Exhibit 99.2
Unaudited pro forma combined condensed balance sheet of M&T as of December 31, 2021, giving effect to the Merger as if it had been completed on December 31, 2021, and the unaudited pro forma combined condensed income statement of M&T for the fiscal year ended December 31, 2021, giving effect to the Merger as if it had been completed on January 1, 2021, and the notes related thereto.
1
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
On April 1, 2022, M&T Bank Corporation (M&T) acquired Peoples United Financial, Inc. (Peoples United). The following unaudited pro forma combined condensed financial information combines the historical consolidated financial position and results of operations of M&T and Peoples United as an acquisition by M&T of Peoples United. Pursuant to the terms of the merger agreement dated February 22, 2021, Peoples United shareholders received consideration valued at .118 of an M&T common share in exchange for each common share of Peoples United. The purchase price totaled approximately $8.4 billion (with the price based on M&Ts closing price of $164.66 per share on the New York Stock Exchange (NYSE) as of April 1, 2022). Additionally, Peoples United outstanding preferred stock was converted into new shares of Series H preferred stock of M&T.
The unaudited pro forma combined condensed financial information has been prepared to give effect to the following:
| the acquisition of Peoples United by M&T under the provisions of the Financial Accounting Standards Board Accounting Standards Codification, ASC 805, Business Combinations, whereby the assets and liabilities of Peoples United are recorded by M&T at their respective fair values as of the date the merger is completed; |
| the issuance of 50,325,004 shares of M&T common stock based on the number of shares of Peoples United common stock issued and outstanding as of April 1, 2022 (based upon a 0.118 exchange ratio and the closing price per share of M&Ts common stock reported on the NYSE on April 1, 2022 of $164.66) and the valuation of Peoples United stock-based compensation; |
| certain reclassifications to conform the historical financial statement presentation of Peoples United to that of M&T; and |
| transaction costs in connection with the merger. |
The following unaudited pro forma combined condensed financial information and related notes are based on and should be read in conjunction with (i) the historical audited consolidated financial statements of M&T and the related notes included in M&Ts Annual Report on Form 10-K for the year ended December 31, 2021 and (ii) the historical audited consolidated financial statements of Peoples United and the related notes included in Peoples Uniteds Annual Report on Form 10-K for the year ended December 31, 2021 included herein under Exhibit 99.1.
The unaudited pro forma combined condensed income statement for the year-ended ended December 31, 2021 combines the historical consolidated income statements of M&T and Peoples United, giving effect to the merger as if it had been completed on January 1, 2021. The accompanying unaudited pro forma combined condensed balance sheet as of December 31, 2021 combines the historical consolidated balance sheets of M&T and Peoples United, giving effect to the merger as if it had been completed on December 31, 2021.
The unaudited pro forma combined condensed financial information is provided for illustrative information purposes only. The unaudited pro forma combined condensed financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The pro forma financial information has been prepared by M&T in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures About Acquired and Disposed Businesses, as adopted by the SEC on May 21, 2020.
The unaudited pro forma combined condensed financial information also does not consider any potential effects of changes in market conditions on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma combined condensed financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded during the measurement period as prescribed by generally accepted accounting principles in the United States.
In connection with the plan to integrate the operations of M&T and Peoples United following the merger, M&T and Peoples United recognized merger-related charges consisting of professional services, including legal expenses, investment banker fees and technology-related activities to prepare for planned integration efforts, and printing costs associated with communications with shareholders, and anticipates additional similar costs will be incurred in the future. The results for 2021 include merger-related expenses of $44 million ($34 million after-tax effect) and $22 million ($18 million after tax-effect) incurred by M&T and Peoples United, respectively.
2
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(in thousands)
(Unaudited)
The following unaudited pro forma combined condensed balance sheet gives effect to the acquisition by M&T of Peoples United using the acquisition method of accounting assuming the acquisition was consummated on December 31, 2021.
December 31, 2021 | ||||||||||||||||||||
Transaction Accounting Adjustments |
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Historical M&T |
Historical Peoples United |
Fair Value (1) |
Other (13) | Pro Forma Combined |
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Assets |
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Cash and due from banks |
$ | 1,337,577 | $ | 320,480 | $ | | $ | | $ | 1,658,057 | ||||||||||
Interest-bearing deposits at banks and other short-term investments |
41,872,304 | 10,268,764 | | | 52,141,068 | |||||||||||||||
Investment securities |
7,155,860 | 10,750,166 | (27,029 | )(2) | | 17,878,997 | ||||||||||||||
Loans and leases |
92,912,452 | 37,860,043 | (473,856 | )(3) | 99,000 | (4) | 130,397,639 | |||||||||||||
Allowance for credit losses |
(1,469,226 | ) | (343,600 | ) | 343,600 | (4) | (341,000 | )(4) | (1,810,226 | ) | ||||||||||
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Loans and leases, net |
91,443,226 | 37,516,443 | (130,256 | ) | (242,000 | ) | 128,587,413 | |||||||||||||
Goodwill |
4,593,112 | 2,680,842 | |
957,276 |
(5), (12) |
| 8,231,230 | |||||||||||||
Core deposit and other intangible assets |
3,998 | 127,764 | 133,236 | (6) | | 264,998 | ||||||||||||||
Other assets |
8,701,083 | 2,977,948 | 9,417 | (7) | 65,878 | (7) | 11,754,326 | |||||||||||||
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Total assets |
$ | 155,107,160 | $ | 64,642,407 | $ | 942,644 | $ | (176,122 | ) | $ | 220,516,089 | |||||||||
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Liabilities and shareholders equity |
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Interest-bearing deposits |
$ | 71,411,929 | $ | 35,814,223 | $ | (300 | )(8) | $ | | $ | 107,225,852 | |||||||||
Total borrowings |
3,532,415 | 1,950,602 | 9,162 | (9) | | 5,492,179 | ||||||||||||||
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Total interest-bearing liabilities |
74,944,344 | 37,764,825 | 8,862 | | 112,718,031 | |||||||||||||||
Noninterest-bearing deposits |
60,131,480 | 17,941,084 | | | 78,072,564 | |||||||||||||||
Other liabilities |
2,127,931 | 1,034,706 | 181,824 | (10) | 17,650 | (10) | 3,362,111 | |||||||||||||
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Total liabilities |
137,203,755 | 56,740,615 | 190,686 | 17,650 | 194,152,706 | |||||||||||||||
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Preferred equity |
1,750,000 | 244,074 | 16,526 | (11) | | 2,010,600 | ||||||||||||||
Common equity |
16,153,405 | 7,657,718 | 735,432 | (12) | (193,772 | ) | 24,352,783 | |||||||||||||
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Total shareholders equity |
17,903,405 | 7,901,792 | 751,958 | (193,772 | ) | 26,363,383 | ||||||||||||||
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Total liabilities and shareholders equity |
$ | 155,107,160 | $ | 64,642,407 | $ | 942,644 | $ | (176,122 | ) | $ | 220,516,089 | |||||||||
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See accompanying notes to pro forma combined condensed financial statements.
3
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(in thousands, except per share)
(Unaudited)
The following unaudited pro forma combined condensed statement of income for the year ended December 31, 2021 gives effect to M&Ts acquisition of Peoples United using the acquisition method of accounting assuming the acquisition was consummated on January 1, 2021.
For the year ended December 31, 2021 | ||||||||||||||||
Historical M&T |
Historical Peoples United |
Transaction Accounting Adjustments (1) |
Pro Forma Combined |
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Interest income |
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Loans and leases, including fees |
$ | 3,748,988 | $ | 1,382,142 | $ | 49,858 | (14) | $ | 5,180,988 | |||||||
Investment securities |
141,162 | 209,693 | 146,348 | (15) | 497,203 | |||||||||||
Other |
48,634 | 9,475 | | 58,109 | ||||||||||||
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Total interest income |
3,938,784 | 1,601,310 | 196,206 | 5,736,300 | ||||||||||||
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Interest expense |
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Deposits |
51,834 | 68,622 | 1,148 | (16) | 121,604 | |||||||||||
Borrowings |
62,172 | 33,558 | 3,642 | (17) | 99,372 | |||||||||||
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Total interest expense |
114,006 | 102,180 | 4,790 | 220,976 | ||||||||||||
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Net interest income |
3,824,778 | 1,499,130 | 191,416 | 5,515,324 | ||||||||||||
Provision for credit losses |
(75,000 | ) | (48,271 | ) | 242,000 | (18) | 118,729 | |||||||||
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Net interest income after provision for credit losses |
3,899,778 | 1,547,401 | (50,584 | ) | 5,396,595 | |||||||||||
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Other income |
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Mortgage banking revenues |
571,329 | 2,103 | | 573,432 | ||||||||||||
Service charges on deposit accounts |
402,113 | 137,819 | | 539,932 | ||||||||||||
Trust income |
644,716 | 69,801 | | 714,517 | ||||||||||||
Brokerage services income |
62,791 | 13,235 | | 76,026 | ||||||||||||
Loss on bank investment securities |
(21,220 | ) | | | (21,220 | ) | ||||||||||
Other revenues from operations |
507,265 | 170,679 | | 677,944 | ||||||||||||
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Total other income |
2,166,994 | 393,637 | | 2,560,631 | ||||||||||||
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Other expense |
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Salaries and employee benefits |
2,045,677 | 679,602 | | 2,725,279 | ||||||||||||
Equipment and net occupancy |
326,698 | 196,501 | (3,945 | )(19) | 519,254 | |||||||||||
Amortization of core deposit and other intangible assets |
10,167 | 36,997 | 31,836 | (20) | 79,000 | |||||||||||
FDIC assessments |
69,704 | 28,203 | | 97,907 | ||||||||||||
Other costs of operations |
1,159,377 | 242,537 | 17,650 | (21) | 1,419,564 | |||||||||||
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Total other expense |
3,611,623 | 1,183,840 | 45,541 | 4,841,004 | ||||||||||||
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Income before taxes |
2,455,149 | 757,198 | (96,125 | ) | 3,116,222 | |||||||||||
Income taxes |
596,403 | 152,310 | (23,525 | )(22) | 725,188 | |||||||||||
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Net income |
1,858,746 | 604,888 | (72,600 | ) | 2,391,034 | |||||||||||
Dividends on preferred stock and income attributable to unvested stock-based compensation awards |
(81,769 | ) | (14,063 | ) | | (95,832 | ) | |||||||||
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Net income available to common shareholders |
$ | 1,776,977 | $ | 590,825 | $ | (72,600 | ) | $ | 2,295,202 | |||||||
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Net income per common share |
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Basic |
$ | 13.81 | $ | 1.40 | $ | | $ | 12.82 | ||||||||
Diluted |
13.80 | 1.39 | | 12.79 | ||||||||||||
Average common shares outstanding |
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Basic |
128,649 | 420,831 | 50,325 | (23) | 178,974 | |||||||||||
Diluted |
128,812 | 424,535 | 50,599 | 179,411 |
See accompanying notes to pro forma combined condensed financial statements.
4
Notes to Pro Forma Combined Condensed Financial Statements
(dollars in thousands, except per share)
(Unaudited)
A. | Adjustments to the Unaudited Pro Forma Combined Condensed Financial Statements |
(1) | Transaction accounting adjustments reflect preliminary estimates of pro forma increases (decreases) resulting from the use of the acquisition method of accounting. |
(2) | Adjustment to reflect acquired investment securities at estimated fair value. |
(3) | Adjustment to reflect acquired loans and leases at estimated fair value, which includes lifetime credit loss expectations, current interest rates and liquidity. The adjustments include the following: |
December 31, 2021 | ||||
Reversal of historical Peoples Uniteds loan and lease adjustments |
$ | 22,806 | ||
Establish fair value mark on Peoples Uniteds loans and leases |
(496,662 | ) | ||
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Net adjustments |
$ | (473,856 | ) | |
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(4) | Adjustments to the allowance for credit losses (ACL) include the following: |
December 31, 2021 | ||||
Reversal of historical Peoples Uniteds allowance for credit losses |
$ | 343,600 | ||
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Increase in loans and leases and the allowance for credit losses for gross-up for estimate of lifetime credit losses for purchased credit-deteriorated (PCD) loans and leases |
$ | (99,000 | ) | |
Provision for estimate of lifetime credit losses for non-PCD loans and leases |
(242,000 | ) | ||
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Net adjustments |
$ | (341,000 | ) | |
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(5) | Adjustment to reflect $3,638,118 of estimated pro forma goodwill from this business combination and the elimination of Peoples United historical goodwill of $2,680,842. |
(6) | Adjustment to reflect $218,000 of estimated core deposit intangible asset and $43,000 of other intangible assets from this business combination and the elimination of existing intangible assets of Peoples United of $127,764. |
(7) | Adjustments to other assets for the following: |
December 31, 2021 | ||||
Adjustment to reflect fixed and other assets at estimated fair value |
$ | (20,520 | ) | |
Adjustment to reflect the estimated increase to deferred tax assets resulting from acquisition accounting adjustments |
29,937 | |||
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Net fair value adjustments |
9,417 | |||
Adjustment to reflect the estimated tax effect of other acquisition adjustments |
65,878 | |||
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Net adjustments |
$ | 75,295 | ||
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(8) | Adjustment to reflect the estimated fair value of interest-bearing deposits. |
(9) | Adjustment to reflect borrowings at estimated fair value: |
December 31, 2021 | ||||
Reversal of historical Peoples Uniteds fair value adjustments |
$ | (2,209 | ) | |
Establish fair value mark on Peoples Uniteds borrowings |
11,371 | |||
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Net adjustments |
$ | 9,162 | ||
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5
Notes to Pro Forma Combined Condensed Financial Statements, continued
(dollars in thousands, except per share)
(Unaudited)
(10) | Adjustments to other liabilities for the following: |
December 31, 2021 | ||||
Merger-related transaction costs of Peoples United |
$ | 155,173 | ||
Other |
26,651 | |||
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Net fair value adjustments |
181,824 | |||
Merger-related transaction costs of M&T |
17,650 | |||
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Net adjustments |
$ | 199,474 | ||
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(11) | Adjustment to reflect preferred stock at estimated fair value. |
(12) | Reflects the issuance of 50,325,004 shares of M&T common stock based on the number of shares of Peoples United common stock issued and outstanding as of April 1, 2022 and the closing price per share of M&Ts common stock reported on the NYSE on April 1, 2022 of $164.66 and the valuation of Peoples United stock-based compensation. |
(13) | Reflects adjustments to record the gross-up for lifetime credit losses for PCD acquired loans and leases ($99,000), to record the allowance for non-PCD acquired loans and leases ($242,000), to reflect M&Ts merger-related transaction costs ($17,650) and recognize the tax effects related thereto ($65,878). |
Year Ended December 31, 2021 |
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(14) | Net adjustment to interest income to eliminate Peoples Uniteds accretion of discounts on previously acquired loans and record the estimated accretion of net discount on acquired loans and leases. | $ | 49,858 | |||
(15) | Net adjustment to interest income to record the estimated amortization of net discounts on securities. | 146,348 | ||||
(16) | Net adjustment to interest expense to record the estimated incremental amortization of fair value adjustments on acquired interest-bearing deposits. | 1,148 | ||||
(17) | Net adjustment to interest expense to record the estimated incremental amortization of fair value adjustments on long-term debt. | 3,642 | ||||
(18) | Adjustment to record provision for credit losses on non-PCD acquired loans and leases. | 242,000 | ||||
(19) | Adjustment to depreciation expense related to fixed assets. | (3,945 | ) |
6
Notes to Pro Forma Combined Condensed Financial Statements, continued
(dollars in thousands, except per share)
(Unaudited)
Year Ended December 31, 2021 |
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(20) | Net adjustment to record incremental amortization expense associated with core deposit and other intangible assets. Core deposit intangible asset and other intangible assets will be amortized using expected lives ranging from three to seven years. | $ | 31,836 |
Amortization Expense | ||||||||||
Useful Life (years) | Year Ended December 31, 2021 |
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Core deposit intangible asset |
7 | $ | 54,500 | |||||||
Trust relationship intangible asset |
5 | 6,333 | ||||||||
Other |
3 | 8,000 | ||||||||
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68,833 | ||||||||||
Historical amortization expense |
(36,997 | ) | ||||||||
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Pro forma net adjustment to amortization |
$ | 31,836 | ||||||||
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Amortization for the next five years |
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Year 1 |
$ | 59,781 | ||||||||
Year 2 |
50,729 | |||||||||
Year 3 |
33,676 | |||||||||
Year 4 |
24,624 | |||||||||
Year 5 |
15,571 |
Year Ended December 31, 2021 |
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(21) | Reflects estimated professional fees of M&T associated with the acquisition. | $ | 17,650 | |||
(22) | Adjustment to income tax expense to record the applicable state and federal tax effects of transaction accounting adjustments at the combined estimated statutory rate of 26% applied to items that are tax-effected. | (23,525 | ) | |||
(23) | Adjustments to weighted-average shares of M&T common stock outstanding to eliminate weighted average shares of Peoples United common stock outstanding and record shares of M&T common stock outstanding calculated using an exchange ratio of .118 per share. |
7
Notes to Pro Forma Combined Condensed Financial Statements, continued
(dollars in thousands, except per share)
(Unaudited)
B. | Pro Forma Purchase Price Allocation |
The following table sets forth a pro forma allocation of the estimated total purchase price to the fair value of the assets and liabilities of Peoples United using Peoples Uniteds audited consolidated balance sheet as of December 31, 2021, with the excess recorded to goodwill:
Peoples Uniteds Net Assets at Fair Value: |
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Assets |
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Cash and due from banks |
$ | 320,480 | ||
Interest-bearing deposits at banks and other short-term investments |
10,268,764 | |||
Investment securities |
10,723,137 | |||
Loans and leases, net |
37,386,187 | |||
Core deposit and other intangible assets |
261,000 | |||
Other assets |
2,987,365 | |||
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Total assets acquired |
61,946,933 | |||
Liabilities and Preferred Equity |
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Interest-bearing deposits |
35,813,923 | |||
Total borrowings |
1,959,764 | |||
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Total interest-bearing liabilities |
37,773,687 | |||
Noninterest-bearing deposits |
17,941,084 | |||
Other liabilities |
1,216,530 | |||
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Total liabilities |
56,931,301 | |||
Preferred equity |
260,600 | |||
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Total liabilities and preferred equity |
57,191,901 | |||
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Net assets acquired |
$ | 4,755,032 | ||
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Pro forma goodwill |
$ | 3,638,118 | ||
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8