ACQUISITIONS AND DIVESTITURES

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS AND DIVESTITURES

NOTE 3. ACQUISITIONS AND DIVESTITURES

We continually evaluate potential mergers, acquisitions, and divestitures that align with our strategy and expedite the evolution of our portfolio of businesses into new and attractive areas. We have completed a number of acquisitions that have been accounted for as purchases of businesses and resulted in the recognition of goodwill in our financial statements. This goodwill arises because the purchase price for each acquired business reflects a number of factors including the complimentary fit, acceleration of our strategy and synergies the business brings with respect to our existing operations, the future earnings and cash flow potential of the business, the potential to add other strategically complimentary acquisitions to the acquired business, the scarce or unique nature of the business in its markets, competition to acquire the business, the valuation of similar businesses in the marketplace (as reflected in a multiple of revenues, earnings, or cash flows), and the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses.

We make an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to refine the estimates of fair value and more accurately allocate the purchase price. Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment. The determination of the fair value of the acquired intangible assets involves judgment and is sensitive to significant assumptions, including projected financial information, royalty rates and discount rates used in the valuation models, and are affected by uncertainties about future market and economic conditions. We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.

Acquisitions

The following describes our significant acquisition activity for the years ended December 31, 2022, 2021, and 2020.

Provation

On December 27, 2021, we acquired Provation Software, Inc. (“Provation”), a leading provider of clinical workflow software solutions used in hospitals and ambulatory surgery centers. The acquisition of Provation extends our digital offering and software capabilities in the healthcare space. The total consideration paid was approximately $1.4 billion, net of acquired cash and was primarily financed with proceeds from our financing activities and available cash. We recorded $972 million of goodwill related to the acquisition, which is not tax deductible. Provation had revenue in 2020 of approximately $90 million and is an operating company within our Advanced Healthcare Solutions segment.

ServiceChannel

On August 24, 2021, we acquired ServiceChannel Holdings, Inc. (“ServiceChannel”), a privately held, global provider of SaaS based multi-site facilities maintenance service solutions with an integrated service-provider network. The acquisition of ServiceChannel broadens our offering of software-enabled solutions for the facility and asset lifecycle workflow. The total consideration paid was approximately $1.2 billion, net of acquired cash, and includes approximately $28 million of deferred compensation consideration that is being recognized ratably over a twelve-month service period. The ServiceChannel acquisition was primarily financed with available cash and proceeds from our financing activities. We recorded approximately $868 million of goodwill related to the ServiceChannel acquisition, which is not tax deductible. ServiceChannel had revenue in 2020 of approximately $70 million and is an operating company within our Intelligent Operating Solutions segment.

Revenue and operating loss attributable to these acquisitions were $262.7 million and $42.8 million for the year ended December 31, 2022, respectively. The operating loss includes $77.2 million of intangible asset amortization and $20.8 million of transaction and integration costs, primary comprised of compensation cost for employee retention and amounts paid to third party advisors, which are recorded in Selling, general and administration expenses.

The following table summarizes the estimated acquisition date fair values of the assets acquired and liabilities assumed from acquisitions discussed above as of December 31, 2022 ($ in millions):

	Provation		ServiceChannel		Total
Accounts receivable	$	41.6	$	10.1	$	51.7
Goodwill	972.0		867.5		1,839.5
Other intangible assets, primarily customer relationships, technology, database, and trade names	586.5		342.9		929.4
Deferred revenue, current	(50.2)		(1.7)		(51.9)
Deferred tax liabilities	(117.0)		(41.9)		(158.9)
Other assets and liabilities, net	(28.2)		(10.6)		(38.8)
Net cash consideration	$	1,404.7	$	1,166.3	$	2,571.0

Acquisitions Summary

The following summarizes the estimated fair values of the assets acquired and liabilities assumed for all acquisitions consummated during the years ended December 31. Balances presented below reflect final measurement period adjustments ($ in millions):

	2021		2020
Accounts receivable	$	51.8	$	0.1
Inventories	11.3		26.9
Property, plant and equipment	3.3		5.0
Goodwill	1,838.6		30.9
Other intangible assets, primarily customer relationships, trade names and technology	929.4		9.5
Trade accounts payable	(10.6)		(1.1)
Other assets and liabilities, net	(255.0)		(41.8)
Net cash consideration	$	2,568.8	$	29.5

Other Acquisition-related Matters

On April 1, 2019 (the “Principal Closing Date”), we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation. Prior to our acquisition of ASP, Johnson & Johnson received a Civil Investigative Demand from the United States Department of Justice (“DOJ”) regarding a False Claims Act investigation arising from a whistleblower lawsuit pertaining to the pricing, quality, marketing, and promotion of certain of ASP’s products. Based on the totality of available information at the Principal Closing Date and throughout the applicable measurement period, management allocated $26 million of the $2.7 billion purchase price to a potential liability related to the aforementioned litigation. Following the Principal Closing Date, management continually evaluated the likelihood and magnitude of the asserted claims based on any new information that became available. In the second quarter of 2021, following the unsealing of the whistleblower lawsuit and DOJ’s declination to intervene in the litigation, the plaintiff dismissed the whistleblower lawsuit. Based on these developments, management derecognized the litigation liability from our Consolidated Balance Sheet and recorded as a Gain on litigation resolution of $26 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.

During 2019, we acquired Censis Technologies (“Censis”). At the closing date of the purchase of Censis, a contractual liability existed which management allocated to the purchase price and was recorded in our Consolidated Balance Sheet. During the fourth quarter of 2021, that liability was discharged for an amount less than the amount allocated, and the excess was recorded as a Gain on litigation resolution of $3.9 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.

Divestitures

Therapy Physics Divestiture

On September 30, 2022, we completed the sale of our Therapy Physics product line, which was reported in our Advanced Healthcare Solutions segment, to an unrelated third party for cash consideration of $9.6 million. As a result of the sale, during the year ended December 31, 2022, we recorded a net realized pre-tax gain totaling $0.5 million, net of transaction costs, which is recorded as “Other non-operating expense, net” in the Consolidated Statements of Earnings. The divested business accounted for less than 1.0% of total revenue and less than 0.3% of total assets for the year ended December 31, 2021. The divestiture of this product line did not represent a strategic shift with a major effect on the Company’s operations and financial results and therefore the divested product line is not reported as a discontinued operation.