Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2019

Acquisitions and Divestitures

Acquisitions and Divestitures

NOTE 3. Acquisitions and Divestitures

Acquisitions:

3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to, among other factors, growth markets and adjacent product lines or technologies. Goodwill resulting from business combinations is largely attributable to the existing workforce of the acquired businesses and synergies expected to arise after 3M’s acquisition of these businesses.

	2019 Acquisition Activity
			Finite-Lived
			Intangible-Asset
(Millions)			Weighted-Average
Asset (Liability)	M*Modal		Lives (Years)
Accounts receivable	$	77
Other current assets		2
Property, plant, and equipment		8
Purchased finite-lived intangible assets:
Customer related intangible assets		275	14
Other technology-based intangible assets		160	6
Definite-lived tradenames		11	6
Purchased goodwill		508
Other assets		59
Accounts payable and other liabilities		(124)
Interest bearing debt		(251)
Deferred tax asset/(liability)		(21)
Net assets acquired	$	704
Supplemental information:
Cash paid	$	708
Less: Cash acquired		4
Cash paid, net of cash acquired	$	704

Purchased identifiable finite-lived intangible assets related to acquisitions which closed in the nine months ended September 30, 2019 totaled $446 million. The associated finite-lived intangible assets acquired will be amortized on a systematic and rational basis (generally straight line) over a weighted-average life of 11 years (lives ranging from 6 to 14 years).

In February 2019, 3M completed the acquisition of the technology business of M*Modal for $0.7 billion of cash, net of cash acquired, and assumption of $0.3 billion of M*Modal’s debt. Based in Pittsburgh, Pennsylvania, M*Modal is a leading healthcare technology provider of cloud-based, conversational artificial intelligence-powered systems that help physicians efficiently capture and improve the patient narrative. The allocation of purchase consideration related to M*Modal is considered preliminary with provisional amounts primarily related to certain tax-related and contingent liability amounts. 3M expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the third quarter of 2019 were approximately $75 million and $5 million, respectively. Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the first nine months of 2019 were approximately $200 million and $40 million, respectively. Proforma information related to the acquisition has not been included as the impact on the Company’s consolidated results of operations was not considered material.

In October 2019, 3M completed the acquisition of Acelity Inc. and its KCI subsidiaries for cash of approximately $4.5 billion, subject to closing and other adjustments, and assumption of $2.5 billion of debt and related items (see also Note 10). Acelity is a leading global medical technology company focused on advanced wound care and specialty surgical applications marketed under the KCI brand. This transaction will be reflected within the Company’s Health Care business. Due to the limited amount of time since the October acquisition date and the limitations on access to Acelity information prior to the acquisition date, the preliminary allocation of purchase consideration is incomplete at this time. As a result, the Company is unable to provide the amounts recognized as of the

acquisition date for the major classes of assets acquired and liabilities assumed, including the information required for valuation of intangible assets and goodwill.

There were no acquisitions that closed during the nine months ended September 30, 2018.

Divestitures:

3M may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders.

2019 divestitures:

During the first quarter of 2019, the Company sold certain oral care technology comprising a business and reflected an earnout on a previous divestiture resulting in an aggregate immaterial gain.

In August 2019, 3M closed on the sale of its gas and flame detection business, a leader in fixed and portable gas and flame detection, to Teledyne Technologies Incorporated. This business has annual sales of approximately $120 million. The transaction resulted in a pre-tax gain of $112 million that was reported within the Company’s Safety and Industrial business.

In August 2019, 3M entered into an agreement with Avon Rubber p.l.c. to purchase 3M’s advanced ballistic-protection business for $91 million, subject to closing and other adjustments, plus contingent considerations of up to $25 million depending on the outcome of pending tenders. The business, with annual sales of approximately $85 million, consists of ballistic helmets, body armor, flat armor and related helmet-attachment products serving government and law enforcement. The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to be completed in late 2019 or early 2020. The Company reflected an immaterial impact in the third quarter of 2019 within the Transportation and Electronics business as a result of measuring this disposal group at the lower of its carrying amount or fair value less cost to sell.

2018 divestitures:

During 2018, as described in Note 3 in 3M’s 2018 Annual Report on Form 10-K, the Company divested a number of businesses including: certain personal safety product offerings primarily focused on noise, environmental and heat stress monitoring; a polymer additives compounding business; an abrasives glass products business; and substantially all of its Communication Markets Division.

Operating income and held for sale amounts:

The aggregate operating income of these businesses was approximately $30 million and immaterial in the first nine months of 2018 and 2019, respectively. The approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of December 31, 2018 were not material and as of September 30, 2019 included the following:

	September 30,
(Millions)	2019
Inventory	$	25
Property, plant and equipment		10
Intangible assets		35

In addition, approximately $10 million of goodwill was estimated to be attributable to disposal groups classified as held-for-sale as of September 30, 2019, based upon relative fair value. The amounts above have not been segregated and are classified within the existing corresponding line items on the Company’s consolidated balance sheet.

Refer to Note 3 in 3M’s 2018 Annual Report on Form 10-K for more information on 3M’s acquisitions and divestitures.