Business Combinations

12 Months Ended

Dec. 31, 2020

Note 2 — BUSINESS COMBINATIONS

On July 1, 2020, we completed our acquisition of the equity interests in the global masterbatch business of Clariant AG, a corporation organized and existing under the law of Switzerland (Clariant), and the masterbatch assets in India of Clariant Chemicals (India) Limited, a public limited company incorporated in India and an indirect majority owned subsidiary of Clariant (Clariant India). The business and assets are collectively referred to as Clariant MB and the acquisitions are collectively referred to as the Clariant MB Acquisition. The Clariant MB Acquisition increased our scale, product depth and geographic reach in the Color, Additives and Inks segment. Clariant MB has leading portfolios of solid and liquid masterbatches that include sustainable solutions. In connection with the completion of the Clariant MB Acquisition and effective as of June 30, 2020, the Company amended its existing Articles of Incorporation to change its name to Avient Corporation. In conjunction with our rebranding and new name, we also changed our ticker symbol from “POL” to “AVNT”, effective at the start of trading on July 13, 2020.

Total consideration paid by the Company to complete the Clariant MB Acquisition was $1.4 billion, net of cash and debt. To finance the purchase of Clariant MB, the Company used $496.1 million in net proceeds from the issuance of common shares in an underwritten public offering completed in February 2020 and $640.5 million in net proceeds from a senior unsecured notes offering completed in May 2020, and funded the balance using the net proceeds of the October 2019 sale of our Performance Products and Solutions business segment (PP&S). For additional details related to the sale of PP&S and the senior unsecured notes offering, refer to Note 3, Discontinued Operations and Note 9, Financing Arrangements, respectively.

The Clariant MB Acquisition is being accounted for under the acquisition method of accounting. As of December 31, 2020, the purchase accounting for the Clariant MB Acquisition is preliminary and the amounts recognized in the financial statements for the Clariant MB Acquisition are provisional. The purchase price allocation adjustments will be made throughout the measurement period, which is not to exceed one year from the acquisition date. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from the preliminary estimates. We are in the ongoing process of conducting a valuation of the assets acquired and liabilities assumed related to the acquisition, including the personal and real property, lease obligations, pension and other post-retirement liabilities, deferred taxes, and intangible assets. The provisional measurements and preliminary allocation of consideration transferred and determination of fair values of assets acquired and liabilities assumed, reflect estimates, judgments and

assumptions made by management. These estimates, judgments and assumptions are subject to change upon final valuation.

The summarized preliminary purchase price allocation is as follows:


	July 1, 2020
Cash and cash equivalents	$	145.1
Accounts receivable	170.8
Inventories	99.0
Other current assets	56.9
Property	267.6
Goodwill	569.0
Intangible assets:
Customer relationships	221.9
Trade names and trademarks	32.0
Patents, technology and other	273.9
Operating lease assets	30.1
Other long-term assets	1.3
Short term debt	(0.4)
Accounts payable	(92.7)
Current operating lease obligations	(2.8)
Accrued expenses and other current liabilities	(81.2)
Long-term debt	(6.7)
Non-current operating lease obligations	(25.8)
Deferred tax liabilities	(60.7)
Pension and other post-retirement benefits	(53.8)
Other long-term liabilities	(5.4)
Non-controlling interests	(12.8)
Total purchase price consideration	$	1,525.3

The intangible assets that have been acquired are being amortized over a period of 18 to 20 years.

Goodwill of $569.0 million was recorded and allocated to the Color, Additives and Inks segment. The goodwill recognized is primarily attributable to the expected synergies to be achieved from the business combination. We expect a portion of goodwill to be deductible for tax purposes.

The amounts of revenue and income from continuing operations before income taxes of Clariant MB since the acquisition date included in the consolidated income statement for 2020 are $544.2 million and $32.7 million, respectively. Had the Clariant MB Acquisition occurred as of the beginning of fiscal 2019, sales and income from continuing operations before income taxes on a pro forma basis would have been as follows:


	(Unaudited)
	Year Ended December 31,
	2020		2019
Sales	$	3,782.5	$	3,981.3
Income from continuing operations before income taxes	204.2		98.9

The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments that assume the acquisition occurred on January 1, 2019. These unaudited pro forma results do not represent financial results realized, nor are they intended to be a projection of future results. In preparation of the pro forma financial information, we eliminated certain historical allocations made by Clariant as they do not represent the stand alone operations of Clariant MB and replaced them

with costs more likely to occur as a part of Avient. This elimination removed expense of $6.6 million and $12.7 million during 2020 and 2019, respectively. The amortization of inventory step-up from the preliminary purchase price allocation was $9.7 million, and is reflected in Cost of sales. Additionally, we incurred $10.1 million of costs related to committed financing which are reflected in Interest expense, net. The amounts associated with the amortization of inventory step-up and costs related to committed financing were removed from 2020, and presented in the pro forma financial information.

Costs incurred in connection with the Clariant MB Acquisition were $19.2 million in 2020. These fees were charged to Selling and Administrative expense.

Other Acquisitions

Our acquisitions of PlastiComp, Inc. (PlastiComp) on May 31, 2018 and Fiber-Line, LLC (Fiber-Line) on January 2, 2019 involved contingent earnout consideration. The PlastiComp earnout had a ceiling of $35.0 million that was reached during the first quarter of 2020 and paid in the third quarter of 2020. The Fiber-Line earnout was based on two annual earnout periods, with the second earnout period target based on year-one results. The second earnout period ended on December 31, 2020. A payment of $53.9 million associated with the first Fiber-Line earnout period was made in the first quarter of 2020 and no additional payments are expected to be made. During the twelve months ended December 31, 2020 and 2019, the Company recorded charges of $1.0 million and $36.4 million, respectively, associated with the earnouts within Selling and administrative expense that were primarily attributable to improved earnings from the acquisitions.