Acquisitions

9 Months Ended

Sep. 27, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisitions

ACQUISITIONS

For a description of the Company’s acquisition activity for the year ended December 31, 2023, reference is made to the financial statements as of and for the year ended December 31, 2023 and Note 2 thereto included in the Company’s 2023 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 the purchase prices reflecting 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, the 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 the acquired 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.

During the nine-month period ended September 27, 2024, the Company acquired two businesses for total consideration of $525 million in cash, net of cash acquired. The businesses acquired complement existing units of the Company’s Life Sciences segment. The Company is continuing to evaluate certain pre-acquisition contingencies associated with the 2023 acquisition of Abcam plc (“Abcam”) and its 2024 acquisitions 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 any appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

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 27, 2024 ($ in millions):

Trade accounts receivable	$	40
Inventories	1
Property, plant and equipment	2
Goodwill	280
Other intangible assets, primarily technology and customer relationships	411
Deferred tax liabilities	(64)
Other assets and liabilities, net	5
Net assets acquired	675
Less: noncash consideration	(150)
Net cash consideration	$	525

The noncash consideration of $150 million reflects the Company’s equity-method investment in one of the acquired businesses. As a result of the acquisition, the Company realized a gain on the step-up of the equity-method investment of $24 million. This realized gain is recorded in Other income in the three and nine-month periods ended September 27, 2024.

Pro Forma Financial Information

The unaudited pro forma information for the periods set forth below gives effect to the 2023 and 2024 acquisitions as if they had occurred as of January 1, 2023, including the results from operations for the acquired businesses 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 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Sales	$	5,798	$	5,770	$	17,376	$	17,913
Net earnings from continuing operations	818		896		2,837		2,883
Diluted net earnings per common share from continuing operations(a)	1.12		1.20		3.83		3.86

(a) Diluted net earnings per common share from continuing operations for the nine-month period ended September 29, 2023 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).

The nine-month period ended September 27, 2024 unaudited pro forma net earnings from continuing operations set forth above were adjusted to exclude the pretax impact of a $25 million nonrecurring acquisition date fair value adjustment to inventory related to the acquisition of Abcam. The nine-month period ended September 29, 2023 unaudited pro forma net earnings from continuing operations were adjusted to include the pretax impact of $92 million of nonrecurring acquisition date fair value adjustments to inventory and the settlement of pre-acquisition share-based payment awards related to the acquisition of Abcam, reflecting these fourth quarter of 2023 and first quarter of 2024 charges as if the acquisition had occurred as of January 1, 2023.