ACQUISITION

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

On September 8, 2021, the Company entered into a sale and purchase agreement to acquire E&I. The E&I Acquisition closed on November 1, 2021. Under the terms of the sale and purchase agreement, total consideration was $1,770.4, net of $10.3 of cash acquired. The gross consideration of $1,780.7, consisted of $1,168.7 in cash, approximately $601.1 of Company common stock, equating to 23.1 million shares of Vertiv common stock, $7.4 of contingent consideration and $3.5 of other adjustments. The Company was obligated to pay up to $200.0 of additional cash consideration if E&I achieved certain EBITDA targets for the year ended December 31, 2022. As of December 31, 2022, the value of the contingent earnout was zero based on E&I’s EBITDA results for the year ended December 31, 2022. As of December 31, 2021, the fair value of the contingent consideration related to the EBITDA targets was $3.7. The change in the fair value of the contingent consideration is recorded within “Other operating expense (income)” on the Consolidated Statements of Earnings (Loss).

E&I is a leading independent provider of switchgear, busway and modular power units serving data center and C&I customers in Europe, Middle East, and America. The combination is expected to broaden our power infrastructure portfolio, expand our services opportunities by providing additional upfront project start-up and ongoing maintenance services, enable us to offer complete integrated power and modular solutions. Additionally, this acquisition strengthens our participation with large customers as well as gain new customers, including Hyperscale cloud providers, as we have an expanded portfolio of products and services to offer customers more flexible and scalable power deployment options.

The Company accounted for the acquisition of E&I using the acquisition method of accounting. Assets acquired and liabilities assumed have been recorded based on their fair values, and as a result, the estimates and assumptions are subject to change. The Company has finalized the valuations to determine the final purchase price allocation including the final working capital adjustments, amounts allocated to intangible assets, the allocation of fair value to its foreign jurisdictions, and recording the tax effects of the E&I Acquisition.

The following is the final purchase price allocation of assets acquired and liabilities assumed related to the E&I acquisition:


	Preliminary Allocation		Adjustments		Final Allocation
Accounts receivable	$	87.7	$	—	$	87.7
Inventories	50.1		—		50.1
Other current assets	15.7		—		15.7
Property, plant and equipment	87.1		—		87.1
Goodwill	748.2		4.5		752.7
Other intangible assets	1,004.2		—		1,004.2
Other assets	10.4		—		10.4
Accounts payable	33.9		—		33.9
Accrued expenses and other liabilities	50.0		1.0		51.0
Deferred income taxes	129.8		(1.5)		128.3
Other long-term liabilities	24.3		—		24.3
Net assets acquired and liabilities assumed	$	1,765.4	$	5.0	1,770.4

The following table represents the definite lived intangible assets acquired, the final fair values and respective useful lives:

Useful Life

Fair Value

Customer relationships

15 to 16 years

731.6

Developed technology

13 years

180.7

Trademarks

15 to 16 years

52.3

Backlog

1 year

39.6

Total intangible assets

1,004.2

The Company used the multi-period excess earnings method to value the customer relationship intangible assets and the relief from royalty method to value the developed technology intangible assets. The significant assumptions used to estimate the fair value of customer relationships included forecasted earnings before interest, taxes, and amortization, customer attrition rates and a discount rate. The significant assumptions used to estimate the fair value of developed technology included the forecasted revenues, royalty rates and a discount rate. These significant assumptions are forward-looking and could be affected by future economic and market conditions. The estimated weighted-average useful lives was 14.2 years for finite lived intangible assets.

Goodwill was calculated as the difference between the acquisition date fair value of the consideration transferred and the fair value of net assets recognized for E&I, and represents the future economic benefits, including synergies, and assembled workforce, that are expected to be achieved as a result of the consummation of the acquisition of E&I. The goodwill arising from the acquisition is not expected to be deductible for tax purposes. As of the E&I Acquisition closing date, goodwill of $273.6 and $479.1 has been allocated to the America’s and the Europe, Middle East and Africa segments, respectively. Refer to “Note 5 - Goodwill and Other Intangibles” for additional information about goodwill and other intangible assets.

For the year ended December 31, 2021, E&I net sales were $67.4 which are included in “Net sales” and operating loss from the acquisition were $10.0 included in “Income (loss) before income taxes, net” on the Consolidated Statement of Earnings (Loss).

Pro Forma Financial Information

In accordance with ASC 805 Business Combination, the following unaudited pro forma results of operations for the year ended December 31, 2021 and 2020, respectively, assumes the E&I business combination was completed on January 1, 2020. The following pro forma results include adjustments to reflect acquisition related costs, additional interest expense and amortization of debt issuance costs, accounting policies applied to E&I after the business combination, amortization of intangibles associated with the business combination and the effects of adjustments made to the carrying value of certain assets.


Unaudited proforma information	Year Ended December 31, 2021		Year Ended December 31, 2020
Net sales	$	5,323.9	$	4,814.1
Net income (loss)	76.7		(380.0)

The unaudited pro forma results contain adjustments to give effect to pro forma events that are directly attributable to the business transaction, factually supportable, and expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that would have been obtained had the acquisition occurred at the beginning of the periods presented, nor is it intended to be a projection of future results. Additionally, the pro forma financial information does not reflect the costs which the Company has incurred or may incur to integrate the acquired business.