Business Combinations

9 Months Ended

Oct. 03, 2021

Acquisitions in fiscal year 2021

Acquisition of BioLegend, Inc. The Company completed the acquisition of BioLegend, Inc. ("BioLegend") and paid an aggregate consideration of $5.7 billion, net of cash acquired of $292.4 million, reflecting preliminary working capital and other adjustments (the "Aggregate Consideration") that are subject to final adjustments following the closing. The Aggregate Consideration was paid in a combination of $3.3 billion in cash and shares of the Company's common stock having a fair value of approximately $2.6 billion based on the $187.56 per share closing price of the Company's common stock on the New York Stock Exchange on September 17, 2021 (the "Stock Consideration"). The Stock Consideration consisted of 14,066,799 shares of the Company's common stock. The cash consideration was funded through a combination of $2.3 billion in proceeds from the issuance of senior unsecured notes, $500.0 million in proceeds from the Company's term loan credit facility and $310.0 million in proceeds from the Company's revolving credit facility and available cash on hand of $252.6 million. BioLegend is recognized as a leading, global provider of life science antibodies and reagents, headquartered in San Diego, California, with approximately 700 employees. The operations for this acquisition will be reported within the results of the Company's Discovery & Analytical Solutions segment from the acquisition date. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, which is not tax deductible. Identifiable definite-lived intangible assets, such as core technology, trade names, customer relationships and clone library, acquired as part of this acquisition had a weighted average amortization period of 16.3 years.

BioLegend's revenue and net loss for the period from the acquisition date to October 3, 2021 were $12.1 million and $6.2 million, respectively. The following unaudited pro forma information presents the combined financial results for the Company and BioLegend as if the acquisition of BioLegend had been completed at the beginning of fiscal year 2020:


	Nine Months Ended		Fiscal Year Ended
	October 3, 2021		January 3, 2021
	(In millions, except per share data)
Pro Forma Statement of Operations Information:
Revenue	$	3,943	$	4,025
Income from continuing operations	797		552
Basic earnings per share:
Income from continuing operations	$	6.28	$	4.39
Diluted earnings per share:
Income from continuing operations	$	6.26	$	4.37

The unaudited pro forma information for fiscal years 2021 and 2020 have been calculated after applying the Company's accounting policies and the impact of acquisition date fair value adjustments. The fiscal year 2021 unaudited pro forma income from continuing operations was adjusted to exclude approximately $43.2 million of acquisition-related transaction costs and $23.3 million of bridge financing and debt pre-issuance hedging costs that were recognized in expense in the quarter. The fiscal year 2020 pro forma income from continuing operations was adjusted to include these acquisition-related transaction costs and the nonrecurring expenses related to the bridge financing and debt pre-issuance hedging costs and fair value adjustments. These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain

adjustments, such as fair value adjustment to inventory, increased interest expense on debt obtained to finance the transaction, and increased amortization for the fair value of acquired intangible assets.

The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities. The actual results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

Other acquisitions in 2021. During the first nine months of fiscal year 2021, the Company also completed the acquisition of six other businesses for aggregate consideration of $1.2 billion. The acquired businesses include Oxford Immunotec Global PLC, a company based in Abingdon, UK with approximately 275 employees, for a total consideration of $590.9 million and Nexcelom Bioscience Holdings, LLC, a company based in Lawrence, Massachusetts with approximately 130 employees, for a total consideration of $267.1 million, and four other businesses, which were acquired for a total consideration of $296.0 million. The excess of the purchase price over the fair value of the acquired businesses' net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as employee workforces acquired, and has been allocated to goodwill, which is not tax deductible. 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 12.4 years.

The total purchase price for the acquisitions in fiscal year 2021 has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:


	Preliminary
	BioLegend		Other
	(In thousands)
Fair value of business combination:
Cash payments	$	3,335,753	1,118,884
Common stock issued	2,638,369		—
Other liability	6,857		910
Contingent consideration	—		34,131

Less: cash acquired	(292,377)		(195,010)
Total	$	5,688,602	$	958,915
Identifiable assets acquired and liabilities assumed:
Current assets	$	184,541	$	73,933
Property, plant and equipment	147,200		26,507
Other assets	9,330		15,564
Identifiable intangible assets:
Core technology and clone library	782,400		285,609
Trade names and patents	38,000		39,620
Licenses	8,979		—
Customer relationships and backlog	1,714,800		141,170

Goodwill	3,511,498		527,402
Deferred taxes	(669,906)		(86,471)
Deferred revenue	—		(1,197)
Debt assumed	—		(4,628)
Liabilities assumed	(38,240)		(58,594)
Total	$	5,688,602	$	958,915

Acquisitions in fiscal year 2020

During the fiscal year 2020, the Company completed the acquisition of four businesses for aggregate consideration of $438.9 million. The acquired businesses were Horizon Discovery Group plc, a company based in Cambridge, UK with approximately 400 employees, which was acquired on December 23, 2020 for a total consideration of $399.8 million (£296.0

million), and three other businesses, which were acquired for a total consideration of $39.1 million. The excess of the purchase price over the fair value 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. Identifiable definite-lived intangible assets, such as core technology, trade names, customer relationships and in-process research and development, 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 2020 has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:


	Preliminary
	(In thousands)
Fair value of business combination:
Cash payments	$	437,661
Other liability	1,660

Working capital and other adjustments	(384)
Less: cash acquired	(26,840)
Total	$	412,097
Identifiable assets acquired and liabilities assumed:
Current assets	$	35,532
Property, plant and equipment	20,302
Other assets	18,114
Identifiable intangible assets:
Core technology	65,730
Trade names	5,580


Customer relationships	108,523
In-process research and development ("IPR&D")	10,700
Goodwill	221,960
Deferred taxes	(27,142)
Deferred revenue	(2,031)

Liabilities assumed	(45,171)
Total	$	412,097

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.

The allocations of the purchase prices 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.

As of October 3, 2021, the Company may have to pay contingent consideration related to acquisitions with open contingency periods of up to $90.7 million. As of October 3, 2021, the Company has recorded contingent consideration obligations of $37.2 million, of which $4.2 million was recorded in accrued expenses and other current liabilities, and $33.0

million was recorded in long-term liabilities. As of January 3, 2021, the Company had recorded contingent consideration obligations with an estimated fair value of $3.0 million, of which $2.9 million was recorded in accrued expenses and other current liabilities, and $0.1 million was recorded in long-term liabilities. The expected maximum earnout period for acquisitions with open contingency periods does not exceed 7.2 years from October 3, 2021, and the remaining weighted average expected earnout period at October 3, 2021 was 6.8 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 3, 2021 were $72.5 million and $87.6 million, respectively. These amounts included $2.1 million and $13.8 million of incentive award associated with the Company's acquisition of Meizheng Group for the three and nine months ended October 3, 2021, respectively. Net foreign exchange gain, and bridge financing and debt pre-issuance hedging costs, related to the Company's acquisitions for the nine months ended October 3, 2021 amounted to $5.4 million and $23.6 million, respectively. 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. 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.