Acquisitions and Divestitures

Acquisitions

The Company acquired several businesses and equity investments for approximately $283,000, $1,457,000, and $420,000, net of cash acquired, during the years ended December 31, 2018, 2017, and 2016, respectively.

2018

In 2018, a significant portion of the businesses acquired included 20 businesses in the Automotive Parts Group and three businesses in the Industrial Parts Group.

The 20 Automotive Parts Group acquisitions generate annual unaudited revenues of approximately $180,000. The acquisitions included TMS Motor Spares ("TMS") in August 2018 and Platinum International Group ("Platinum") in October 2018. TMS is a leading automotive parts distributor and operates 17 locations in Scotland and seven locations in England. Platinum is a leading value-added battery distributor in the automotive, industrial, and leisure markets and operates nine locations in the U.K. and one location in the Netherlands.

The three Industrial Parts Group acquisitions generate annual unaudited revenues of approximately $100,000. The largest acquisition was Hydraulic Supply Company ("HSC") in October 2018, which operates 30 locations in the U.S. HSC is a full-service fluid power distributor, with a product offering of hydraulic, pneumatic and industrial components and systems.

For each acquisition, the Company allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates. The results of operations for the acquired companies were included in the Company’s consolidated statements of income and comprehensive income beginning on their respective acquisition dates. The Company recorded approximately $167,000 of goodwill and other intangible assets associated with the 2018 acquisitions. Other intangible assets acquired consisted of customer relationships of $76,000 with weighted average amortization lives of 15 years.

2017 and 2016

In 2017, a significant portion of the businesses acquired included 12 businesses in the Automotive Parts Group and three businesses in the Industrial Parts Group. The aggregate purchase price for these 15 acquisitions was approximately $1,334,000, net of cash acquired. The acquisitions of Alliance Automotive Group (“AAG”) and the Inenco equity method investment are described further below. In 2016, a significant portion of the businesses acquired included 11 businesses in the Automotive Parts Group, six businesses in the Industrial Group and two businesses in the Business Products Group. The purchase price for these 19 acquisitions was approximately $370,000, net of cash acquired.

For each 2017 and 2016 acquisition, the Company allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates. The results of operations for the acquired companies were included in the Company’s consolidated statements of income and comprehensive income beginning on their respective acquisition dates. The Company recorded approximately $1,926,000 and $260,000 of goodwill and other intangible assets associated with the 2017 and 2016 acquisitions, respectively. Other intangible assets acquired in 2017, excluding AAG, consisted of customer relationships of $69,000 with weighted average amortization lives of 15 years. Other intangible assets acquired in 2016 consisted of customer relationships of $112,000 and trademarks of $28,000, with weighted average amortization lives of 17 and 35 years, respectively.

Alliance Automotive Group

The Company acquired all of the equity interests in AAG for approximately $1,067,000 in cash on November 2, 2017. The net cash consideration transferred of approximately $1,067,000 is net of the cash acquired of approximately $123,000. AAG, which is headquartered in London, is the second largest parts distribution platform in Europe, based on revenues, with a focus on light and commercial vehicle replacement parts distributed to the independent aftermarket in France, Germany, the U.K., and Poland.

Coincident with the transaction, GPC repaid a majority of AAG’s debt including publicly held notes and a revolving credit facility with a banking group, including accrued interest, for approximately $825,000. The acquisition and subsequent redemption of substantially all acquired debt, was financed using a combination of new borrowings under a term loan, five private placement notes, and borrowings under increased credit facilities.

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date as well as the adjustments made when finalizing the acquisition accounting during the year ended December 31, 2018 (referred to as the "measurement period adjustments”). The measurement period adjustments primarily resulted from revisions to the valuation of certain tangible and intangible assets. The adjustments to current period earnings that would have been recognized in previous periods if the acquisition accounting had been completed on the acquisition date were not material.



	November 2, 2017			Measurement Period Adjustments			As Adjusted
Trade accounts receivable	$	380,000		$	6,000		$	386,000
Merchandise inventories	374,000			4,000			378,000
Prepaid expenses and other current assets	213,000			10,000			223,000
Intangible assets	727,000			86,000			813,000
Deferred tax assets	4,000			(2,000		)	2,000
Property and equipment	93,000			(1,000		)	92,000
Other assets	25,000			(11,000		)	14,000
Total identifiable assets acquired	1,816,000			92,000			1,908,000
Current liabilities	(768,000		)	(50,000		)	(818,000		)
Long-term debt	(769,000		)	—			(769,000		)
Pension and other post-retirement benefit liabilities	(14,000		)	—			(14,000		)
Deferred tax liabilities	(151,000		)	(21,000		)	(172,000		)
Other long-term liabilities	(32,000		)	(2,000		)	(34,000		)
Total liabilities assumed	(1,734,000		)	(73,000		)	(1,807,000		)
Net identifiable assets acquired	82,000			19,000			101,000
Noncontrolling interests in subsidiaries	(38,000		)	1,000			(37,000		)
Goodwill	1,036,000			(33,000		)	1,003,000
Net assets acquired	$	1,080,000		$	(13,000	)	$	1,067,000

The acquired intangible assets of approximately $813,000 were assigned to customer relationships of $630,133, trademarks of $181,702, and other intangibles of $1,165, with weighted average amortization lives of 20, 28 and 2 years, respectively, for a total weighted average amortizable life of 22 years.

The goodwill recognized as part of the acquisition is not tax deductible and has been assigned to the Automotive segment. The goodwill was attributable primarily to expected synergies and the assembled work-force. The fair values of the non-controlling interests in subsidiaries were valued using income approaches.

The amounts of net sales and earnings of AAG included in the Company’s consolidated statements of income and comprehensive income from November 2, 2017 to December 31, 2017 were approximately $256,400 in net sales and net income of $0.07 on a per share diluted basis, respectively.

The unaudited pro forma consolidated statements of income and comprehensive income of the Company as if AAG had been included in the consolidated results of the Company for the years ended December 31, 2017 and 2016 would be estimated at $17,627,000 and $16,575,000 in net sales, respectively, and net income of $4.56 and $4.55 on a per share diluted basis, respectively. The pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the transaction actually occurred at the beginning of these periods, nor is it necessarily indicative of future results.

The adjustments to the pro forma amounts include, but are not limited to, applying the Company’s accounting policies, amortization related to fair value adjustments to intangible assets, one-time purchase accounting adjustments, interest expense on acquisition related debt, and any associated tax effects.

Inenco

Effective April 3, 2017, the Company acquired a 35% investment in the Inenco Group for approximately $72,100 from Conbear Holdings Pty Limited ("Conbear"). The equity investment was funded with the Company’s cash on hand. The Inenco Group, which is headquartered in Sydney, Australia, is an industrial distributor of bearings, power transmissions, and seals in Australasia, with annual revenues of approximately $400,000 and 174 locations across Australia and New Zealand, as well as an emerging presence in Asia.The Company and Conbear both have an option to acquire or sell, respectively, the remaining 65% of Inenco at a later date contingent upon certain conditions being satisfied. However, there can be no guarantee that such conditions will be met or, if they are met, whether either company would exercise its option.

Divestitures

Business Products Group

On April 12, 2018, the Company entered into a definitive agreement with Essendant, Inc. ("Essendant") for Essendant to combine with the Company's Business Products Group in a business combination transaction. The transaction was to be structured as a Reverse Morris Trust, in which the Company would separate the Business Products Group into a standalone company and spin off that standalone company to the Company's shareholders, immediately followed by the merger of a subsidiary of Essendant and the spun-off company.

On September 14, 2018, the definitive agreement with Essendant was terminated by Essendant, so that Essendant could enter into a merger agreement with another party. Concurrently with the termination, the Company received a termination fee of $12,000. The termination fee is classified as an offset to the transaction and other costs incurred related to the merger agreement within selling, administrative and other expenses in the consolidated statements of income and comprehensive income.

Grupo Auto Todo

On December 13, 2018, the Company entered into a definitive agreement to sell all of the equity of a Mexican subsidiary in the Automotive Parts Group, Grupo Auto Todo, to a group of investors for approximately $12,000. Grupo Auto Todo contributed approximately $93,000 of revenues for the year ended December 31, 2018. The transaction is expected to close in 2019. The Company estimates that it will recognize a charge of approximately $30,000 when the transaction closes, primarily from accumulated foreign currency losses.