Acquisitions & Divestitures

6 Months Ended

Jun. 30, 2021

5. Acquisitions & Divestitures:

Acquisitions

Purchase price consideration for all acquisitions was paid primarily in cash. All acquisitions, except as otherwise stated, were for 100 percent of the acquired business and are reported in the Consolidated Statement of Cash Flows, net of acquired cash and cash equivalents.

During the six months ended June 30, 2021, the company completed seven acquisitions at an aggregate cost of $2,940 million. Each acquisition is expected to enhance the company’s portfolio of products and services capabilities and further advance IBM’s hybrid cloud and AI strategy.

Acquisition	Segment	Description of Acquired Business
First Quarter

Nordcloud	Global Business Services	Consulting company providing services in cloud implementation, application transformation and managed services

Taos Mountain, LLC (Taos)	Global Business Services	Leading cloud professional and managed services provider

StackRox	Cloud & Cognitive Software	Innovator in container and Kubernetes-native security
Second Quarter

Turbonomic, Inc. (Turbonomic)	Cloud & Cognitive Software	Application Resource Management and Network Performance Management software provider

ECX Copy Data Management business	Cloud & Cognitive Software	Smart data protection solution
from Catalogic Software, Inc.

Waeg	Global Business Services	Leading Salesforce Consulting Partner

myInvenio	Cloud & Cognitive Software	Process mining software company

On June 16, 2021, the company completed the acquisition of Turbonomic, a privately held company, for cash consideration of $1,834 million of which $120 million was unremitted as of June 30, 2021. Of the amount outstanding, $70 million was recorded as restricted cash in the Consolidated Balance Sheet and is expected to be paid in the third quarter of 2021, with the remaining $50 million expected to be paid by December 31, 2022.

The purchase consideration for the acquisition of Nordcloud includes a fair value estimate of contingent consideration to be paid annually through the first quarter of 2024 upon achieving certain revenue milestones. The annual payments are not expected to be material.

The following table reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of June 30, 2021.


	Amortization			Other
(Dollars in millions)	Life (in years)	Turbonomic		Acquisitions
Current assets		$	126	$	85
Property, plant and equipment/noncurrent assets			—		5
Intangible assets:
Goodwill	N/A		1,444		833
Client relationships	7		290		144
Completed technology	4-7		117		131
Trademarks	1-7		18		27
Total assets acquired		$	1,996	$	1,225
Current liabilities			49		52
Noncurrent liabilities			113		67
Total liabilities assumed		$	161	$	119
Total purchase price		$	1,834	$	1,105

N/A – not applicable

The goodwill generated is primarily attributable to the assembled workforce of the acquired businesses and the increased synergies expected to be achieved from the integration of the acquired businesses into the company’s various integrated solutions and services neither of which qualifies as an amortizable intangible asset.

The valuation of the assets acquired and liabilities assumed is subject to revision. If additional information becomes available, the company may further revise the purchase price allocation as soon as practical, but no later than one year from the acquisition date; however, material changes are not expected.

Turbonomic—The overall weighted-average useful life of the identified amortizable intangible assets acquired was 6.9 years. Goodwill of $1,377 million and $67 million was assigned to the Cloud & Cognitive Software and Global Business Services segments, respectively. It is expected that none of the goodwill will be deductible for tax purposes.

Other acquisitions—The overall weighted-average useful life of the identified amortizable intangible assets acquired was 6.4 years. Goodwill of $549 million, $283 million and $2 million was assigned to the Global Business Services, Cloud & Cognitive Software and Global Technology Services segments, respectively. It is expected that approximately ten percent of the goodwill will be deductible for tax purposes.

The identified intangible assets will be amortized on a straight-line basis over their useful lives, which approximates the pattern that the assets’ economic benefits are expected to be consumed over time.

On July 15, 2021, the company announced its intent to acquire Bluetab Solutions Group, S.L. (Bluetab), a privately held IT Services provider serving large corporations in the highly specialized Data Solutions space. The acquisition is expected to close in the third quarter of 2021, subject to customary closing conditions, including regulatory clearance. Upon closing, Bluetab will be integrated into the Global Business Services segment.

Divestitures

In the second quarter of 2021, the Cloud & Cognitive Software segment completed one divestiture. The financial terms related to this transaction were not material.

In the fourth quarter of 2020, the company entered into a definitive agreement to sell certain remaining OEM commercial financing capabilities reported within the Global Financing segment. The financial terms related to this transaction are not material. The transaction is expected to be completed in the second half of 2021.