NOTE 3 - ACQUISITIONS

Acquisition of TS

On September 19, 2016, Tech Data entered into an interest purchase agreement, as subsequently amended, with Avnet to acquire all the shares of TS. Pursuant to the interest purchase agreement, and subject to the terms and conditions contained therein, at the closing of the acquisition on February 27, 2017, Tech Data acquired all of the outstanding shares of TS for an aggregate estimated purchase price of approximately $2.7 billion, including approximately $2.5 billion in cash, including estimated closing adjustments, and 2,785,402 shares of the Company's common stock, valued at approximately $247 million based on the closing price of the Company's common stock on February 27, 2017. The final cash consideration is subject to certain working capital and other adjustments, as determined through the process established in the interest purchase agreement. Therefore, the final purchase price may vary significantly from these estimates. TS delivers technology services, software, hardware and solutions across the data center. The TS acquisition diversifies the Company's end-to-end solutions, deepens its value added capabilities and balances its solutions portfolio. The addition of TS also extends the Company's geographic reach into the Asia-Pacific region while broadening its capabilities in Europe and the Americas, including re-entering Latin America with a focus on the delivery of new technologies that drive and complement the data center in this market.

The Company has accounted for the TS acquisition as a business combination and allocated the preliminary estimated purchase price to the estimated fair values of assets acquired and liabilities assumed. The Company has not yet completed its evaluation and determination of certain assets acquired and liabilities assumed, primarily (i) the final valuation of intangible assets related to customer relationships and trade names, (ii) the final assessment and valuation of certain other assets acquired and liabilities assumed, including accounts receivable, accrued expenses and other liabilities and (iii) the final assessment and valuation of certain tax amounts. Therefore, the final fair values of the assets acquired and liabilities assumed may vary significantly from the Company's preliminary estimates. During the six months ended October 31, 2017, the Company updated its estimated fair values of certain assets acquired and liabilities assumed, including an increase in goodwill of $116 million, a decrease in intangible assets of $94 million, a decrease in current assets of $11 million and an increase in total liabilities of $9 million.

The preliminary allocation of the estimated purchase price to assets acquired and liabilities assumed is as follows:



(in millions)
Cash	$	176
Accounts receivable	1,836
Inventories	233
Prepaid expenses and other current assets	107
Property and equipment, net	62
Goodwill	609
Intangible assets	941
Other assets, net	177
Total assets	4,141

Other current liabilities	1,184
Revolving credit loans and long-term debt	134
Other long-term liabilities	106
Total liabilities	1,424

Estimated purchase price	$	2,717

The allocation of the preliminary value of identifiable intangible assets is comprised of approximately $898 million of customer relationships with a weighted-average amortization period of 14 years and $43 million of trade names with an amortization period of 5 years. Goodwill is the excess of the consideration transferred over the net assets recognized and primarily represents the expected revenue and cost synergies of the combined company and assembled workforce. Approximately $1.1 billion of the goodwill and identifiable intangible assets are expected to be deductible for tax purposes. The Company has recorded certain indemnification assets for expected amounts to be received from Avnet related to preliminary liabilities recorded for unrecognized tax benefits and other items.

Included within the Company’s Consolidated Statement of Income are estimated net sales for the three and nine months ended October 31, 2017, of approximately $2.2 billion and $6.1 billion, respectively, from TS subsequent to the acquisition date of February 27, 2017. As the Company began integrating certain sales and other functions after the closing of the acquisition, these amounts represent an estimate of the TS net sales for the three and nine months ended October 31, 2017 and are not necessarily indicative of how the TS operations would have performed on a stand-alone basis.

The following table presents unaudited supplemental pro forma information as if the TS acquisition had occurred at the beginning of fiscal 2017. The pro forma results presented are based on combining the stand-alone operating results of the Company and TS for the periods prior to the acquisition date after giving effect to certain adjustments related to the transaction. The pro forma results exclude any benefits that may result from potential cost synergies of the combined company and certain non-recurring costs. As a result, the pro forma information below does not purport to present what actual results would have been had the acquisition actually been consummated on the date indicated and it is not necessarily indicative of the results of operations that may result in the future.



	Three months ended October 31,				Nine months ended October 31,
	2017		2016		2017		2016
(in millions)	(unaudited)
Pro forma net sales	$	9,136	$	8,525	$	26,416	$	25,439
Pro forma net income	$	38	$	30	$	122	$	118

Adjustments reflected in the pro forma results include the following:


•	Amortization of acquired intangible assets based on the preliminary valuation and estimated purchase price


•	Interest costs associated with the transaction


•	Removal of certain non-recurring transaction costs


•	Tax effects of adjustments based on an estimated statutory tax rate

Acquisition, integration and restructuring expenses

Acquisition, integration and restructuring expenses are comprised of professional services, restructuring costs, transaction related costs and other costs related to the acquisition of TS. Professional services are primarily comprised of integration related activities, including professional fees for project management, accounting, tax and IT consulting services. Restructuring costs are comprised of severance and facility exit costs. Transaction related costs primarily consist of investment banking fees, legal expenses and due diligence costs incurred in connection with the completion of the transaction. Other costs primarily consist of payroll related costs including retention, stock compensation, relocation and travel expenses incurred as part of the integration of TS.

Acquisition, integration and restructuring expenses for the three and nine months ended October 31, 2017 and 2016 are comprised of the following:



	Three months ended October 31,				Nine months ended October 31,
	2017		2016		2017		2016
(in thousands)
Professional services	$	10,694	$	3,978	$	37,702	$	5,305
Restructuring costs	6,861		—		24,188		—
Transaction related costs	1,925		8,535		19,154		9,190
Other	10,268		502		20,887		502
Total	$	29,748	$	13,015	$	101,931	$	14,997

During the three months ended October 31, 2017, the Company recorded restructuring costs of $2.0 million in the Americas and $4.9 million in Europe. During the nine months ended October 31, 2017, the Company recorded restructuring costs of $12.4 million in the Americas and $11.8 million in Europe. The accrued restructuring charges are included in “accrued expenses and other liabilities” in the Consolidated Balance Sheet.

Restructuring activity during the nine months ended October 31, 2017 is as follows:



	Nine months ended October 31, 2017
	Severance			Facility Exit Costs			Total
(in thousands)
Fiscal 2018 restructuring expenses	$	18,687		$	5,501		$	24,188
Cash payments	(11,270		)	(2,489		)	(13,759		)
Foreign currency translation	49			29			78
Balance at October 31, 2017	$	7,466		$	3,041		$	10,507