Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Divestiture

On May 15, 2021, we entered into a definitive agreement to sell certain product lines within our global respiratory product portfolio (the "Divested respiratory business") to Medline Industries, Inc. (“Medline”) for consideration of $286.0 million, reduced by $12 million in working capital not transferring to Medline, which is subject to customary post close adjustments (the "Respiratory business divestiture"). In connection with the Respiratory business divestiture, we also entered into several ancillary agreements with Medline to help facilitate the transfer of the business, which provide for transition support, quality, supply and manufacturing services, including a manufacturing and supply transition agreement (the "MSTA").

On June 28, 2021, the first day of the third quarter of 2021, we completed the initial phase of the Respiratory business divestiture, pursuant to which we received cash proceeds of $259 million. We attributed $33.8 million of the proceeds to our performance obligations pursuant to the MSTA. The resulting liability was measured as the excess of the estimated fair value of the services to be performed over the estimated proceeds we expect to receive over the MSTA term. The significant assumption used to estimate the fair value of the services to be performed is the selection of an appropriate gross margin based on comparable companies. The MSTA liability was recorded within Other current liabilities and Other liabilities in the condensed consolidated balance sheet and the related proceeds will be recognized in net revenues as the services are performed.

The second phase of the Respiratory business divestiture will occur once we transfer certain additional manufacturing assets to Medline. Our receipt of $15.0 million in additional cash proceeds is contingent upon the transfer of these manufacturing assets and is expected to occur prior to the end of 2023. We plan to recognize the contingent consideration, and any gain on sale resulting from the completion of the second phase of the divestiture, when it becomes realizable.

The following assets and liabilities were sold as part of the initial phase of the Respiratory business divestiture:


Assets
Inventories	$	26,830
Current assets	26,830

Property, plant and equipment, net	17,006
Intangible assets, net	41,583
Goodwill	35,745
Operating lease assets	1,053
Other assets	94
Noncurrent assets	95,481

Total assets	$	122,311
Liabilities
Other current liabilities	$	535
Noncurrent operating lease liabilities	568
Liabilities	$	1,103

As disclosed in Note 8, $35.7 million of goodwill of our Americas, EMEA and Asia reportable operating segments’ goodwill was attributed to the divested respiratory business based on the fair value of the divested respiratory business relative to the fair value of certain of our reporting units. The fair values were estimated using a combination of the discounted cash flows based on projected future earnings (Income Approach) and market multiples of publicly traded companies in similar lines of business (Market Approach). The more significant judgments and assumptions in determining fair value using the Income Approach include the amount and timing of expected future cash flows and the discount rate that was used to estimate the present value of the future cash flows. The more significant judgments and assumptions in determining fair value using the Market Approach include the determination of appropriate revenue and EBITDA multiples based on the selection of appropriate comparable companies.

Net revenues attributable to our divested respiratory business recognized prior to the Respiratory business divestiture are included within each of our geographic segments and were $60.7 million during the year ended December 31, 2021 and $138.5 million for the year ended December 31, 2020. For the year ended December 31, 2021, we recognized $51.1 million in net revenues attributed to services provided to Medline in accordance with the MSTA, which are presented within our Americas reporting segment and our Other global product category.

Acquisitions

On February 18, 2020, we acquired IWG High Performance Conductors, Inc. (HPC), a privately-held original equipment manufacturer of minimally invasive medical products and high performance conductors, for an initial purchase price of $260.0 million. The purchase price was allocated based on the fair values of the assets and liabilities, including goodwill of $107.1 million, intangible assets of $179.0 million and deferred tax liabilities of $43.4 million. The acquisition complements our OEM product portfolio. For the years ended December 31, 2021 and 2020, we recorded post acquisition revenue of $38.6 million and $27.1 million, respectively, related to HPC within our OEM operating segment.

On December 28, 2020, we acquired Z-Medica, LLC ("Z-Medica"), a privately held medical device company that manufactures and sells hemostatic (hemorrhage control) products to complement our anesthesia product portfolio. The acquisition included an initial cash purchase price of $500.0 million, with the potential to make an additional payment up to $25 million upon the achievement of certain commercial milestones. The purchase price was allocated based on the fair values of the assets and liabilities, including goodwill of $186.0 million, intangibles assets of $332.0 million and deferred tax liabilities of $32.2 million. For the year ended December 31, 2021, we recorded post acquisition revenue and operating profit of $66.4 million and $21.8 million, respectively, related to Z-Medica across our geographic segments.