
Note 2.	Acquisitions and Dispositions

The company’s acquisitions have historically been made at prices above the determined fair value of the acquired identifiable net assets, resulting in goodwill, due to expectations of the synergies that will be realized by combining the businesses. These synergies include the elimination of redundant facilities, functions and staffing; use of the company’s existing commercial infrastructure to expand sales of the acquired businesses’ products; and use of the commercial infrastructure of the acquired businesses to cost-effectively expand sales of company products.

Acquisitions have been accounted for using the purchase method of accounting, and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition transaction costs are recorded in selling, general and administrative expenses as incurred.

2018

The company has entered into an agreement to acquire Gatan, Inc., a wholly owned subsidiary of Roper Technologies, Inc., for approximately $925 million in cash. Gatan is a leading manufacturer of instrumentation and software used to enhance and extend the operation and performance of electron microscopes. The transaction is subject to customary closing conditions, including regulatory approvals.

On October 25, 2018, the company acquired, within the Life Sciences Solutions segment, Becton Dickinson and Company's Advanced Bioprocessing business for $477 million in cash. This North America-based business adds complementary cell culture products that expand the segment's bioproduction offerings to help customers increase yield during production of biologic drugs. Revenues of the Advanced Bioprocessing business were $100 million in 2017. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $146 million was allocated to goodwill, all of which is tax deductible.

In 2018, the company acquired, within the Life Sciences Solutions segment, IntegenX Inc., a North America-based provider of a rapid DNA platform for use in forensics and law enforcement applications, for an aggregate purchase price of $65 million.

The components of the purchase price and net assets acquired for 2018 acquisitions are as follows:



(In millions)	Advanced Bioprocessing business			IntegenX			Total

Purchase Price
Cash paid	$	476		$	55		$	531
Fair value of contingent consideration	—			11			11
Purchase price payable	1			—			1
Cash acquired	—			(1		)	(1		)

	$	477		$	65		$	542

Net Assets Acquired
Current assets	$	53		$	4		$	57
Property, plant and equipment	42			—			42
Definite-lived intangible assets:
Customer relationships	108			—			108
Product technology	132			31			163
Tradenames and other	8			—			8
Indefinite-lived intangible assets:
In-process research and development	—			10			10
Goodwill	146			15			161
Other assets	—			14			14
Deferred tax liabilities	(7		)	—			(7		)
Other liabilities assumed	(5		)	(9		)	(14		)

	$	477		$	65		$	542

The weighted-average amortization periods for definite-lived intangible assets acquired in 2018 are 14 years for customer relationships, 13 years for product technology and 6 years for tradenames and other. The weighted average amortization period for all definite-lived intangible assets acquired in 2018 is 13 years.

2017

On August 29, 2017, the company acquired, within the Laboratory Products and Services segment, Patheon N.V., a leading global provider of high-quality drug development and delivery solutions to the pharmaceutical and biopharma sectors, for $35.00 per share in cash, or $7.36 billion, including the assumption of net debt. The company financed the purchase price, including the repayment of indebtedness of Patheon, with issuances of debt and equity.

Patheon provides comprehensive, integrated and highly customizable solutions as well as the expertise to help biopharmaceutical companies of all sizes satisfy complex development and manufacturing needs. The acquisition provided entry into the pharmaceutical contract development and manufacturing organization market and added a complementary service to the company's existing pharmaceutical services portfolio. Patheon's revenues totaled $1.87 billion for the year ended October 31, 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $3.28 billion was allocated to goodwill, $125 million of which is tax deductible.

On March 2, 2017, the company acquired, within the Analytical Instruments segment, Core Informatics, a North America-based provider of cloud-based platforms supporting scientific data management, for a total purchase price of $94 million, net of cash acquired. The acquisition enhanced the company's existing informatics solutions. Revenues of Core Informatics were approximately $10 million in 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $63 million was allocated to goodwill, $50 million of which is tax deductible.

On February 14, 2017, the company acquired, within the Life Sciences Solutions segment, Finesse Solutions, Inc., a North America-based developer of scalable control automation systems and software for bioproduction, for a total purchase price of $221 million, net of cash acquired. The acquisition expanded the company's bioproduction offerings. Revenues of Finesse Solutions were approximately $50 million in 2016. The purchase price exceeded the fair market value of the identifiable net assets and, accordingly, $136 million was allocated to goodwill, none of which is tax deductible.

In addition, in 2017 the company acquired, within the Specialty Diagnostics segment, a North America-based molecular diagnostics company offering qPCR tests to the transplant community and, within the Analytical Instruments segment, a provider of desktop scanning electron microscopy solutions and a manufacturer of volatile organic compound monitoring instruments and integrated systems, for an aggregate purchase price of $110 million.

The components of the purchase price and net assets acquired for 2017 acquisitions are as follows:



(In millions)	Patheon			Core Informatics			Finesse Solutions			Other			Total

Purchase Price
Cash paid	$	6,911		$	95		$	223		$	103		$	7,332
Debt assumed	488			—			—			—			488
Fair value of contingent consideration	—			9			—			8			17
Fair value of equity awards exchanged	6			—			—			—			6
Fair value of previously held interest	—			—			—			11			11
Purchase price payable	—			—			—			1			1
Cash acquired	(47		)	(10		)	(2		)	(13		)	(72		)

	$	7,358		$	94		$	221		$	110		$	7,783

Net Assets Acquired
Current assets	$	1,062		$	2		$	17		$	20		$	1,101
Property, plant and equipment	1,242			—			1			3			1,246
Definite-lived intangible assets:
Customer relationships	3,641			6			68			16			3,731
Product technology	—			29			32			35			96
Tradenames and other	112			3			2			—			117
Indefinite-lived intangible assets:
In-process research and development	—			—			2			—			2
Goodwill	3,276			63			136			64			3,539
Other assets	54			—			—			—			54
Deferred tax liabilities	(1,093		)	(4		)	(22		)	(14		)	(1,133		)
Other liabilities assumed	(936		)	(5		)	(15		)	(14		)	(970		)

	$	7,358		$	94		$	221		$	110		$	7,783

The weighted-average amortization periods for definite-lived intangible assets acquired in 2017 are 17 years for customer relationships, 9 years for product technology and 4 years for tradenames and other. The weighted average amortization period for all definite-lived intangible assets acquired in 2017 is 16 years.

2016

On September 19, 2016, the company acquired, within the Analytical Instruments segment, FEI Company, a North America-based provider of high-performance electron microscopy, for a total purchase price of $4.08 billion, net of cash acquired. The acquisition strengthened the company's analytical instrument portfolio with the addition of high-end electron microscopes. Revenues of FEI were $930 million in 2015. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $2.13 billion was allocated to goodwill, approximately $65 million of which is tax deductible.

On March 31, 2016, the company acquired, primarily within the Life Sciences Solutions segment, Affymetrix, Inc., a North America-based provider of cellular and genetic analysis products, for a total purchase price of $1.34 billion, net of cash acquired, including the assumption of $254 million of debt. The acquisition expanded the company's existing portfolio of antibodies and assays for flow cytometry and single-cell biology applications. Additionally, the acquisition expanded the company's genetic analysis portfolio through the addition of microarrays. Revenues of Affymetrix were $360 million in 2015. The purchase price exceeded the fair value of the identifiable net assets and, accordingly, $615 million was allocated to goodwill, none of which is tax deductible.

In addition, in 2016, the company acquired, within the Life Sciences Solutions segment, a manufacturer of transfection reagents and cell-related products and selected assets of an existing channel partner, within the Analytical Instruments segment, a provider of X-ray diffraction solutions for material science and industrial applications and, within the Specialty Diagnostics segment, an existing channel partner for its microbiology media products, for an aggregate purchase price of $33 million.

The components of the purchase price and net assets acquired for 2016 acquisitions are as follows:



(In millions)	FEI			Affymetrix			Other			Total

Purchase Price
Cash paid	$	4,451		$	1,166		$	32		$	5,649
Debt assumed	—			254			1			255
Cash acquired	(369		)	(78		)	—			(447		)

	$	4,082		$	1,342		$	33		$	5,457

Net Assets Acquired
Current assets	$	619		$	161		$	3		$	783
Property, plant and equipment	153			19			—			172
Definite-lived intangible assets:
Customer relationships	1,051			501			9			1,561
Product technology	740			253			7			1,000
Tradenames and other	42			46			—			88
Indefinite-lived intangible assets:
In-process research and development	105			14			—			119
Goodwill	2,125			615			16			2,756
Other assets	72			8			—			80
Liabilities assumed	(825		)	(275		)	(2		)	(1,102		)

	$	4,082		$	1,342		$	33		$	5,457

The weighted-average amortization periods for definite-lived intangible assets acquired in 2016 are 16 years for customer relationships, 8 years for product technology and 8 years for tradenames and other. The weighted average amortization period for all definite-lived intangible assets acquired in 2016 is 13 years.

The company recorded a deferred tax liability of $156 million in the acquisition accounting related to the outside basis difference of the Affymetrix Singapore operations as the company does not intend to permanently reinvest the pre-acquisition Singapore earnings. This deferred tax liability was reversed in 2017 as a result of the enactment of the Tax Act.

Unaudited Pro Forma Information

The following unaudited pro forma information provides the effect of the company's 2017 acquisition of Patheon as if the acquisition had occurred on January 1, 2016, and the effects of the company's 2016 acquisitions of FEI and Affymetrix as if the acquisitions had occurred on January 1, 2015:



(In millions)	2017		2016

Revenues	$	22,144	$	20,807

Net Income	$	2,258	$	1,791

The historical consolidated financial information of the company, Patheon, FEI, and Affymetrix has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisitions and related financing arrangements, are expected to have a continuing impact on the company, and are factually supportable.

To reflect the acquisition of Patheon as if it had occurred on January 1, 2016, and the acquisitions of FEI and Affymetrix as if they had occurred on January 1, 2015, the unaudited pro forma results include adjustments to reflect, among other things, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset and the interest expense from debt financings obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the company's historical statutory rates in effect for the respective periods. The unaudited pro forma amounts are not necessarily indicative of the combined results of operations that would have been realized had the acquisitions and related financings occurred on the aforementioned dates, nor are they meant to be indicative of any anticipated combined results of operations that the company will experience after the transaction. In addition, the amounts do not include any adjustments for actions that may be taken following the completion of the transaction, such as expected cost savings, operating synergies, or revenue enhancements that may be realized subsequent to the transaction.

Pro forma net income for the year ended December 31, 2017, excludes certain items associated with the Patheon acquisition that were included in the determination of net income for that period. These items have been included in the determination of pro forma net income for the year ended December 31, 2016, and are as follows: $54 million of direct transaction costs, $39 million of accounting policy conformity adjustments, $21 million of initial restructuring costs, $40 million reduction of revenues for revaluing the deferred revenue obligations to fair value, and $55 million of expense related to the fair value adjustment to acquisition-date inventories.

Pro forma net income for the year ended December 31, 2016, excludes certain items associated with the FEI and Affymetrix acquisitions that were included in the determination of net income for that period. These items have been included in the determination of pro forma net income for the year ended December 31, 2015 (not presented), and are as follows: $102 million of direct transaction costs, $33 million of accounting policy conformity adjustments, $46 million of initial restructuring costs, $6 million reduction of revenues for revaluing the deferred revenue obligations to fair value, and $99 million of expense related to the fair value adjustment to acquisition-date inventories.

The company’s results would not have been materially different from its pro forma results had the company’s other 2018, 2017 or 2016 acquisitions occurred at the beginning of 2017, 2016 or 2015, respectively.

Disposition

On January 28, 2019, the company entered into an agreement to sell its Anatomical Pathology business to PHC Holdings Corporation for approximately $1.14 billion. The business is part of the Specialty Diagnostics segment. Revenues in 2018 of the business to be sold were approximately $344 million. The sale is subject to customary closing conditions and applicable regulatory approvals. The assets and liabilities of the Anatomical Pathology business were as follows on December 31, 2018:



(In millions)	December 31, 2018

Current Assets	$	81
Long-term Assets	528
Current Liabilities	34
Long-term Liabilities	24