Business Acquisitions

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Business Acquisitions

3. Business Acquisitions

Gracenote

On February 1, 2017, Nielsen completed the acquisition of Gracenote, through the purchase of 100% of Gracenote’s outstanding common stock for a total purchase price of $582 million.  Nielsen acquired the data and technology that underpins the programming guides and personnel user experience for major video, music, audio and sports content. This acquisition expands Nielsen’s footprint with major clients including Gracenote’s global content database which spans across platforms including multichannel video programing distributors (MVPD’s), smart television, streaming music services, connected devices, media players and in-car infotainment systems.  

The acquisition of Gracenote was accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. Effective February 1, 2017, the financial results of Gracenote were included within the Watch segment of Nielsen’s condensed consolidated financial statements. For the three months ended March, 31, 2017, the Company’s condensed consolidated statement of operations includes $34 million of revenues related to the Gracenote acquisition.

The purchase price was preliminarily allocated based upon the fair value of the assets acquired and liabilities assumed at the date of acquisition using available information and certain assumptions management believed reasonable. The following table summarizes the preliminary purchase price allocation:

(IN MILLIONS)
Identifiable assets acquired and liabilities assumed:
Cash	$	11
Other current assets		55
Property and equipment		12
Goodwill		311
Amortizable intangible assets		341
Other long-term assets		11
Deferred revenue		(22	)
Other current liabilities		(20	)
Deferred tax liabilities		(110	)
Other long-term liabilities		(7	)
Total	$	582

As of the acquisition date, the expected fair value of accounts receivable approximated historical cost. The gross contractual receivable was $37 million, of which $1 million was deemed uncollectible.  The estimated fair values assigned to amortizable intangible assets, goodwill and uncertain tax positions are provisional and subject to adjustment primarily based upon additional information the Company is in process of obtaining.

The provisional allocation of the purchase price to goodwill and identified intangible assets was $311 million and $341 million, respectively. All of the Gracenote related goodwill and intangible assets are attributable to Nielsen’s Watch segment.  As of March 31, 2017, $24 million of goodwill is expected to be deductible for income tax purposes.

Intangible assets and their estimated useful lives consist of the following:

(IN MILLIONS)
Description	Amount		Useful Life
Customer-related intangibles	$	109		10 - 15 years
Content database		168		12 – 16 years
Trade names and trademarks		7		5 years
Computer software		57		7-8 years
Total	$	341

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents expected synergies and the going concern nature of Gracenote.

The Company incurred acquisition-related expenses of $4 million for the three months ended March 31, 2017, which primarily consisted of transaction fees, legal, accounting and other professional services that are included in selling, general and administrative expense in the condensed consolidated statement of operations.

The following unaudited pro forma information presents the consolidated results of operations of the Company and Gracenote for the three months ended March 31, 2017, as if the acquisition had occurred on January 1, 2016, with pro forma adjustments to give effect to amortization of intangible assets, an increase in interest expense from acquisition financing, and certain other adjustments:

	Three Months Ended March, 31
(IN MILLIONS)		2017		2016
Revenues	$	1,544	$	1,539
Income from continuing operations	$	72	$	97

The unaudited pro forma results do not reflect any synergies and are not necessarily indicative of the results that the Company would have attained had the acquisition of Gracenote been completed as of the beginning of the reporting period.

Other Acquisitions

For the three months ended March 31, 2017, excluding Gracenote, Nielsen paid cash consideration of $8 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these current period acquisitions occurred as of January 1, 2017, the impact on Nielsen’s consolidated results of operations would not have been material.

For the three months ended March 31, 2016, Nielsen paid cash consideration of $47 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these current period acquisitions occurred as of January 1, 2016, the impact on Nielsen’s consolidated results of operations would not have been material.