Acquisitions. As discussed below, we completed two acquisitions during fiscal 2023. Each acquisition was accounted for as a business combination.

On November 3, 2022, we acquired the Gin Mare and Gin Mare Capri brands through our purchase of 100% of the equity interests of Gin Mare Brand, S.L.U., a Spanish company, and Mareliquid Vantguard, S.L.U., a Spanish company (the “Gin Mare acquisition”). The purchase price of the Gin Mare acquisition was $524, which consisted of $468 in cash paid at the acquisition date plus contingent consideration of $56.

We have preliminarily allocated the purchase price based on management’s estimates and independent valuations as follows:


	Initial Allocation1		Adjustments		Updated Allocation




Trademarks and brand names (indefinite-lived)	$	308	$	(1)	$	307
Goodwill	288		1		289


Total assets	596		—		596


Deferred tax liabilities	72		—		72



Net assets acquired	$	524	$	—	$	524

1As reported in Note 14 to our condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2023.

The contingent consideration of $56 reflects the estimated fair value, at the acquisition date, of contingent future cash payments of up to €90 to the sellers under an “earn-out” provision of the acquisition agreement. We determined the estimated fair value of the contingent consideration using a Monte Carlo simulation, which requires the use of assumptions, such as projected future net sales, discount rates, and volatility rates.

Any contingent consideration earned by the sellers will be payable in cash no earlier than July 2024 and no later than July 2027, depending on when the sellers choose to exercise the right to receive the payment. The amount payable will depend on the achievement of net sales targets for Gin Mare for the latest fiscal year completed prior to the date of exercise by the sellers. The possible payments range from zero to €90 (approximately $89 as of the acquisition date).

At the acquisition date, we also entered into a supply agreement with the sellers for the production and supply of Gin Mare products to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

On January 5, 2023, we acquired the Diplomático and Botucal rum brands through our purchase of (i) 100% of the equity interests of (a) International Rum and Spirits Distributors Unipessoal, Lda., a Portuguese company, (b) Diplomático Branding Unipessoal Lda., a Portuguese company, (c) International Bottling Services, S.A., a Panamanian corporation, and (d) International Rum & Spirits Marketing Solutions, S.L., a Spanish company; and (ii) certain assets of Destilerias Unidas Corp. (the “Diplomático acquisition”). The purchase price of the Diplomático acquisition consisted of cash of $727.

We have preliminarily allocated the purchase price based on management’s estimates and independent valuations as follows:


	Initial Allocation1		Adjustments		Updated Allocation
Accounts receivable	$	11	$	—	$	11
Inventories	33		3		36
Other current assets	25		—		25
Property, plant, and equipment	36		2		38
Trademarks and brand names (indefinite-lived)	312		—		312
Goodwill	365		(2)		363
Other assets	—		2		2
Total assets	782		5		787

Accounts payable and accrued expenses	10		3		13
Deferred tax liabilities	45		—		45
Other liabilities	—		2		2
Total liabilities	55		5		60

Net assets acquired	$	727	$	—	$	727

1As reported in Note 14 to our condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2023.

At the acquisition date, we also entered into a supply agreement with the sellers for their production and supply of rum to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

We allocated the purchase price for each acquisition based on preliminary estimates, which we may revise as asset valuations are finalized and we obtain further information on the fair value of liabilities. The primary matters to be finalized consist of the valuation of certain tangible assets and identifiable intangible assets, any related tax effects, and any resulting impact on residual goodwill.

The amounts preliminarily allocated to trademarks and brand names for each acquisition were estimated using the relief-from-royalty method, which requires the use of significant assumptions, such as discount rates and projected future net sales.

Goodwill is calculated as the excess of the purchase price over the fair value of the net identifiable assets acquired. The goodwill recorded for each acquisition is primarily attributable to the value of leveraging our distribution network and brand-building expertise to grow sales of the acquired brands. For the Gin Mare acquisition, we expect none of the preliminary goodwill of $289 to be deductible for tax purposes. For the Diplomático acquisition, we expect $109 of the preliminary goodwill of $363 to be deductible for tax purposes.

Results for Gin Mare and Diplomático have been included in our consolidated financial statements since their acquisition dates. Pro forma results are not presented as the aggregate impact is not material to our consolidated statements of operations.

In connection with the acquisitions, we recognized transaction expenses of $55 during fiscal 2023. The following table shows the classification of the transaction expenses in the accompanying consolidated statement of operations.

The transaction expenses largely reflect payments made to terminate certain distribution contracts related to the acquired brands.