3. ACQUISITIONS

Bats Global Markets, Inc.

On February 28, 2017, pursuant to the Agreement and Plan of Merger, dated as of September 25, 2016 (the “Merger Agreement”), by and among Cboe, Bats, CBOE Corporation, a Delaware corporation and a wholly-owned subsidiary of Cboe (“Merger Sub”), and Cboe Bats, LLC (formerly CBOE V, LLC), a Delaware limited liability company and a wholly-owned subsidiary of Cboe (“Merger LLC”), Cboe completed the merger of Merger Sub with and into Bats and the subsequent merger of Bats with and into Merger LLC. As a result of the Merger, Bats became a wholly-owned subsidiary of Cboe.

The acquisition-date fair value of the consideration transferred totaled $4.0 billion, which consisted of the following (in millions):


Cash consideration for Bats outstanding common stock	$	955.5
Common stock issued		2,387.3
Equity awards issued		37.4
		3,380.2
Debt extinguished		580.0
Total consideration	$	3,960.2

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):


Cash and cash equivalents	$	130.1
Accounts receivable		117.8
Financial investments		66.0
Property and equipment		21.8
Other assets		32.8
Goodwill		2,653.3
Intangibles		2,000.0
Accounts payable		(33.7)
Accrued expenses		(26.2)
Section 31 fees		(143.6)
Income tax payable		(52.9)
Deferred tax liability		(722.6)
Other liabilities		(82.6)
	$	3,960.2

For tax purposes, no tax deductible goodwill was generated as a result of this acquisition. Goodwill was assigned to the Options, U.S. Equities, European Equities, and Global FX segments as further described in Note 9 and is attributable to the expansion of asset classes, broadening of geographic reach, and expected synergies of the combined workforce, products and technologies of the Company and Bats. The intangible assets were assigned to the Options, U.S. Equities, European Equities, and Global FX segments in the following manner and will be amortized over the following useful lives:



			U.S.		European
	Options		Equities		Equities		Global FX		Useful life
Trading registrations and licenses	$	95.5	$	572.7	$	171.8	$	—	indefinite
Customer relationships		37.1		222.9		160.0		140.0	20	years
Market data customer relationships		53.6		322.0		60.0		64.4	15	years
Technology		22.5		22.5		22.5		22.5	7	years
Trademarks and tradenames		1.0		6.0		1.8		1.2	2	years
Goodwill		226.4		1,738.1		419.3		267.2
	$	436.1	$	2,884.2	$	835.4	$	495.3

There were no goodwill or intangible assets assigned to the Futures segment as a result of this transaction as Bats did not operate a Futures business and no synergies are attributable to this segment.

The fair value of accounts receivable acquired was $117.8 million. The gross amount of accounts receivable was $118.0 million of which $0.2 million was deemed uncollectable.

The Company expensed $8.6 million of acquisition-related costs during the three months ended June 30, 2018 that included $7.4 million of compensation-related costs and $1.2 million of professional fees. These expenses are included in acquisition-related costs in the condensed consolidated statements of income.

The Company expensed $17.4 million of acquisition-related costs during the six months ended June 30, 2018 that included $12.8 million of compensation-related costs, $2.7 million of stock-based compensation, $1.3 million of professional fees, and $0.6 million of general and administrative expenses. These expenses are included in acquisition-related costs in the condensed consolidated statements of income.

The Company expensed $4.7 million of acquisition-related costs expensed during the three months ended June 30, 2017 that included $3.4 million of compensation-related costs and $1.3 million of professional fees. These costs are included in acquisition-related costs in the condensed consolidated statements of income.

The Company expensed $69.9 million of acquisition-related costs during the six months ended June 30, 2017 that included $33.5 million of compensation-related costs, $20.6 million of professional fees, $14.9 million of an impairment of capitalized data processing software, and $0.9 million of facilities expenses. These costs are included in acquisition-related costs in the condensed consolidated statements of income.

The amounts of revenue, operating income and net income of Bats are included in the Company’s condensed consolidated statements of income after the acquisition date of February 28, 2017 and are as follows (in millions):


	Three Months Ended June 30,		Three Months Ended June 30,		Six Months Ended June 30,		Six Months Ended June 30,
	2018		2017		2018		2017
Revenue	$	470.2	$	446.0	$	996.7	$	605.8
Revenue less cost of revenues		129.0		114.9		260.2		154.1
Operating income (loss)		48.6		28.6		102.5		26.6
Net income (loss)		45.1		18.3		96.2		17.6

The financial information in the table below summarizes the combined results of operations of the Company and Bats, on a pro forma basis, as though the companies had been combined as of January 1, 2017. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented. Such pro forma financial information is based on the historical financial statements of the Company and Bats. This pro forma financial information is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information, including, without limitation, preliminary purchase accounting adjustments. The pro forma financial information does not reflect any synergies or operating cost reductions that may be achieved from the combined operations. The pro forma financial information combines the historical results for the Company and Bats for the six months ended June 30, 2017 in the following table (in millions, except per share amounts):


	Six Months Ended June 30,
	2017
Revenue	$	1,269.9
Revenue less cost of revenues		532.2
Operating income		229.4
Net income		157.3
Earnings per share:
Basic	$	1.40
Diluted		1.40

The supplemental 2017 pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results to reflect the additional amortization that would have been charged assuming the adjusted fair values of acquired intangible assets had been applied on January 1, 2017. The supplemental 2017 pro forma financial information includes pro forma adjustments of $93.3 million for acquisition-related costs, such as fees to investment bankers, attorneys, accountants and other professional advisors, as well as severance to employees.