Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2020

2020 Acquisitions and Divestitures

We had no material acquisition or divestiture activity during the 12 months ended December 31, 2020.

2019 Acquisitions

During the 12 months ended December 31, 2019 we spent approximately $18 million, net of cash received on acquisition activity.

2018 Acquisitions and Divestitures

Pure Technologies Ltd.

On January 31, 2018, we acquired all the issued and outstanding shares of Pure, a leader in intelligent leak detection and condition assessment solutions for water distribution networks for approximately $420 million, net of cash received. Acquisition costs of $4 million were reflected as a component of selling, general and administrative expenses in our Consolidated Income Statement for the year ended December 31, 2018.

Pure’s results of operations were consolidated with the Company effective February 1, 2018 and are reflected in the Measurement & Control Solutions segment.

The Pure purchase price allocation as of January 31, 2018 is shown in the following table:


(in millions)	Amount
Cash	$	14
Receivables	23
Inventories	4

Prepaid and other current assets	2
Property, plant and equipment	22

Intangible assets	149
Other long-term assets	1

Accounts payable	(3)
Accrued and other current liabilities	(12)

Deferred income tax liabilities	(25)

Other non-current accrued liabilities	(2)
Total identifiable net assets	173

Goodwill	261

Total consideration	$	434

The fair values of Pure's assets and liabilities were determined based on estimates and assumptions which management believes are reasonable.

Goodwill arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of Pure and Xylem. All of the goodwill was assigned to the Measurement & Control Solutions segment and is not deductible for tax purposes.

The estimate of the fair value of Pure's identifiable intangible assets was determined primarily using the “income approach,” which requires a forecast of all of the expected future cash flows either through the use of the multi-period excess earnings method or the relief-from-royalty method. Some of the more significant assumptions inherent in the development of intangible asset values include: the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, the assessment of the intangible asset’s life cycle, as well as other factors.

The following table summarizes key information underlying identifiable intangible assets related to the Pure acquisition:

Category

Life

Amount
(in millions)

Customer Relationships

17 - 18 years

Technology

3 - 10 years

Tradenames

20 years

Internally Developed Software

3 years

Total

149

The following table summarizes, on an unaudited pro forma basis, the condensed combined results of operations of the Company for the year ended December 31, 2018 assuming the acquisition of Pure was made on January 1, 2017:



(in millions)	Year Ended December 31,
		2018
Revenue		$5,212
Net income		$546

The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred had the acquisition occurred on January 1, 2017, nor are they necessarily indicative of future results. The pro forma financial information includes the impact of purchase accounting and other nonrecurring items directly attributable to the acquisition, which include:

•Amortization expense of acquired intangibles

•Adjustments to the depreciation of property, plant and equipment reflecting the impact of the calculated fair value of those assets in accordance with purchase accounting

•Adjustments to interest expense to remove historical Pure interest costs and reflect Xylem's current debt profile

•The related tax impact of the above referenced adjustments

The pro forma results do not include any cost savings or operational synergies that may be generated or realized due to the acquisition of Pure.

During the 11 month period ended December 31, 2018 Pure had revenue and an operating loss of $96 million and $2 million, respectively.

Other Acquisition Activity

During the 12 months ended December 31, 2018 we spent approximately $13 million, net of cash received on other acquisition activity.

Divestiture

During the third quarter we divested our Precision Die Casting business for approximately $22 million, net of cash assumed. The sale resulted in an immaterial gain, which is reflected in gain from sale of business in our Consolidated Income Statements. The business, which was part of our Measurement & Controls Solutions segment, provided aluminum die casting products primarily to customers in the automotive sector. The business reported 2017 annual revenue of approximately $32 million.