Business Combinations |
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Business Combinations | Business Combinations Acquisitions in fiscal year 2020 During the second quarter of fiscal year 2020, the Company completed the acquisition of two businesses for aggregate consideration of $4.3 million in cash. The Company has reported the operations for these acquisitions within the results of the Company's Diagnostics segment from the acquisition dates. Identifiable definite-lived intangible assets, such as customer relationships, acquired as part of these acquisitions had a weighted average amortization period of 5.0 years. Subsequent to the third quarter of fiscal year 2020, the Company reached an agreement with Horizon Discovery Group plc (“Horizon”) on the terms of a recommended all cash offer whereby an indirect wholly owned subsidiary of the Company will acquire Horizon for approximately $383.0 million (£296.0 million). The transaction is subject to customary closing conditions and is currently anticipated to close either late in the fourth quarter of fiscal year 2020 or in the first quarter of fiscal year 2021. Horizon is based in Cambridge, UK, has approximately 400 employees, and is widely recognized as a leading provider of CRISPR and RNAi reagents, cell models, cell engineering and base editing offerings which help scientists better understand gene function, genetic disease drivers and biotherapeutics delivery. Acquisitions in fiscal year 2019 During the fiscal year 2019, the Company completed the acquisition of five businesses for aggregate consideration of $433.1 million in cash. The acquired businesses include Cisbio Bioassays SAS (“Cisbio”), a company based in Codolet, France, which was acquired for a total consideration of $219.9 million in cash, Shandong Meizheng Bio-Tech Co., Ltd. ("Meizheng Group"), a company headquartered in Beijing, China, for a total consideration of $166.5 million in cash, and three other businesses which were acquired for a total consideration of $46.6 million in cash. The Company has a potential obligation to pay the former shareholders of certain of these acquired businesses additional contingent consideration of up to $31.8 million. The excess of the purchase prices over the fair values of the acquired businesses' net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill, which is not tax deductible. The Company has reported the operations for these acquisitions within the results of the Company's Diagnostics and Discovery & Analytical Solutions segments, as applicable, from the acquisition dates. Identifiable definite-lived intangible assets, such as core technology, trade names and customer relationships, acquired as part of these acquisitions had a weighted average amortization period of 11.0 years. The total purchase price for the acquisitions in fiscal year 2019 has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:
The preliminary allocations of the purchase prices for acquisitions are based upon initial valuations. The Company's estimates and assumptions underlying the initial valuations are subject to the collection of information necessary to complete its valuations within the measurement periods, which are up to one year from the respective acquisition dates. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, assets and liabilities related to income taxes and related valuation allowances, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition dates during the measurement periods. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition dates that, if known, would have resulted in the recognition of those assets and liabilities as of those dates. These adjustments will be made in the periods in which the amounts are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition dates. All changes that do not qualify as adjustments made during the measurement periods are also included in current period earnings. Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocations. The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair values for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Contingent consideration is measured at fair value at the acquisition date, based on the probability that revenue thresholds or product development milestones will be achieved during the earnout period, with changes in the fair value after the acquisition date affecting earnings to the extent it is to be settled in cash. Increases or decreases in the fair value of contingent consideration liabilities primarily result from changes in the estimated probabilities of achieving revenue thresholds, changes in discount rates or product development milestones during the earnout period. As of October 4, 2020, the Company may have to pay contingent consideration related to acquisitions with open contingency periods of up to $7.3 million. As of October 4, 2020, the Company has recorded contingent consideration obligations with an estimated fair value of $2.8 million, which was recorded in long-term liabilities. As of December 29, 2019, the Company had recorded contingent consideration obligations with an estimated fair value of $35.5 million, of which $20.8 million was recorded in accrued expenses and other current liabilities, and $14.7 million was recorded in long-term liabilities. The expected maximum earnout period for acquisitions with open contingency periods does not exceed 2.2 years from October 4, 2020, and the remaining weighted average expected earnout period at October 4, 2020 was 1.2 years. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the condensed consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of definite-lived intangible assets or the recognition of additional contingent consideration which would be recognized as a component of operating expenses from continuing operations. Total acquisition and divestiture-related costs for the three and nine months ended October 4, 2020 were $0.2 million and $7.4 million, respectively. These amounts included $0.2 million and $6.9 million of incentive award associated with the Company's acquisition of Meizheng Group for the three and nine months ended October 4, 2020, respectively. Total acquisition and divestiture-related costs for the three and nine months ended September 29, 2019 were $0.8 million and $5.9 million, respectively. These amounts for the nine months ended September 29, 2019 included $2.6 million of net foreign exchange loss related mainly to the Company's acquisition of Cisbio. These acquisition and divestiture-related costs were expensed as incurred and recorded in selling, general and administrative expenses and interest and other expense, net in the Company's consolidated statements of operations.
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