Acquisitions and Investments

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

2022 Acquisitions

During the nine months ended September 30, 2022, the Company completed four asset acquisitions, two business combinations, and one investment, which is carried at cost as it does not have a readily determinable fair value. Two of these transactions were completed by the Company’s Reconstructive segment, and the other five transactions were completed by the Prevention & Recovery segment. The asset acquisitions broaden the Company’s product offering and distribution network. Aggregate purchase consideration for the four asset acquisitions was $22.3 million, of which $12.6 million was paid in cash and $9.6 million consists of deferred and contingent consideration. The investment was acquired for $10.0 million in cash consideration.

On May 6, 2022, the Company completed a business acquisition in its Reconstructive segment of KICo Knee Innovation Company Pty Limited and subsidiaries, an Australian private company doing business as 360 Med Care, by acquiring 100% of its equity interests. 360 Med Care is a medical device distributor that bundles certain computer-assisted surgery and patient experience enhancement programs to add value to its device supply arrangements with surgeons, hospitals, and insurers. The acquisition is accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the acquisition date. The Company paid $14.3 million for the acquisition, net of cash received, and recorded estimated contingent consideration at fair value of $12.8 million related to expected results over future revenue targets. The Company has preliminarily allocated $13 million to goodwill and $18.2 million to intangible assets acquired. Purchase accounting procedures are ongoing and revisions to contingent consideration, intangible assets acquired, and adjustments for working capital true-ups may be recorded in future periods during the measurement period. The 360 Med Care acquisition broadens our customer base in Australia and adds to our overall product offerings.

On July 5, 2022, the Reconstructive segment of the Company acquired a controlling interest of Insight Medical Systems (“Insight”). Insight’s flagship solution, ARVIS, is an FDA-cleared augmented reality solution precisely engineered for the specific needs of hip and knee replacement surgery. The ARVIS navigation unit consists of a hands-free heads-up display worn by the surgeon which provides surgical guidance at the point of care in a streamlined, space-conserving, and cost-effective manner compared to traditional robotic offerings. The acquisition is accounted for under the acquisition method of accounting as a step-acquisition, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the acquisition date.

Enovis made initial investments in Insight in 2020 and 2021, which were carried at cost. During the quarter, the Company acquired an additional 53.7% interest in Insight for $34.2 million net of cash received, and recorded contingent consideration of $5.0 million, which is the maximum payable under the agreement based on Insight’s achievement of certain milestones related to ARVIS. As of September 30, 2022, Enovis holds 99.5% interest in Insight and recognizes $0.3 million noncontrolling equity interest in its financial statements attributed to Insight.

The Company has preliminarily allocated $36.3 million to goodwill and $38.4 million to intangible assets acquired. Goodwill is primarily driven by expected synergies between ARVIS’ augmented reality surgical guidance system and our existing customer base and existing products. The Company does not expect any of the goodwill to be deductible for tax purposes. Purchase accounting procedures are ongoing and revisions to contingent consideration, intangible assets acquired, and adjustments for working capital true-ups may be recorded in future periods during the measurement period.

As a result of obtaining control of Insight, the Company remeasured its initial investments to its fair value resulting in a $8.8 million gain.

Investments

As of September 30, 2022, the balance of investments held by the company without readily determinable fair values was $16.5 million. The investments are carried at cost minus impairments, if any, plus adjustments for fair value indicators from observable price changes in orderly transactions for the identical or similar investment of the same issuer. There have been no impairments or upward adjustments in the current year or since acquisition of the investments except for the gain on our previously held equity investment in Insight discussed above. As a result of acquiring control of Insight, Enovis now consolidates the assets, liabilities, and results of operations of Insight and therefore current year and previous investments in Insight of $16.6 million are no longer recorded as cost basis investments.

The Company holds equity securities in ESAB Corporation with a total value of $200.3 million, which are recorded at fair value. During the three and nine months ended September 30, 2022, the Company recorded an unrealized loss of $63.1 million and an unrealized gain of $72.4 million over cost basis, respectively. The Company does not hold other equity securities measured at fair value.

2021 Acquisitions

During the nine months ended October 1, 2021, the Company completed three business combinations and one asset acquisition in its Reconstructive segment for aggregate net cash consideration of $196.4 million and one asset acquisition in its Prevention and Recovery segment for cash consideration of $4 million. The acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date of each business combination.

The Reconstructive segment acquired Trilliant Surgical (“Trilliant”), a provider of foot and ankle orthopedic implants, in the first quarter of 2021 for net cash consideration of $79.6 million. The Reconstructive segment’s acquisitions in the second quarter of 2021 included MedShape, Inc. (“MedShape”), a provider of innovative surgical solutions for foot and ankle surgeons, which was acquired for net cash consideration of $124.6 million. The Trilliant and MedShape acquisitions further expand the Company’s U.S. foot and ankle product lines. The purchase accounting for all acquisitions made in the nine months ended October 1, 2021 has been completed. The Company also made two investments in medical technology businesses during the nine months ended October 1, 2021 for a total of $14.8 million, one of which was a previous investment in Insight for $13.3 million. The Insight investment is now consolidated as part of the acquisition discussed above and the other investment is carried at cost as of September 30, 2022, as it does not have a readily determinable fair value.

During the second half of 2021, the Reconstructive segment acquired Mathys AG Bettlach for total acquisition equity consideration of $285.7 million, which included cash acquired of $14.7 million. Purchase accounting procedures for this acquisition have been completed and the finalized allocation is presented below. For further information on prior year acquisitions and investments, refer to Note 5. “Acquisitions” in the Notes to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.


	July 28, 2021
	(In thousands)
Trade receivables	$	19,578
Inventories	76,824
Property, plant and equipment	58,465
Goodwill	92,438
Intangible assets	106,000
Accounts payable	(4,808)
Other assets and liabilities, net	(77,494)
Consideration, net of cash acquired	$	271,003