Acquisitions and Divestitures

6 Months Ended

Oct. 02, 2015

Business Combinations [Abstract]

Acquisitions and Divestitures

Acquisitions and Divestitures

Fiscal 2016 Acquisitions

On September 24, 2015, CSC acquired Fixnetix, Limited (Fixnetix), a privately held provider of front-office managed trading solutions for capital markets, for total estimated purchase consideration of $110 million. The acquisition enhances CSC's ability to offer capital market clients an expanded range of as-a-service front office capabilities and address growing demand for greater efficiency and innovation in trading, market data, hosting, infrastructure, connectivity and risk management.

The purchase consideration included cash of $88 million (net of $1 million of cash acquired) paid at closing, and the preliminarily estimated fair value of contingent consideration of $21 million (see Note 7). The estimated amount of contingent consideration was based on a contractually defined multiple of Fixnetix's revenues during two specified periods, as well as other considerations. Should the final amount of contingent consideration be different from the preliminary estimate of $21 million, the difference will be recorded as other income or expense in the future periods. The range of possible outcomes for the final fair value of the contingent consideration is $0 to $26 million. A portion of the earnout is expected to be paid on the first anniversary of the acquisition date and the remainder is expected to be paid on the second anniversary of the acquisition date. The acquisition was funded from CSC's existing cash balances. The Company incurred transaction costs of under $1 million associated with this acquisition. These costs were expensed and are included within selling, general and administrative expenses.

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed is presented below:

(Amounts in millions)	Estimated Fair Value
Accounts receivable and other current assets	$	13
Intangible asset - developed technology	12
Intangible assets - customer relationships and trade names	31
Property and equipment and other noncurrent assets	8
Trade payables, accrued expenses and deferred revenue	(24		)
Leases and other long-term liabilities	(6		)
Deferred tax liability, net	(4		)
Total identifiable net assets acquired	30
Goodwill	80
Total estimated consideration	$	110

The goodwill recognized in the acquisition is attributable to the intellectual capital, the acquired assembled work force, and expected cost synergies, none of which qualify for recognition as a separate intangible asset; it is associated with the GIS segment and is not tax-deductible.

On September 17, 2015, CSC acquired Fruition Partners (Fruition), a privately-held company that is a leading provider of technology-enabled solutions for the service management sector and the largest ServiceNow-exclusive service management consulting firm. The acquisition bolsters CSC's ability to offer enterprise and emerging clients an expanded range of cloud-based service-management solutions to improve their business through organizational efficiency and lower operating costs.

Cash consideration of $148 million (net of cash acquired of $2 million) was paid at closing for this acquisition. The acquisition was funded from CSC's existing cash balances. The Company incurred transaction costs of under $1 million associated with this acquisition. These costs were expensed and are included within selling, general and administrative expenses.

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed is presented below:

(Amounts in millions)	Estimated Fair Value
Accounts receivable and other current assets	$	19
Intangible asset - developed technology	9
Intangible assets - customer relationships and trade names	34
Property and equipment and other noncurrent assets	1
Trade payables, accrued expenses and deferred revenue	(12		)
Deferred tax liabilities, net	(6		)
Total identifiable net assets acquired	45
Goodwill	105
Total consideration	$	150

The goodwill recognized in the acquisition is attributable to the intellectual capital, the acquired assembled work force, and expected cost synergies, none of which qualify for recognition as a separate intangible asset; it is associated with the GBS segment and is not tax-deductible.

The Company’s purchase price allocations for the Fixnetix and Fruition acquisitions are preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available.

The financial results of the fiscal 2016 acquired businesses, from the dates of their acquisition, were not material for inclusion in Company's unaudited Consolidated Condensed Financial Statements. Pro forma financial information for these acquisitions has not been presented as they were neither individually nor in the aggregate material to CSC’s consolidated results.

Fiscal 2015 Acquisition

On July 31, 2014, CSC acquired a privately held entity for $35 million in an all cash transaction. CSC acquired this entity primarily to enhance its cyber security, systems engineering, and software development service offerings in the federal intelligence sector. The purchase price was allocated to assets acquired and liabilities assumed based on preliminary estimates of fair value at the date of acquisition, as follows: $4 million to current assets, $9 million to an intangible asset other than goodwill, $9 million to current liabilities, and $31 million to goodwill. The intangible asset, which is associated with the Company's customer relationships and government programs, will be amortized over 15 years. The goodwill is associated with the Company's North American Public Sector (NPS) segment and is expected to be tax deductible.

The financial results of the fiscal 2015 acquired business were included in the Company’s unaudited Consolidated Condensed Financial Statements from the date of acquisition. Pro forma financial information for this acquisition has not been presented as it was not material to CSC’s consolidated results.

Fiscal 2016 Divestiture

On April 27, 2015, the Company divested its wholly-owned subsidiary, Welkin Associates Limited (Welkin), a provider of systems engineering and technical assistance services to the intelligence community and other U.S. Department of Defense clients. The Welkin business was part of the NPS segment. CSC received consideration of $34 million, and recorded a pre-tax gain on sale of $22 million, which is included in Other income, net on the unaudited Consolidated Condensed Statement of Operations. Included in the divested net assets of $10 millionwas $7 million of goodwill, and the transaction costs approximated $2 million. The divestiture did not qualify to be presented as discontinued operations as it did not represent a strategic shift that would have a major effect on CSC's operations and financial results.

Fiscal 2015 Divestiture

On July 31, 2014, CSC completed the sale of a German software business to a strategic investor for cash consideration of $3 million. This divestiture, which was a part of the GBS segment's healthcare group, resulted in a pre-tax loss of $22 million. Net assets divested were $23 million. The historical results of this business have been presented as discontinued operationsin the Company's unaudited Consolidated Condensed Statement of Operations.

A summary of the results of the discontinued operations is presented below:

	Quarter Ended					Six Months Ended
	October 2, 2015		October 3, 2014			October 2, 2015		October 3, 2014
Operations
Revenue	$	—	$	3		$	—	$	10
Income from discontinued operations, before taxes	—		(2		)	—		(11		)
Tax expense	—		—			—		—
Net income from discontinued operations	$	—	$	(2	)	$	—	$	(11	)
Disposal
Gain (loss) on disposition, before taxes	$	—	$	(22	)	$	—	$	(21	)
Tax expense	—		(3		)	—		(3		)
Gain (loss) on disposition, net of taxes	$	—	$	(19	)	$	—	$	(18	)
Income from discontinued operations, net of taxes	$	—	$	(21	)	$	—	$	(29	)