XML 45 R27.htm IDEA: XBRL DOCUMENT

Business Combinations (Tables)

3 Months Ended

Mar. 31, 2020

The aggregate purchase consideration has been preliminarily allocated as follows.

Purchase Price
Fair value of Ingersoll Rand common stock issued for Ingersoll Rand
Industrial outstanding common stock⁽¹⁾	$	6,919.5
Fair value attributable to pre-merger service for replacement equity awards⁽²⁾		8.6
Fair value attributable to pre-merger service for deferred compensation plan⁽³⁾		8.9
Total purchase consideration	$	6,937.0

Purchase Price Allocation

Purchase Price Allocation
Cash	$	41.3
Accounts receivable		579.9
Inventory		576.2
Other current assets		136.9
Property, plant and equipment		520.0
Goodwill		4,278.2
Intangible assets		4,501.3
Other noncurrent assets		269.8
Total current liabilities, including current maturities of long-term debt of $19.0 million		(830.6	)
Deferred tax liability		(900.6	)
Long-term debt, net of debt issuance costs and an original issue discount		(1,851.7	)
Other noncurrent liabilities		(310.4	)
Noncontrolling interest		(73.3	)
	$	6,937.0

⁽¹⁾

Represents the fair value of 211,023,522 shares of the Company’s common stock issued for Ingersoll Rand Industrial outstanding common stock multiplied by $32.79, the price per share of common stock as of the closing price on February 28, 2020.

⁽²⁾

Represents the fair value of the replacement equity awards to the extent those related to services provided by the employee of Ingersoll Rand Industrial prior to closing. See Note 9 “Stock-Based Compensation Plan” for additional information about the replacement equity awards.

⁽³⁾

Represents the fair value of the deferred compensation plan to be settled in equity. See Note 7 “Benefit Plans” for additional information about the deferred compensation plan.

Preliminary Fair Value of Property, Plant and Equipment

The preliminary fair value of property, plant and equipment was primarily calculated using replacement costs adjusted for the age and condition of the asset, with the exception of real property which was calculated using the market approach, and is summarized below.

Land	$	38.8
Buildings		177.4
Machinery and equipment		255.9
Office furniture and equipment		13.2
Other		0.9
Construction in progress		33.8
Preliminary fair value of property, plant and equipment	$	520.0

Estimated Preliminary Fair Value and Weighted Average Useful Life of Identifiable Intangible Assets

The estimated preliminary fair value and weighted average useful life of the Ingersoll Rand Industrial identifiable intangible assets are as follows.

	Fair Value		Weighted average useful life (years)
Tradenames⁽¹⁾	$	1,427.0	Indefinite
Developed technology⁽²⁾		145.0		6
Customer relationships⁽³⁾		2,805.0		21
Backlog⁽⁴⁾		90.9	< 1
Other⁽⁵⁾		33.4		4
Preliminary fair value of identfiable intangible assets	$	4,501.3

⁽¹⁾

Tradenames were identified from brands of Ingersoll Rand Industrial. The preliminary fair value of tradenames were determined using a relief from royalty methodology which estimates the cost savings generated by a company related to the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset. The discount rate used was determined at the time of measurement based on an analysis of the implied internal rate of return of the transaction, weighted average cost of capital and weighted average return on assets. Tradenames are expected to have an indefinite useful life.

⁽²⁾

Developed technology was identified from the products of Ingersoll Rand Industrial. Preliminary fair values were determined using a relief from royalty methodology with similar methodology and assumptions as described in the tradename description above. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

⁽³⁾

Customer relationships represent the preliminary fair value of existing relationships with the Ingersoll Rand Industrial customers. Its preliminary fair value was determined using the Multi-Period Excess Earning Method which involves isolating the net earnings attributable to the asset being measured based on present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. The valuation includes a valuation of the assembled workforce, using the Cost Approach, for purposes of calculating contributory asset charges to be used in the Multi-Period Excess Earning Method valuations. The economic useful life was determined based on historical customer attrition rates.

⁽⁴⁾

Backlog primarily relates to the dollar value of purchase arrangements with customers, effective, as of a given point in time, that are based on mutually agreed terms which, in some cases, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty. Ingersoll Rand Industrial’s backlog consists of these arrangements with assigned shipment dates expected, in most cases, within three to twelve months. The preliminary fair value was determined using the Multi-Period Excess Earning Method. The economic useful life is based on the time to fulfill the outstanding order backlog obligation.

⁽⁵⁾

Other intangible assets is primarily comprised of software.

Impact of Material and Nonrecurring Adjustments to the Unaudited Pro forma Results

The table below reflects the impact of material and nonrecurring adjustments to the unaudited pro forma results for the three month periods ended March 31, 2020 and 2019 that are directly attributable to the acquisition.

	For the Three Month Period Ended March 31,
	2020			2019
(Decrease) increase to expense as a result of inventory fair value adjustment, net of tax		(31.1	)		74.7
(Decrease) increase to expense as a result of transaction costs, net of tax		(38.1	)		78.6

Unaudited Pro Forma Information

The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of the Company’s condensed consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2019 or of the results of the Company’s future results of operations of the combined businesses.

	For the Three Month Period Ended March 31,
	2020			2019
Revenues	$	1,269.8		$	1,500.0
Net loss		(0.2	)		(110.5	)