Acquisitions

3 Months Ended

Dec. 31, 2022

Business Combinations [Abstract]

Acquisitions

5. Business Combinations

The Company recorded the assets acquired and liabilities assumed related to the following acquisitions at their fair values as of the acquisition date, from a market participant’s perspective. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. The finalization of the assignment of fair values will be completed within one year after the respective acquisition date.

Acquisition Completed in Fiscal Year 2023

B Medical Systems S.á r.l.

On October 3, 2022, the Company acquired B Medical Systems S.á r.l. and its subsidiaries ("B Medical"), for a purchase price of approximately $432.2 million including contingent consideration, which the company estimated the fair value to be $17 million as of the measurement date. B Medical is a market leader in temperature-controlled storage and transportation solutions that enables the delivery of life-saving treatments to more than 150 countries worldwide. B Medical’s results of operations are reported in the Company’s Life Sciences Products reportable segment from the date of acquisition. The Company paid a total initial cash purchase price at closing of $424 million, as adjusted for cash acquired and other items pursuant to the Agreement. B Medical Systems Holdings S.A (the “Seller”) is eligible to earn up to approximately €50 million in contingent consideration based upon achievement of certain financial metrics by B Medical and its subsidiaries. Included in the purchase price, the Company repaid B Medical’s outstanding debt of $43.1 million prior to September 30, 2022 which was classified in prepaid assets as of September 30, 2022. In addition, as of September 30, 2022, the Company had recorded $381 million in short-term restricted cash, which was reserved to complete the acquisition on October 3, 2022.

The contingent consideration payment is based on achievement of certain revenue targets over the one-year period from October 3, 2022 to September 30, 2023. Pursuant to ASC 805, Business Combinations (“ASC 805”), the Company recorded its estimate of the fair value of the contingent consideration liability utilizing the Monte Carlo simulation based on future revenue projections, revenue growth rates of comparable companies, implied volatility and applying a risk adjusted discount rate. Each quarter, the Company is required to remeasure the fair value of this liability as assumptions change over time and any resulting adjustments in the fair value of this liability are recorded in “Operating expenses” in the Company’s Consolidated Statements of Operations. This fair value measurement was based on significant inputs not observable in the market and thus represented a Level 3 measurement as defined in ASC 820, Fair Value Measurements. This fair value measurement is directly impacted by the Company’s estimate of future incremental revenue growth of the business. Accordingly, if actual revenue growth is higher or lower than the estimates within the fair value measurement, the Company would record additional charges or gains. As of December 31, 2022, the contingent consideration liability was $18.5 million.

The total purchase price was allocated to B Medical’s tangible and identifiable intangible assets and liabilities based on the estimated fair values as of October 3, 2022, as set forth below:

	Fair Value of
	Assets and
	Liabilities
Accounts receivable		19,549
Inventory		49,700
Other assets		20,330
Property plant and equipment		55,170
Identifiable Intangible Assets:
Completed technology		100,200
Trademarks		5,500
Customer relationships		36,700
Backlog		600
Other liabilities		(31,699)
Deferred income taxes, net		(42,974)
Goodwill		219,085
Total purchase price, net of cash acquired	$	432,160

In performing the preliminary purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of B Medical’s business. The allocation of the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities. As part of the purchase price allocations, the Company determined the identifiable intangible assets were completed technology, trademarks, customer relationships and backlog. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a 13% rate. The cash flows were based on estimates used to price the transaction, and the discount rate applied was benchmarked with references to the implied rate of return from the transaction and the weighted average cost of capital. The weighted average life of completed technology is 10 years, customer relationships is 16 years, trademarks is 5 years and backlog is 1 year. The intangible assets acquired are amortized over their respective weighted average life using methods that approximate the pattern in which the economic benefits are expected to be realized. The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Goodwill of $219.1 million largely reflects the potential expansion of the Company's cold chain capabilities by adding differentiated solutions for reliable and traceable transport of temperature controlled specimens in the Company's Life Sciences Products reportable segment. The goodwill is not expected to be deductible for income tax purposes.

The revenues and net loss from B Medical included in the Company's consolidated results for the reporting period since acquisition were $41.8 million and $4.7 million, respectively. The Company incurred $8.7 million in transaction costs related to the acquisition of which $4.7 million was incurred during the three months ended December 31, 2022. 

The following unaudited pro forma information reflects our consolidated results of operations as if the acquisition had taken place on October 1, 2021. The unaudited pro forma information is not necessarily indicative of the results of operations that we would have reported had the transaction actually occurred at the beginning of these periods nor is it necessarily indicative of future results.

	Three Months Ended, December 31,
		2022		2021
			(pro forma)		(pro forma)
Revenue		$	178,366	$	178,621
Net loss			(5,845)		(33,526)

The unaudited pro forma information is based on historical information and is adjusted for items including, but not limited to, the application of our accounting policies, GAAP adjustments, additional transaction costs, depreciation and amortization related to fair value adjustments to property, plant and equipment, inventory and intangible assets, and reversal of interest expense on acquisition related debt fully repaid.  Non-recurring acquisition related items and significant GAAP adjustments included in the three months ended December 31, 2021 include $8.7 million of transaction costs, $5.4 million of reversal of debt interest expense and $1.6 million expensed as a reversal of R&D capitalization.  The pro forma information does not include any anticipated costs savings or other effects of the integration of B Medical.  Accordingly, the unaudited pro forma information does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations.

Acquisition Completed in Fiscal Year 2022

Barkey Holding GmbH

On July 1, 2022, the Company acquired Barkey Holding GmbH and its subsidiaries (“Barkey”), a leading provider of controlled-rate thawing devices for customers in the medical, biotech and pharmaceutical industries, head quartered in Leopoldshöhe, Germany. The Company has included the financial results of the acquired operations within the Life Sciences Products segment. The total cash purchase price of the acquisition was approximately $84.8 million, net of cash acquired. The acquisition brings innovative products and capabilities that extend the Company’s extensive cold chain of condition portfolio of products and services, while also expanding our customer reach in the fast-growing cell and gene therapy space. The allocation of the consideration included $3.0 million of customer relationships, $29.0 million of technology, $57.8 million of goodwill, $9.8 million of deferred tax liabilities, and several other assets and liabilities. The weighted useful life of all the intangible assets acquired is 15 years. The goodwill and intangibles are not tax deductible.

The Company did not present a pro forma information summary for its consolidated results of operations for the acquisitions completed in fiscal year 2022 because such results were immaterial.