Acquisitions

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisitions

Acquisitions

On March 15, 2024, we completed the acquisition of Yak Access, LLC, Yak Mat, LLC and New South Access & Environmental Solutions, LLC (collectively, “Yak”). Yak was a leader in the North American matting industry with a fleet of approximately 600,000 hardwood, softwood, and composite mats that provide surface protection across both construction and maintenance, repair and operations (“MRO”) applications, and served customers primarily in the industrial sector across over 40 states. The acquisition:

• Provided entry into the matting market via an industry leader with established scale across fleet, operations, and talent;

• Augmented exposure to the energy and power verticals, where significant investment is expected over the next several decades; and

• Enhanced our one-stop-shop value proposition with immediate cross-selling opportunities to existing and new construction and MRO customers.

The acquisition date fair value of the purchase price to acquire Yak was $1.158 billion, comprised of cash and $41 of estimated contingent consideration ($50 is the maximum amount of contingent consideration) that could become payable to the seller based on revenue attainment in the first two years after closing. The acquisition and related fees and expenses were funded through the issuance of $1.100 billion principal amount of 6 1/8 Senior Notes (see note 7 to the condensed consolidated financial statements for further information) and drawings on our senior secured asset-based revolving credit facility (“ABL facility”).

The table below summarizes the fair values of the assets acquired and liabilities assumed. The purchase price allocations for these assets and liabilities are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period. The accounting for the acquisition that has not yet been completed principally relates to finalizing the valuations of the acquired rental equipment, intangible assets and taxes. During the three months ended September 30, 2024, we recognized measurement period adjustments that were not material.

Accounts receivable (1)	$	99
Inventory	8
Rental equipment	132
Property and equipment	32
Intangible assets (customer relationships) (2)	140
Operating lease right-of-use assets	4
Other assets	17
Total identifiable assets acquired	432
Accounts payable, accrued expenses and other liabilities	(102)
Operating lease liabilities	(4)
Total liabilities assumed	(106)
Net identifiable assets acquired	326
Goodwill (3)	832
Net assets acquired	$	1,158

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(1)The estimated fair value of accounts receivables acquired was $99, and the gross contractual amount was $102. We estimated that $3 would be uncollectible.

(2)The customer relationships are being amortized over a 6 year life.

(3)All of the goodwill was assigned to our specialty segment. As noted above, we have not yet obtained all the information required to finalize the valuations of the assets acquired and liabilities assumed. As such, we expect that goodwill will change from the amount noted above. Once finalized, we expect that the goodwill that results from the acquisition will be primarily reflective of Yak's going-concern value, the value of Yak's assembled workforce and new customer relationships expected to arise from the acquisition. All of the goodwill is expected to be deductible for income tax purposes (because the acquired Yak entities were sold as disregarded entities, the acquisition was treated as an asset purchase for income tax purposes, which resulted in the goodwill that is deductible for income tax purposes equaling the total acquired goodwill).

The debt issuance costs associated with the issuance of debt to partially fund the acquisition are reflected, net of amortization subsequent to the acquisition date, in long-term debt in our consolidated balance sheets. The total post-acquisition revenue attributable to the acquired Yak locations was $104 and $206 for the three and nine months ended September 30, 2024, respectively. It is not practicable to reasonably estimate the amount of earnings of Yak since the acquisition date, primarily due to our corporate structure and the allocation of corporate costs.

Pro forma financial information

The pro forma information below gives effect to the Yak acquisition as if it had been completed on January 1, 2023. Pro forma information for the three months ended September 30, 2024 is excluded from the presentation below because Yak was included in our results for the entire period. Pro forma information for the nine months ended September 30, 2024 is presented below because Yak was not included in our results in 2024 prior to the acquisition date. The pro forma information is not necessarily indicative of our results had the acquisition been completed on the above date, nor is it necessarily indicative of our future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition and also does not reflect additional revenue opportunities following the acquisition. The pro forma information includes adjustments to record the acquired assets and liabilities of Yak at their respective fair values and to give effect to the financing for the acquisition. The pro forma adjustments reflected in the table below are subject to change as additional analysis is performed. The purchase price allocations for the assets acquired and liabilities assumed are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period. Increases or decreases in the estimated fair values of the net assets acquired may impact our statements of income in future periods. The table below presents unaudited pro forma consolidated income statement information as if Yak had been included in our consolidated results for the entire periods reflected:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2023		2024		2023
United Rentals historic revenue (1)	$	3,765	$	11,250	$	10,604
Yak historic revenue (2)	86		97		270
Pro forma revenue (1)	3,851		11,347		10,874
United Rentals historic pretax income	943		2,479		2,309
Yak historic pretax (loss) income	(9)		10		68
Combined pretax income	934		2,489		2,377
Pro forma adjustments to combined pretax income:
Impact of fair value mark-ups/useful life changes on depreciation (3)	—		—		1
Intangible asset amortization (4)	(4)		—		(12)
Interest expense (5)	(18)		(14)		(52)
Elimination of historic interest (6)	14		11		53
Elimination of refinancing transactions (7)	—		(40)		(101)
Transaction bonuses and other (8)	—		22		2
Pro forma pretax income	$	926	$	2,468	$	2,268

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(1)United Rentals historic revenue for the nine months ended September 30, 2024 includes the post-acquisition revenue attributable to the acquired Yak locations of $206 that is discussed above. Pro forma revenue for the nine months ended September 30, 2024 includes $303 of pre/post-acquisition revenue from the acquired Yak locations, comprised of $97 of historic Yak revenue and $206 of post-acquisition revenue attributable to the acquired Yak locations.

(2)Yak revenue reflects only the historical results of the entities being acquired, and includes an estimate of revenue from mat rentals to a commonly controlled entity that were eliminated in consolidation by Yak.

(3)Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups of the equipment acquired in the Yak acquisition. There were no material changes to the useful lives and salvage values of the acquired equipment.

(4)Intangible asset amortization was adjusted to include amortization of the acquired intangible assets.

(5)As discussed above, the acquisition and related fees and expenses were funded through the issuance of senior notes and drawings on our ABL facility. Interest expense was adjusted to reflect interest on the debt used to finance the acquisition.

(6)Historic interest on debt that is not part of the combined entity was eliminated.

(7)Reflects gains on the extinguishment of debt, net of refinancing transaction expenses.

(8)Primarily reflects bonuses paid in connection with the acquisition.

During 2024 and 2023, we completed other acquisitions that were not significant individually or in the aggregate. See the condensed consolidated statements of cash flows for the total cash outflow for purchases of other companies (including Yak), net of cash acquired.