LifeStance TopCo was formed for the purpose of completing a merger transaction with affiliates of TPG and Lynnwood MergerSub, Inc. (“Merger Sub”) in order to carry on the business of LifeStance Health, LLC and subsidiaries. On April 14, 2020, LifeStance Health Holdings, Inc. ("LifeStance Holdings") entered into a merger agreement among LifeStance Holdings, Lynnwood Intermediate Holdings, Inc., Merger Sub and Shareholder Representatives Services LLC (the "TPG Acquisition"). Immediately prior to the TPG Acquisition, LifeStance Health, LLC completed a reorganization pursuant to which the equity holders of LifeStance Health, LLC, including affiliates of Summit and affiliates of Silversmith (together with TPG and Summit, the Company’s “Principal Stockholders”) received a distribution of 100% of the equity interests of LifeStance Health Holdings, a direct subsidiary of LifeStance Health, LLC, in complete redemption of their equity interests of LifeStance Health, LLC. Pursuant to the TPG

Acquisition, (i) the historic equity holders of LifeStance Health, LLC contributed a portion of their units of LifeStance Holdings to LifeStance TopCo in exchange for equity interests of LifeStance TopCo and (ii) an indirect subsidiary of LifeStance TopCo, merged with and into LifeStance Holdings, with shareholders of LifeStance Holdings receiving cash consideration in connection with cancellation of the remainder of their shares.

LifeStance TopCo has a controlling financial interest in LifeStance Holdings under the voting interest model. Therefore, the Company determined LifeStance TopCo would consolidate LifeStance Holdings. Further, the TPG Acquisition is considered to constitute a change in control of the LifeStance business, with LifeStance TopCo being deemed the acquirer. The TPG Acquisition has been accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. Immediately prior to the transaction, LifeStance Health, LLC was the reporting entity. As noted above, this entity will be considered the predecessor entity and the period prior to and including May 14, 2020 will be the predecessor period. LifeStance Health, LLC was subsequently dissolved as part of the transaction. Given that LifeStance TopCo is the accounting acquirer, it will be considered the successor entity and the successor period will begin on April 13, 2020. For the period from April 13, 2020 through May 13, 2020, the operations of LifeStance TopCo were limited to those incident to its formation and the TPG Acquisition, which were not significant.

Pursuant to the merger, LifeStance TopCo issued 979,563 Class A-1 Units and 35,845 Class A-2 Units to certain of its equity holders, including TPG, Summit, Silversmith and members of the Company’s management team. Following the TPG Acquisition, the Company conducted its business through LifeStance TopCo and its consolidated subsidiaries, and subsequent to the IPO, the Company has conducted its business through LifeStance Health Group. All previously owned preferred units were converted into LifeStance TopCo common units upon the acquisition.

Total consideration transferred consisted of the following:


Cash consideration	$	670,941
Class A-1 units		345,978
Class A-2 units		35,845
Total consideration transferred	$	1,052,764

The total consideration of $1,052,764 consisted of $381,823 equity, including 345,978 Class A-1 Units and 35,845 Class A-2 Units at $1 per unit and $670,941 cash, including $4,500 cash placed in escrow, transaction fees, cash for debt repayment, and a working capital adjustment. The Company recorded the fair value of net assets acquired of $126,106 and recorded goodwill of $926,658 on May 14, 2020.

The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of acquisition:


Allocation of Purchase Price	Amount
Cash	$	27,224
Patient accounts receivable		25,152
Property and equipment		34,813
Prepaid expenses and other current assets		9,590
Deposits		1,766
Intangible assets		344,300
Goodwill		926,658
Total assets acquired		1,369,503
Accounts payable		3,456
Accrued payroll expenses		25,739
Other accrued expenses		48,655
Current portion of contingent consideration		5,861
Other current liabilities		1,848
Long-term debt, net		135,006
Other noncurrent liabilities		9,617
Contingent consideration, net of current portion		4,048
Deferred tax liability, net		82,509
Total liabilities assumed		316,739
Fair value of net assets	$	1,052,764

The fair value of assets and liabilities other than intangible assets approximate the carrying amount as of the acquisition date. The liquidity of receivables is based on contractual rates to payors. The identifiable intangible assets acquired include the LifeStance corporate trade name, trade names related to the regional clinics, non-competition agreements with the Company’s executives, and non-competition agreements with providers.

In order to value trade names, the “relief-from-royalty” method was utilized. This method is based on the supposition that in lieu of ownership, the Company would be willing to pay a royalty in order to exploit the related benefits of the trade names. The value of the trade names was determined by discounting the inherent after-tax royalty savings associated with ownership or possession of the trade name over the expected useful life. The selected royalty rate (pre-tax) was based on an analysis of various factors, including an analysis of market data and comparable trade name agreements.

As it pertains to the non-competition agreements, the “with-and-without” method was utilized to determine the value. Revenue with the non-competition agreement in place was based on the Company’s forecast. The values indicated from the “with-and-without” method were adjusted to reflect the ability, feasibility and desire for the partners to compete.

Subsequent to the closing of the TPG Acquisition, there was an additional cash payment of $2,977 related to a working capital adjustment, which was accounted for as a measurement period adjustment (see Note 8).

The following table summarizes the fair values of acquired intangible assets as of the date of the TPG Acquisition:


	Amount		Useful Life
Trade names – Corporate	$	235,500	22.5 years
Trade names – Regional		22,900	5 years
Non-competition agreements – Executives		77,500	4 years
Non-competition agreements – Providers		8,400	5 years
Total intangible assets	$	344,300

The Company’s unaudited pro forma revenue and net loss for the years ended December 31, 2020 and 2019 below have been prepared as if the TPG Acquisition occurred on January 1, 2019.


	Year ended December 31, 2020			Year ended December 31, 2019
Revenue	$	377,217		$	212,518
Net loss	$	(26,727	)	$	(52,463	)

Goodwill represented the excess of the purchase price over the net identifiable assets acquired and liabilities assumed. Goodwill is primarily attributable to the assembled workforce, customer and payor relationships and anticipated synergies and economies of scale expected from the integration of the businesses. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as result of the acquisition. There is no tax-deductible goodwill from the TPG Acquisition.

The transaction costs related to the TPG Acquisition were $32,942, all of which were expensed as incurred.