Business combinations in 2020:

During the year ended December 31, 2020, the Group completed several business combinations, total purchase consideration in aggregate was RMB

3.5

billion, among which RMB

4.0

billion was allocated to goodwill. The Group expects to achieve significant synergies from such acquisitions which it plans to complement its existing businesses. The acquired entities were considered insignificant, both individually and in aggregate. Results of the acquired entities’ operations have been included in the Group’s consolidated financial statements since the acquisition date.


	RMB
	(In millions)
Purchase consideration		3,499

Net assets acquired, excluding intangible assets and the related deferred tax liabilities		1,515
Intangible assets, net		1,116
Deferred tax liabilities		(229	)
Pre-existing equity interests and debt investment		(2,103	)
Noncontrolling interests		(798	)
Goodwill		3,998

		3,499

The Group’s pre-existing equity interests in the acquired entities were remeasured to fair value at the acquisition date. For the year ended December 31, 2020, the Group recognized a net re-measurement gain of

RMB123

million in “Others, net” in the consolidated statement of comprehensive income.

Goodwill, which is

non-deductible

for tax purposes, is primarily attributable to the synergies expected to be achieved from the acquisitions.

Neither the results of operations since the acquisition dates nor the pro forma results of operations of the acquirees were presented because the effects of these business combinations, both individually and in aggregate, were not significant to the Group’s consolidated results of operations.

Business combinations in 2021:

During the year ended December 31, 2021, the Group completed several business combinations, total purchase consideration in aggregate was RM

B326 million, among which RMB357

million was allocated to goodwill. The Group expects to achieve significant synergies from such acquisitions which it plans to complement its existing businesses. The acquired entities were considered insignificant, both individually and in aggregate. Results of the acquired entities’ operations have been included in the Group’s consolidated financial statements since the acquisition date.

Goodwill, which is

non-deductible

for tax purposes, is primarily attributable to the synergies expected to be achieved from the acquisitions.

The valuations used in the purchase price allocation described above were determined by the Group with the assistance of independent third-party valuation firm. The valuation reports considered generally accepted valuation methodologies such as the income, market and cost approaches. As the acquirees are all private companies, the fair value estimates of

pre-existing

equity interests and debt investment or noncontrolling interests are based on significant inputs considered by market participants which mainly include (a) discount rate, (b) projected terminal value based on future cash flows, (c) equity multiples or enterprise value multiples of companies in the same industries and (d) adjustment for lack of control or lack of marketability.

The Group entered into definitive agreements with JOYY Inc. (“JOYY”) and certain of its affiliates, to acquire YY Live on November 16, 2020, and subsequently amended the share purchase agreement (“SPA”) on February 7, 2021. Pursuant to the SPA, the closing of this acquisition is subject to certain conditions, including, among others, obtaining necessary regulatory approvals from governmental authorities.

The Group has not obtained the necessary regulatory approvals with respect to this acquisition from government authorities as of the date of this annual report and there is no assurance that they will be ultimately obtained. Accordingly, the Group believes the closing has not occurred, which is further evidenced by mutual agreement from both JOYY and the Group on multiple occasions since November 16, 2020 to extend the long stop date, which is the closing deadline of the proposed transaction. Therefore, the Group has not consolidated YY Live as of December 31, 2022. The Group and JOYY have currently extended the long stop date indefinitely until the extension is terminated by either party.

As of December 31, 2022, the Group has made aggregate prepayments of

US$1.9

billion (equivalent to RMB12.8 billion) to JOYY, after considering working capital adjustments of

US$0.1 billion,

which were recorded as “Other non-current assets” on the consolidated balance sheets; and deposited an aggregate of

US$1.6

billion into several escrow accounts, in accordance with the terms set forth in the share purchase agreement that was recorded as “Restricted cash” on the consolidated balance sheet.

The Group has assessed the recoverability of such other

non-current

assets as of December 31, 2022 and believes that such amounts are recoverable, either in the form of the YY Live business if the acquisition is ultimately closed, or by way of return of the prepayment and release of the escrowed amounts should the proposed transaction ultimately be terminated and unwound.