On August 2, 2021, (the “Acquisition Date”), we completed the Diamond Acquisition by exchanging 100 percent of the outstanding equity interests of Diamond to HGV common shares. Following the closing of the Diamond Acquisition, pre-existing HGV shareholders owned approximately 72 percent of the combined company after giving effect to the Diamond Acquisition, with Apollo Funds and other minority shareholders holding the remaining approximately 28 percent at the time the Diamond Acquisition was completed. Diamond is a leader in the vacation ownership industry focused on the infusion of hospitality and experiences through the full life cycle of an owner or members' life cycle relationship with Diamond. This strategic combination creates a more expansive industry offering, leveraging HGV's strong brand and net owner growth along with Diamond's diverse network of locations and strength in experiential offerings. The acquisition also diversifies our product offerings and allows us to expand our customer demographic.

On the Acquisition Date, shareholders of Diamond received 0.32 shares of our common stock for each share of Diamond common stock, totaling approximately 28 percent of our total common shares outstanding. Additionally, in connection with the Diamond Acquisition, HGV repaid certain existing indebtedness of Diamond. Costs related to the acquisition for the year ended December 31, 2021 were $106 million, which were expensed as incurred, and reflected as Acquisition and integration-related expense in our consolidated statements of operations.

The following table presents the fair value of each class of consideration transferred in relation to the Diamond Acquisition at the Acquisition Date.


($ in millions, except stock price amounts)
HGV common stock shares issued for outstanding Diamond shares		33.93
HGV common stock price as of Acquisition Date(1)		40.71
Stock purchase price	$	1,381

Repayment of Legacy-Diamond debt	$	2,029

Total consideration transferred	$	3,410

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(1) Represents the average of the opening and closing price of HGV stock on August 2, 2021.

We accounted for the Diamond Acquisition as a business combination, which requires us to record the assets acquired and liabilities assumed at fair value as of the Acquisition Date. The preliminary fair values of the assets acquired and liabilities assumed, which are presented in the table below, and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as information compiled by management, including the books and records of Diamond. Our estimates and assumptions are subject to change during the measurement period, not to exceed one year from the Acquisition Date. The magnitude of the Diamond Acquisition could necessitate the need to use the full one-year measurement period to adequately analyze and assess a number of the factors used in establishing the asset and liability fair values as of the Acquisition Date. The final values may also result in changes to amortization expense related to intangible assets and depreciation expense related to property and equipment, among other changes. Any potential adjustments made could be material in relation to the values presented in the table below.

As discussed more fully below, the primary areas of the purchase price allocation that are not yet finalized include the following: (1) finalizing the review and valuation of acquired intangible assets and assigning the useful lives to such assets; (2) finalizing the review and valuation of acquired inventory, property and equipment (including key assumptions, inputs and estimates) and assigning the remaining useful lives to the depreciable assets; (3) finalizing the review and valuation of acquired timeshare financing receivables; (4) finalizing the review of accounts receivable, including the evaluation of which receivables are purchased credit deteriorated; (5) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), including determining the appropriate amortization period; (6) finalizing the review and valuation of other acquired assets and assumed liabilities; and (7) finalizing our estimate of the impact of purchase accounting on deferred income tax liabilities.


($ in millions)	Preliminary Amounts Recognized as of the Acquisition Date
Assets acquired
Cash and cash equivalents	$	310
Restricted cash		127
Accounts receivable, net of allowance for doubtful accounts		58
Timeshare financing receivables, net		825
Inventory		497
Property and equipment, net		298
Operating lease right-of-use assets, net		30
Intangible assets, net		1,431
Other assets		250
Total assets acquired	$	3,826

Liabilities assumed
Accounts payable, accrued expenses and other	$	470
Debt, net		14
Non-recourse debt, net		660
Operating lease liabilities		33
Advanced deposits		4
Deferred revenues		140
Deferred income tax liabilities		472
Total liabilities assumed	$	1,793

Net assets acquired	$	2,033

Total consideration transferred	$	3,410

Goodwill(1)	$	1,377

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(1) Goodwill is calculated as total consideration transferred less net assets acquired and it primarily represents the value that we expect to obtain from synergies and growth opportunities from our combined Company post-acquisition. The majority of goodwill is not expected to be deductible for tax purposes.

The measurement period adjustments recorded during the quarter ended December 31, 2021 resulted from changes to our estimates of the fair value of the acquired assets and assumed liabilities based on management’s review of the historical accounting records of Diamond and third-party valuations. The measurement period adjustments recognized include an adjustment to reduce the initial vacation ownership customer relationship initially recognized, based on management’s determination that the intangible should no longer be separately recognized, an adjustment to reduce the initial estimate of the fair value of the acquired inventory based on management’s review of the key assumptions impacting fair value, other working capital adjustments, and the impact of the measurement period adjustments on deferred tax balances, which resulted in net adjustments to goodwill for the period of $557 million. The net income effect associated with the measurement period adjustments during the year ended December 31, 2021 were immaterial.

We acquired timeshare financing receivables which consist of loans to customers who purchased vacation ownership products and chose to finance their purchases. These timeshare financing receivables are collateralized by the underlying VOIs and generally have 10-year amortizing repayment terms. We preliminarily estimated the fair value of the timeshare financing receivables using a discounted cash flow model, which calculated a present value of expected future risk-adjusted cash flows over the remaining term of the respective timeshare financing receivables. We are continuing to evaluate the significant assumptions underlying the discounted cash flow model including default and prepayment assumptions, which could result in changes to our preliminary estimate. For purposes of our initial allocation, we have considered all acquired receivables to be purchase credit deteriorated. See Note 7: Timeshare Financing Receivables for additional information.

We acquired inventory which primarily consists of completed unsold VOIs. We preliminarily estimated the value of acquired inventory using a discounted cash flows method, which included an estimate of cash flows expected to be generated from the sale of VOIs. Significant estimates and assumptions impacting the fair value of the acquired inventory that are subjective and/or require complex judgments include our estimates of operating costs and margins, and the discount rate. Certain other estimates and assumptions impacting the fair value of the acquired inventory involving less subjective and/or less complex judgments include: short-term and long-term revenue growth rates, capital expenditures, tax rates and other factors impacting the discounted cash flows. We are continuing to assess the market assumptions and property conditions, which could result in changes to these preliminary values.

We acquired property and equipment, which includes land, building and leasehold improvements, furniture and fixtures and construction in progress. We preliminarily estimated the value of the majority of property and equipment using a mix of cost, market and discounted cash flow approaches, which included estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of the resorts. Certain property and equipment assets were preliminarily valued at carrying value, which is our best estimate of fair value at this time given the information available to us. We are continuing to assess the market assumptions and property conditions, which could result in changes to these preliminary values.

We recognized goodwill of approximately $1.4 billion in connection with the Diamond Acquisition. We have allocated the acquired goodwill to our segments, Real Estate Sales and Financing and Resort Operations and Club Management, as indicated in the table below. Our allocations may change throughout the measurement period as we continue to finalize the fair value of assets acquired and liabilities assumed in the Diamond Acquisition.

The following table presents our preliminary estimates of the fair values of the acquired Diamond’s identified intangible assets and their related estimated remaining useful lives.


	Estimated Fair		Estimated
	Value		Useful Life
	($ in millions)		(in years)
Trade name	$	18		1.5
Management contracts		1,251	35.4
Club member relationships		139		14.4
Computer software		23		1.5
Total intangible assets	$	1,431

We preliminarily estimated the fair value of Diamond’s trade name using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value. We provisionally estimated the value of management contracts and member relationships using the multi-period excess earnings method, which is a variation of the income approach. This method estimates an intangible asset’s value based on the present value of the incremental after-tax cash flows attributable to the intangible asset. Significant estimates and assumptions impacting the fair value of the acquired management contracts intangible that are subjective and/or require complex judgments include our estimates of operating costs and margins, and the discount rate. Certain other estimates and assumptions impacting the fair value of the acquired management contracts intangible involving less subjective and/or less complex judgments include: short-term and long-term revenue growth rates, attrition rates, capital expenditures, tax rates and other factors impacting the discounted cash flows. We continue to review Diamond’s contracts and historical performance in addition to evaluating the assumptions impacting the estimated values of such intangible assets and their respective useful lives, including the discount rate applied to the estimated cash flows and renewal and growth estimates and expected margins, which could result in changes to these preliminary values.

Deferred revenue primarily relates to deferred sales incentives revenues, primarily related to Bonus Points, which are deferred and recognized upon redemption; and Club membership fees, which are deferred and recognized over the terms of the applicable contract term or membership on a straight-line basis. Additionally, deferred revenue includes maintenance fees collected from owners, in certain cases, which are earned by the relevant property owners’ association over the applicable period. We preliminarily estimated the fair value of the deferred revenue at the carrying value of such liabilities as of the Acquisition Date. We continue to review Diamond’s contracts, which could result in changes to the preliminary estimate.

Deferred income taxes primarily relate to the fair value of assets and liabilities acquired from Diamond, including timeshare financing receivables, inventory, property and equipment, intangible assets, and debt. We preliminarily estimated deferred income taxes based on statutory rates in the jurisdictions of the legal entities where the acquired assets and liabilities are recorded. We are continuing to assess the tax rates used, and we will update our

estimate of deferred income taxes based on changes to our preliminary valuations of the related assets and liabilities and refinement of the effective tax rates, which could result in changes to these preliminary values.

As part of the acquisition and consideration transferred, we paid off $2,029 million of Diamond’s existing corporate debt, accrued interest and early termination penalties. The nominal amount remaining represents various smaller notes. Please refer to Note 15: Debt & Non-recourse debt for more information.

We preliminarily estimated the fair value of the securitized debt from VIEs and warehouse loan facilities, using a discounted cash flow model under the income approach. The significant assumptions in our analysis include default rates, prepayment rates, bond interest rates and other structural factors. We are continuing to evaluate the significant assumptions underlying the discounted cash flow model including default and prepayment assumptions, which could result in changes to our preliminary estimate.

We have recorded a preliminary estimate of the liability for those operating leases assumed in connection with the Diamond Acquisition with a remaining term in excess of a year. We measured the lease liabilities assumed at the present value of the remaining contractual lease payments based on the guidance in ASC 842 and using a discount rate determined as of the Acquisition Date. The right-of-use assets for such leases were initially measured at an amount equal to the lease liabilities, adjusted for favorable or unfavorable terms of the lease when compared with market terms. A small number of operating lease right of use assets and lease liabilities were preliminarily estimated at carrying value. We continue to assess the market assumptions, which could result in changes to our preliminary estimate.

The following unaudited pro forma information presents the combined results of operations of HGV and Diamond as if we had completed the Diamond Acquisition on January 1, 2020, the first day of our 2020 fiscal year, but using our preliminary fair values of assets and liabilities as of the Acquisition Date. These unaudited pro forma results do not reflect any synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Diamond Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.


	Year Ended December 31,
($ in millions, except per share data)	2021		2020
Revenue	$	3,146	$	1,896
Net income (loss)		374		(561	)