjustments, was $314.2 million (£228.2 million), of which $260.2 million (£189.0 million) was paid out in the fourth quarter of fiscal 2021. The remaining payment of $54.0 million (£39.2 million), which was held in an escrow account and presented as Restricted cash on the consolidated balance sheets as of January 2, 2022, was paid out during the first quarter of fiscal 2022 upon receipt of required approvals from the U.K. Competition and Markets Authority. The Company funded the acquisition with cash on hand and $100.0 million in borrowings under its Revolving Credit Facility.

The Company finalized the purchase price allocation for the SYNETIQ acquisition during the three months ended July 3, 2022. The following table summarizes the fair value of consideration transferred and the fair values of assets acquired and liabilities assumed as of the date of acquisition (in millions):


	October 26, 2021
Cash	$	260.2
Fair value of contingent consideration*	51.4
Total fair value of consideration transferred	$	311.6

*Recorded in Other accrued expenses line within the consolidated balance sheets as of January 2, 2022.


	October 26, 2021
Cash	$	7.1
Accounts receivable	4.7
Inventory	17.4
ROU assets	39.0
Property and equipment	12.5
Goodwill	256.4
Intangible assets	41.3
Other assets	1.4
Accounts payable and other accrued expenses	(18.9)
Operating lease liabilities	(39.0)
Other long-term liabilities	(10.3)
Net assets acquired	$	311.6

The Company did not record any material measurement period adjustments during the quarter ended July 3, 2022 in connection with determining the final purchase price allocation for the SYNETIQ acquisition.

The intangible assets acquired related to developed technology (useful life 4 years) and tradename (useful life 5 years), which will be amortized over a weighted average-useful life of approximately 4 years. The relief from royalty method was used to value the developed technology and tradename. This method requires forward looking estimates to determine fair value, including among other assumptions, forecasted revenue growth, obsolescence, and estimated discount and royalty rates. The goodwill recognized from this acquisition reflects expected synergies resulting from adding SYNETIQ's products and processes to the Company's products and processes. The acquired goodwill has been allocated to the International segment and is deductible for tax purposes.

The following unaudited pro forma financial information summarizes the combined results of operations for the Company and SYNETIQ, as though the companies were combined as of the beginning of fiscal 2021 (in millions):


	Three Months Ended June 27, 2021		Six Months Ended June 27, 2021
Net revenue	$	496.2	$	974.6
Net income	83.0		154.8

These pro forma results are based on estimates and assumptions, which the Company believes are reasonable. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the Company’s fiscal 2021, and is not necessarily indicative of the Company's consolidated results of operations in future periods.

The pro forma results include adjustments related to purchase accounting, primarily amortization of intangible assets, and interest expense related to the borrowings under the Company's Revolving Credit Facility in connection with the acquisition of SYNETIQ.