ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS

2017 Acquisition Activity

On May 12, 2017, we acquired Souq Group Ltd. (“Souq”), an e-commerce company, for approximately $579 million, net of cash acquired, and on August 28, 2017, we acquired Whole Foods Market, a grocery store chain, for approximately $13.2 billion, net of cash acquired. Both acquisitions are intended to expand our retail presence. During the nine months ended September 30, 2017, we also acquired certain other companies for an aggregate purchase price of $126 million. The primary reason for our other 2017 acquisitions was to acquire technologies and know-how to enable Amazon to serve customers more effectively.

Acquisition-related costs were expensed as incurred and were not significant. Due to the limited amount of time since the Whole Foods Market acquisition, the valuation of certain assets and liabilities is preliminary and subject to change. The aggregate purchase price of Whole Foods Market and the other 2017 acquisitions, which primarily includes the acquisition of Souq, was allocated as follows (in millions):



	Whole Foods Market			Other 2017 Acquisitions			Total
Purchase Price
Cash paid, net of cash acquired	$	13,176		$	612		$	13,788
Indemnification holdback	—			93			93
	$	13,176		$	705		$	13,881
Allocation
Goodwill	$	8,985		$	446		$	9,431
Intangible assets (1):
Marketing-related	1,928			59			1,987
Contract-based	408			33			441
Technology-based	—			129			129
Customer-related	—			48			48
	2,336			269			2,605
Property and equipment	3,826			16			3,842
Deferred tax assets	96			15			111
Other assets acquired	1,710			130			1,840
Long-term debt	(1,158		)	(7		)	(1,165		)
Deferred tax liabilities	(934		)	(20		)	(954		)
Other liabilities assumed	(1,685		)	(144		)	(1,829		)
	$	13,176		$	705		$	13,881

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(1)

Acquired intangible assets for Whole Foods Market have estimated useful lives of between one and twenty-five years, with a weighted-average amortization period of twenty-four years, primarily driven by the Whole Foods Market tradename, and acquired intangible assets for other 2017 acquisitions have estimated useful lives of between one and seven years, with a weighted-average amortization period of four years.

We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income approach. These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line basis over their estimated useful lives.

Pro Forma Financial Information (unaudited)

The acquired companies were consolidated into our financial statements starting on their respective acquisition dates. The aggregate net sales and operating income of Whole Foods Market consolidated into our financial statements since the date of acquisition was $1.3 billion and $21 million for the nine months ended September 30, 2017. The aggregate net sales and operating loss of other acquisitions consolidated into our financial statements since the respective dates of acquisition was $222 million and $(80) million for the nine months ended September 30, 2017. The following financial information, which excludes certain acquired companies for which the pro forma impact is not meaningful, presents our results as if the acquisitions during the nine months ended September 30, 2017 had occurred on January 1, 2016 (in millions):



	Nine Months Ended September 30,
	2016		2017
Net sales	$	103,476	$	127,441
Net income	$	1,597	$	1,137

These pro forma results are based on estimates and assumptions, which we believe are reasonable. They are not the results that would have been realized had the acquisitions actually occurred on January 1, 2016 and are not necessarily indicative of our consolidated results of operations in future periods. The pro forma results include adjustments related to purchase accounting, primarily interest expense related to the proceeds from the issuance of the August 2017 Notes used in connection with the acquisition of Whole Foods Market and amortization of intangible assets.

Goodwill

The goodwill of the acquired companies is primarily related to expected improvements in technology performance and functionality, as well as sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. The goodwill of acquired companies is generally not deductible for tax purposes. The following summarizes our goodwill activity in the first nine months of 2017 by segment (in millions):



	North America		International		AWS		Consolidated
Goodwill - December 31, 2016	$	2,044	$	694	$	1,046	$	3,784
New acquisitions (1)	9,056		357		18		9,431
Other adjustments (2)	5		40		11		56
Goodwill - September 30, 2017	$	11,105	$	1,091	$	1,075	$	13,271

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(1)	Primarily includes the acquisition of Whole Foods Market in the North America segment and Souq in the International segment.


(2)	Primarily includes changes in foreign exchange rates.