Acquisitions

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions

ACQUISITIONS

For a description of the Company’s acquisition activity for the year ended December 31, 2021, reference is made to the financial statements as of and for the year ended December 31, 2021 and Note 2 thereto included in the Company’s 2021 Annual Report.

The Company continually evaluates potential acquisitions that either strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into a new and attractive business area. The Company has completed a number of acquisitions that have been accounted for as purchases and have resulted in the recognition of goodwill in the Company’s financial statements. This goodwill arises because the purchase prices for these businesses exceed the fair value of acquired identifiable net assets due to a number of factors including the future earnings and cash flow potential of these businesses, the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers, the competitive nature of the processes by which the Company acquired the businesses, avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance the Company’s existing product offerings to key target markets and enter into new and profitable businesses and the complementary strategic fit and resulting synergies these businesses bring to existing operations.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains the information used for the purchase price allocation during due diligence and through other sources. In the months after closing, as the Company obtains additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted results of the acquired business including earnings before interest, taxes, depreciation and amortization (“EBITDA”), revenue, revenue growth rates, royalty rates and technology obsolescence rates. These assumptions are forward looking and could be affected by future economic and market conditions. The Company engages third-party valuation specialists who review the Company’s critical assumptions and calculations of the fair value of acquired intangible assets in connection with significant acquisitions. Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment. The Company is continuing to evaluate certain pre-acquisition contingencies associated with its 2021 and 2022 acquisitions (for those acquisitions with open measurement periods) and is also in the process of obtaining valuations of certain acquisition-related assets and liabilities in connection with these acquisitions. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

During the nine-month period ended September 30, 2022, the Company acquired five businesses for total consideration of $304 million in cash, net of cash acquired. The businesses acquired complement existing units of the Company’s Life Science and Environmental & Applied Solutions segments. The aggregate annual sales of the five businesses acquired in 2022 at the time of acquisition, in each case based on the company’s revenues for its last completed fiscal year prior to the acquisition, were $53 million.

The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the nine-month period ended September 30, 2022 ($ in millions):

Trade accounts receivable	$	5
Inventories	3
Property, plant and equipment	3
Goodwill	197
Other intangible assets, primarily technology and customer relationships	111
Deferred tax liabilities	(9)
Other assets and liabilities, net	(6)
Net cash consideration	$	304

On August 30, 2021, the Company acquired Aldevron, L.L.C. (“Aldevron”) for a cash purchase price of approximately $9.6 billion (the “Aldevron Acquisition”). Aldevron manufactures high-quality plasmid DNA, mRNA and proteins, serving biotechnology and pharmaceutical customers across research, clinical and commercial applications, and is included in the Company’s Life Sciences segment results beginning in the third quarter of 2021. The acquisition has provided and is expected

to provide additional sales and earnings opportunities for the Company’s Life Sciences segment by expanding the business’ product line diversity, including new product offerings supporting genomic medicine.

Pro Forma Financial Information

The unaudited pro forma information for the periods set forth below gives effect to the 2021 and 2022 acquisitions as if they had occurred as of January 1, 2021, including the results from operations for the acquired business as well as the impact of assumed financing of the transaction and the impact of the purchase price allocation (including the amortization of acquired intangible assets). The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time ($ in millions, except per share amounts):

	Three-Month Period Ended				Nine-Month Period Ended
	September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Sales	$	7,670	$	7,306	$	23,133	$	21,615
Net earnings from continuing operations	1,572		1,158		4,976		4,420
Diluted net earnings per common share from continuing operations (a)	2.10		1.54		6.66		5.92

(a) Diluted net earnings per common share from continuing operations is calculated by deducting the Mandatory Convertible Preferred Stock (“MCPS”) dividends from net earnings from continuing operations for the anti-dilutive MCPS shares (refer to Note 4 for additional information).