Acquisitions and Divestiture

3 Months Ended

Dec. 31, 2019

The financial results of the below transactions are included in our condensed consolidated financial statements from the date of each acquisition or divestiture.

2020 Acquisition

Acquisition of Solovis

In March 2020, we acquired Solovis, Inc., which offers multi-asset class, public and private market portfolio management, analytics, and reporting tools used by institutional investors and consultants. Solovis is part of our Information Services segment.

2019 Acquisition and Divestiture

2019 Divestiture

Divestiture of BWise

In March 2019, we sold our BWise enterprise governance, risk and compliance software platform, which was part of our Corporate Solutions business within our Corporate Services segment, to SAI Global and recognized a pre-tax gain on the sale of $27 million, net of disposal costs ($20 million after tax). The pre-tax gain is included in net gain on divestiture of business in the Condensed Consolidated Statements of Income for the three months ended March 31, 2019.

2019 Acquisition

Acquisition of Cinnober


	Purchase Consideration		Total Net Assets Acquired		Total Net Deferred Tax Liability		Acquired Intangible Assets		Goodwill
	(in millions)
Cinnober	$	219	$	18	$	(19)	$	74	$	146

In January 2019, we acquired Cinnober, a Swedish financial technology provider to brokers, exchanges and clearinghouses worldwide for $219 million. Cinnober is part of our Market Technology segment.

Nasdaq used cash on hand to fund this acquisition.

The amounts in the table above represent the final allocation of the purchase price. The allocation of the purchase price was subject to revision during the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments to the provisional values, which may include tax and other estimates, during the measurement period are recorded in the reporting period in which the adjustment amounts are determined. In 2019, we recorded a measurement period adjustment of $4 million which resulted in a decrease to net assets acquired and an increase in goodwill and a measurement period adjustment of $5 million which resulted in a decrease to acquired intangible assets and an increase in goodwill. These adjustments relate to new information obtained during the period regarding the acquisition date fair values of an acquired equity investment and an acquired customer relationship intangible asset. These adjustments did not result in an impact to our Condensed Consolidated Statements of Income. The allocation of the purchase price for Cinnober was finalized in December 2019.

See “Intangible Assets” below for further discussion of intangible assets acquired in the Cinnober acquisition.

Intangible Assets

The following table presents the details of the customer relationships intangible asset at the date of acquisition for Cinnober which was the significant acquired intangible asset for this acquisition. All acquired intangible assets with finite lives are amortized using the straight-line method.


Customer relationships (in millions)	$	67
Discount rate used	9.5		%
Estimated average useful life	13 years

Customer Relationships

Customer relationships represent the non-contractual and contractual relationships with customers.

Methodology

Customer relationships were valued using the income approach, specifically an excess earnings method. The excess earnings method examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return that is attributable to the intangible asset being valued.

Discount Rate

The discount rate used reflects the amount of risk associated with the hypothetical cash flows for the customer relationships relative to the overall business. In developing a discount rate for the customer relationships, we estimated a weighted-average cost of capital for the overall business and

we employed this rate when discounting the cash flows. The resulting discounted cash flows were then tax-effected at the applicable statutory rate.

For our acquisition of Cinnober, a discounted tax amortization benefit was added to the fair value of the assets under the assumption that the customer relationships would be amortized for tax purposes over a period of 5 years.

Estimated Useful Life

We estimate the useful life based on the historical behavior of the customers and a parallel analysis of the customers using the excess earnings method.

Pro Forma Results and Acquisition-Related Costs

The condensed consolidated financial statements for the three months ended March 31, 2020 and 2019 include the financial results of the above acquisitions from the dates of these acquisitions. Pro forma financial results have not been presented since these acquisitions both individually and in the aggregate were not material to our financial results.

Acquisition-related costs for the transactions described above

were expensed as incurred and are included in merger and strategic initiatives expense in the Condensed Consolidated Statements of Income.