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Acquisitions, Goodwill, and Other Intangible Assets, Net
 6 Months Ended
Jun. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Acquisitions, Goodwill, and Other Intangible Assets, Net Acquisitions, Goodwill and Other Intangible Assets, Net
The following table provides a reconciliation of changes in goodwill by reportable segment for the six month period ended June 30, 2024 (in millions):
CommunicationsClean Energy and InfrastructurePower DeliveryOil and GasTotal Goodwill
Goodwill, gross, as of December 31, 2023
$646.9 $742.0 $270.8 $586.0 $2,245.7 
Accumulated impairment loss (a)
— — — (119.3)(119.3)
Goodwill, net, as of December 31, 2023
$646.9 $742.0 $270.8 $466.7 $2,126.4 
Currency translation adjustments— — — (0.5)(0.5)
Goodwill, net as of June 30, 2024
$646.9 $742.0 $270.8 $466.2 $2,125.9 
(a)    Accumulated impairment loss includes the effects of currency translation gains and/or losses.
The following table provides a reconciliation of changes in other intangible assets, net, for the period indicated (in millions):
Other Intangible Assets, Net
Customer Relationships and Backlog
Trade Names (a)
Other (b)
Total
Other intangible assets, gross, as of December 31, 2023
$1,096.6 $229.0 $87.6 $1,413.2 
Accumulated amortization(529.3)(49.8)(49.8)(628.9)
Other intangible assets, net, as of December 31, 2023
$567.3 $179.2 $37.8 $784.3 
Additions from new business combinations0.8 — — 0.8 
Currency translation adjustments— — (0.6)(0.6)
Amortization expense(54.7)(9.3)(3.3)(67.3)
Other intangible assets, net, as of June 30, 2024
$513.4 $169.9 $33.9 $717.2 
(a)Includes approximately $34.5 million of non-amortizing trade names as of both June 30, 2024 and December 31, 2023.
(b)Consists principally of pre-qualifications and non-compete agreements.
During the first quarter of 2024, the reporting units within the Power Delivery operating segment were restructured to more closely align with the segment’s end markets and to better correspond with the operational management reporting structure of the segment, including from the effects of the Company’s recent transformative acquisition efforts. Under the new reporting unit structure, each of the five components within the Power Delivery operating segment is a reporting unit. Management performed testing under the previous reporting unit structure and determined that no goodwill impairment existed, and under the new reporting unit structure the estimated fair values of all but one of the reporting units substantially exceeded their carrying values. A 100 basis point increase in the discount rate would not have resulted in any of the tested reporting units’ carrying values exceeding their fair values. As of March 31, 2024, the reporting unit that did not substantially exceed its carrying value had approximately $47.1 million of goodwill. This reporting unit’s estimated fair value exceeded its carrying value by approximately 16%. Significant assumptions used in testing this reporting unit included terminal values based on a terminal growth rate of 3%, 5 years of discounted cash flows prior to the terminal value, including revenue growth and EBITDA margin assumptions, and a weighted average discount rate of 12%.
Additionally, no events occurred during the three month period ended June 30, 2024 that would indicate it was more likely than not that a goodwill impairment exists. Significant changes in the assumptions or estimates used in management’s assessment, such as a reduction in profitability and/or cash flows, changes in market, regulatory or other conditions, including decreases in project activity levels and/or the effects of elevated levels of inflation, market interest rates or other market disruptions, including from geopolitical or other events, could result in non-cash impairment charges to goodwill and indefinite-lived intangible assets in the future.
Recent Acquisitions
The Company seeks to grow and diversify its business both organically and through acquisitions and/or strategic arrangements in order to deepen its market presence and customer base, broaden its geographic reach and expand its service offerings. Acquisitions are funded with cash on hand, borrowings under the Company’s senior unsecured credit facility and other debt financing and, for certain acquisitions, with shares of the Company’s common stock, and are generally subject to customary purchase price adjustments.
2024 Acquisitions. In July 2024, MasTec acquired all of the equity interests of a construction company focused on underground utility infrastructure for industrial and municipal projects, with expertise in data center utility systems, for approximately $35 million in cash and a five year earn-out liability. The Company expects to include the results of operations from the date of acquisition within the Power Delivery segment. The Company is in the process of preparing its initial valuation of the tangible and intangible assets relating to this acquisition and the allocation of the purchase price to the assets acquired and liabilities assumed.
2023 Acquisitions. During 2023, MasTec completed four acquisitions, including the acquisition of certain assets of a telecommunications company specializing in wireless services, which acquisition was included within the Company’s Communications segment, and was effective in January; and, effective in July, the acquisition of the equity interests of a telecommunications construction company specializing in broadband and fiber-to-the-home initiatives in the New England area, which acquisition was included within the Company’s Communications segment. Determination of the estimated fair values of the net assets acquired and consideration transferred for these acquisitions, which have been accounted for as business combinations under ASC Topic 805, Business Combinations (“ASC 805”), was substantially complete as of June 30, 2024, with exception for certain seller tax reimbursements. Additionally, effective in May 2023, MasTec acquired certain of the equity interests of two equipment companies which were accounted for as asset acquisitions under ASC 805 and were included within the Company’s Oil and Gas segment.
The aggregate purchase price of the Company’s 2023 acquisitions was composed of approximately $69 million in cash, net of cash acquired, and an earn-out liability valued at approximately $1 million. As of June 30, 2024, the remaining potential undiscounted earn-out liabilities for the 2023 acquisitions was estimated to be up to $2 million; however, there is no maximum payment amount. See Note 4 – Fair Value of Financial Instruments for fair value estimates and other details related to the Company’s earn-out arrangements. Approximately $42 million of the goodwill balance related to the 2023 acquisitions is expected to be tax deductible as of June 30, 2024.
Acquisition and integration costs. In 2021, the Company initiated a significant transformation of its end-market business operations to focus on the nation’s transition to low-carbon energy sources and position the Company for expected future growth opportunities. This transformation included significant business combination activity, including expansion of the Company’s scale and capacity in renewable energy, power delivery, heavy civil and telecommunications services, which activity resulted in significant acquisition and integration costs in prior periods. These acquisition and integration activities were completed in the fourth quarter of 2023. For the three and six month periods ended June 30, 2023,
such acquisition and integration costs totaled approximately $22.7 million and $39.8 million, respectively, of which $20.4 million and $35.0 million, respectively, was included within general and administrative expenses, and of which $2.3 million and $4.8 million, respectively, was included within costs of revenue, excluding depreciation and amortization.