Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2021

Acquisition of Ondot

On January 22, 2021, the Company acquired a remaining ownership interest in Ondot, a digital experience platform provider for financial institutions, for approximately $270 million, net of $13 million of acquired cash. The Company previously held a noncontrolling equity interest in Ondot, which was accounted for at cost. The remeasurement of the Company’s previously held equity interest to its acquisition-date fair value resulted in the recognition of a pre-tax gain of $12 million included within other income in the consolidated statement of income during the three months ended March 31, 2021. Ondot is included within the Payments segment and further expands the Company’s digital capabilities, enhancing its suite of integrated payments, banking and merchant solutions.

The preliminary allocation of purchase price recorded for Ondot was as follows:



(In millions)
Cash and cash equivalents	$	13
Receivables and other assets	13
Intangible assets	92
Goodwill	210
Payables and other accrued liabilities	(23)
Total consideration	$	305
Less: Fair value of previously held equity interest	(22)
Total purchase price	$	283

The allocation of the purchase price above is preliminary and subject to further adjustment, pending additional refinement and final completion of valuations. Goodwill, not deductible for tax purposes, is primarily attributed to the anticipated value created by the combined scale of integrated digital solutions to consumers, merchants, acquirers, networks and card issuers. The preliminary amounts allocated to identifiable intangible assets are as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Acquired software and technology	$	60	6 years
Customer relationships	20		10 years
Non-compete agreements and other	12		3 years
Total	$	92	7 years

The results of operations for Ondot are included in the consolidated results of the Company from the date of acquisition. Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations.

Other Acquisitions

On March 1, 2021, the Company acquired Radius8, Inc. (“Radius8”), a provider of a platform that uses consumer location and other information to drive incremental merchant transactions, for approximately $14 million. Radius8 is included within the Acceptance segment and enhances the Company’s ability to help merchants to increase sales, expand mobile application registration and improve one-to-one target marketing. The results of operations for Radius8 are included in the consolidated results of the Company from the date of acquisition. Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations.

On March 25, 2021, the Company announced that it had entered into a definitive agreement to acquire Pineapple Payments Holdings, LLC (“Pineapple Payments”), an independent sales organization that provides payment processing, proprietary technology, and payment acceptance solutions for merchants. The Company expects the acquisition to close in the second quarter of 2021, subject to customary approvals and closing conditions. Upon closing of the acquisition, Pineapple Payments will be included within the Acceptance segment, and will expand the reach of the Company’s payment solutions through its technology- and relationship-led distribution channels.

On March 2, 2020, the Company acquired MerchantPro Express LLC (“MerchantPro”), an independent sales organization that provides processing services, point-of-sale equipment and merchant cash advances to businesses across the United States. MerchantPro is included within the Acceptance segment and further expands the Company’s merchant services business. On March 18, 2020, the Company acquired Bypass Mobile, LLC (“Bypass”), an independent software vendor and innovator in enterprise point-of-sale systems for sports and entertainment venues, food service management providers and national restaurant chains. Bypass is included within the Acceptance segment and further enhances the Company’s ability to help businesses deliver seamless physical and digital customer experiences. On May 11, 2020, the Company acquired Inlet, LLC (“Inlet”), a provider of secure digital delivery solutions for enterprise and middle-market biller invoices and statements. Inlet is included within the Payments segment and further enhances the Company’s digital bill payment strategy.

The Company acquired these businesses for an aggregate purchase price of $167 million, net of $2 million of acquired cash, and including earn-out provisions estimated at a fair value of $45 million (see Note 6). The purchase price allocations for these

acquisitions resulted in software and customer intangible assets totaling approximately $46 million, residual buyout intangible assets of approximately $35 million, goodwill of approximately $90 million, and net assumed liabilities of approximately $4 million. The purchase price allocation for the MerchantPro acquisition was finalized in the third quarter of 2020, and for the Bypass and Inlet acquisitions in the fourth quarter of 2020. Measurement period adjustments did not have a material impact on the consolidated statements of income. The goodwill recognized from these transactions, of which $36 million is deductible for tax purposes, is primarily attributed to synergies and the anticipated value created by selling the Company’s products and services to the acquired businesses’ existing client base.

The amounts allocated to identifiable intangible assets are as follows:



(In millions)	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	32	14 years
Residual buyouts	35		9 years
Acquired software and technology	14		8 years
Total	$	81	11 years

The results of operations for these acquired businesses have been included in the consolidated results of the Company from the dates of acquisition. Pro forma information for these acquisitions is not provided because they did not have a material effect on the Company’s consolidated results of operations.

Dispositions

Effective July 1, 2020, the Company and Bank of America (“BANA”) dissolved the Banc of America Merchant Services joint venture (“BAMS” or the “joint venture”), of which the Company maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation. The remaining activities of the joint venture will consist of supporting the transition of the business to each party and an orderly wind down of remaining BAMS assets and liabilities. Pursuant to the separation agreement, the joint venture retains the responsibility for certain contingencies that may arise from pre-dissolution activities, including potential credit losses for specified merchants in excess of established reserves and certain legal claims and contingencies. The Company may be obligated to fund a proportionate share of any such losses as incurred.

The Company will continue to provide merchant processing and related services to former BAMS clients allocated to BANA, at BAMS pricing, through June 2023. The Company will also provide processing and other support services to new BANA merchant clients pursuant to a five-year non-exclusive agreement which, after June 2023, will also apply to the former BAMS clients allocated to BANA. In addition, both the Company and BANA are entitled to certain transition services, at fair value, from each other through June 2023. The business transferred to the Company will continue to be operated and managed within the Company’s Acceptance segment.

On February 18, 2020, the Company sold a 60% controlling interest of its Investment Services business, subsequently renamed as Tegra118, LLC (“Tegra118”). The Company received pre-tax proceeds of $584 million, net of related expenses, resulting in a pre-tax gain on the sale of $431 million, with the related tax expense of $113 million recorded through the income tax provision, in the consolidated statement of income for the three months ended March 31, 2020. The pre-tax gain included $177 million related to the remeasurement of the Company’s 40% retained interest based upon the enterprise value of the business. The revenues, expenses and cash flows of the Investment Services business were consolidated into the Company’s financial results through the date of the sale transaction, and are reported within Corporate and Other (see Note 20). In conjunction with the sale transaction, the Company also entered into transition services agreements to provide, at fair value, various administration, business process outsourcing, technical and data center related services for defined periods to Tegra118 (see Note 19).

On February 2, 2021, Tegra118 completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined new entity, Wealthtech Holdings, LLC (“Wealthtech”). In connection with the transaction, the Company made an additional capital contribution of $200 million into the combined entity and recognized a pre-tax gain of $28 million within income (loss) from investments in unconsolidated affiliates in the consolidated statement of income, with related tax expense of $6 million recorded through the income tax provision, during the three months ended March 31, 2021. The Company’s remaining 24% ownership interest in Wealthtech is accounted for as an equity method investment.