On April 1, 2022, the Mergers were completed via all-stock merger transactions. Pursuant to the Merger Agreements, DSG issued an aggregate of 10.3 million shares of DSG common stock to the former owners of TestEquity and Gexpro Services. An additional 1.7 million shares of DSG common stock remain potentially issuable upon meeting the conditions of certain earnout provisions. Refer to Note 1 – Nature of Operations and Basis of Presentation for further information regarding the Mergers.

The business combination of Lawson, TestEquity and Gexpro Services combines three value added complementary distribution businesses. Lawson is a distributor of products and services to the industrial, commercial, institutional, and governmental MRO marketplace. TestEquity is a distributor of parts and services to the industrial, commercial, institutional and governmental electronics manufacturing and test and measurement market. Gexpro Services is a provider of supply chain solutions, specializing in developing and implementing VMI and kitting programs to high-specification manufacturing customers. Gexpro Services provides critical products and services to customers throughout the lifecycle of highly technical OEM products. Refer to Note 1 – Nature of Operations and Basis of Presentation for more information on the nature of operations for these businesses.

The Mergers were accounted for as a reverse merger under the acquisition method of accounting for business combinations, whereby TestEquity and Gexpro Services were identified as the accounting acquirers and were treated as a combined entity for financial reporting purposes, and DSG was identified as the accounting acquiree. Accordingly, under the acquisition method of accounting, the purchase price was allocated to DSG's tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition-date fair values. These estimates were determined through established and generally accepted valuation techniques.



(in thousands, except share data)	April 1, 2022
Number of DSG common shares	9,120,167
DSG closing price per common stock on March 31, 2022	$	38.54
Fair value of shares exchanged	$	351,491

Other consideration(1)	1,910

Total consideration exchanged	$	353,401

Due to the publicly traded nature of shares of DSG common stock, the equity issuance of shares of DSG common stock based on this value was considered to be a more reliable measurement of the fair market value of the transaction compared to the equity interests of the accounting acquirer.

The allocation of consideration exchanged to the tangible and identifiable intangible assets acquired and liabilities assumed was based on estimated fair values as of the Merger Date. The accounting for the Mergers was complete as of December 31, 2022. Goodwill generated from the Mergers is not deductible for tax purposes.

During 2022, the Company recorded measurement period adjustments that resulted in a $8.4 million net decrease to goodwill. The measurement period adjustments were associated with adjustments to the fair value of certain property, plant and equipment, changes in estimates related to leases and changes in the deferred tax liability related to intangible assets.


(in thousands)	Merger Date		Measurement Period Adjustments		Final Purchase Price Allocation
Current assets	$	148,308	$	—	$	148,308
Property, plant and equipment	57,053		361		57,414
Right of use assets	17,571		687		18,258
Other intangible assets	119,060		—		119,060
Deferred tax liability, net of deferred tax asset	(26,237)		6,843		(19,394)
Other assets	18,373		—		18,373
Current liabilities	(71,097)		(68)		(71,165)
Long-term obligations	(25,722)		(24)		(25,746)
Lease and financing obligations	(29,474)		647		(28,827)
Derivative earnout liability	(43,900)		—		(43,900)

Goodwill	189,466		(8,446)		181,020
Total consideration exchanged	$	353,401	$	—	$	353,401

The Company incurred transaction costs related to the Mergers of $12.7 million for 2022 and $2.4 million for 2021 which are included in Selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table presents estimated unaudited pro forma consolidated financial information for DSG as if the Mergers and other acquisitions disclosed below occurred on January 1, 2021 for the 2022 acquisitions and January 1, 2020 for the 2021 acquisitions. The unaudited pro forma information reflects adjustments including amortization on acquired intangible assets, interest expense, and the related tax effects. This information is presented for informational purposes only and is not necessarily indicative of future results or the results that would have occurred had the Mergers been completed on the date indicated.

TestEquity and Gexpro Services acquired other businesses during 2022 and 2021. The consideration exchanged for the acquired businesses included various combinations of cash, sellers notes, and forms of share based payments. The acquisitions were accounted for under ASC 805, the acquisition method of accounting. For each acquisition, the allocation of consideration exchanged to the assets acquired and liabilities assumed was based on estimated acquisition-date fair values. Certain estimated values for the acquisitions, including the valuation of intangibles, contingent consideration, and income taxes (including deferred taxes and associated valuation allowances), are not yet finalized, and the preliminary purchase price allocations are subject to change as the Company completes its analysis of the fair value at the date of acquisition. The final valuations will be completed within the one-year measurement periods following the respective acquisition dates, and any adjustments will be recorded in the period in which the adjustments are determined.

During 2022, TestEquity acquired Interworld Highway, LLC, National Test Equipment, and Instrumex, and Gexpro Services acquired Resolux ApS ("Resolux") and Frontier Technologies Brewton, LLC and Frontier Engineering and Manufacturing Technologies, Inc. ("Frontier"). The accounting for the Interworld Highway, LLC, Resolux and Frontier acquisitions was complete as of December 31, 2022. The purchase consideration for each business acquired and the allocation of the consideration exchanged to the estimated fair values of assets acquired and liabilities assumed is summarized below:


(in thousands)	Interworld Highway, LLC		Resolux		Frontier		National Test Equipment		Instrumex
Acquisition date	April 29, 2022		January 3, 2022		March 31, 2022		June 1, 2022		December 1, 2022		Total
Current assets	$	15,018	$	10,210	$	2,881	$	2,187	$	3,495	$	33,791
Property, plant and equipment	313		459		1,189		642		30		2,633
Right of use assets	—		1,125		9,313		—		—		10,438
Other intangible assets:
Customer relationships	6,369		11,400		9,300		2,100		800		29,969
Trade names	4,600		6,100		3,000		—		—		13,700

Other assets	10		86		—		—		14		110
Accounts payable	(8,856)		(3,058)		(778)		(196)		(1,305)		(14,193)
Current portion of long term debt	—		—		—		(2,073)		—		(2,073)
Accrued expenses and other liabilities	—		(4,747)		(1,462)		(1,171)		(153)		(7,533)
Lease obligation	—		(1,125)		(9,313)		—		—		(10,438)



Goodwill	37,236		10,305		11,544		5,703		1,053		65,841
Total purchase consideration exchanged, net of cash acquired	$	54,690	$	30,755	$	25,674	$	7,192	$	3,934	$	122,245
Cash consideration	$	54,690	$	30,755	$	25,674	$	6,023	$	3,934	$	121,076
Seller's notes	—		—		—		1,169		—		1,169

Total purchase consideration exchanged, net of cash acquired	$	54,690	$	30,755	$	25,674	$	7,192	$	3,934	$	122,245

•Frontier was adjusted for the valuation of intangible assets, working capital, accrued expenses and other liabilities. The adjustments to these balances resulted in a $1.2 million increase to goodwill and $0.5 million increase to the total purchase consideration, net of cash acquired.

The consideration for the Frontier acquisition includes a potential earn-out payment up to $3.0 million based upon the achievement of certain milestones and relative thresholds during the earn out measurement period which ends on December 31, 2024. The fair value of the contingent consideration arrangement was classified within Level 3 and was determined using a probability-based scenario analysis approach. As of March 31, 2022 and December 31, 2022, the fair value of the earn-out was $0.9 million and $1.7 million, respectively, with amounts recorded in Accrued expenses and other current liabilities and Other liabilities in the Consolidated Balance Sheets. Changes in the fair value of the earn-out are recorded as a component of Change in fair value of earnout liability in the Consolidated Statements of Operations and Comprehensive Income (Loss).

During 2021, TestEquity acquired MCS Test Group Limited ("MCS"), and Gexpro Services acquired Omni Fasteners Inc. ("Omni"), National Engineered Fasteners ("NEF") and State Industrial Supply ("SIS"). These acquisitions were provisionally accounted for as of December 31, 2021. The accounting was completed during the year ended December 31, 2022.


(in thousands)	Omni		NEF		SIS		MCS
Acquisition date	June 8, 2021		November 1, 2021		December 31, 2021		July 31, 2021		Total
Current assets	$	2,259	$	19,118	$	3,551	$	2,819	$	27,747
Property, plant and equipment	600		589		125		3,702		5,016
Right of use assets	—		1,774		799		—		2,573
Other intangible assets:
Customer relationships	2,530		5,007		4,800		2,621		14,958
Trade names	200		2,503		1,500		41		4,244
Other intangible assets	9		—		380		—		389

Accounts payable	(50)		(3,506)		(1,464)		(2,523)		(7,543)

Accrued expenses and other liabilities	—		(3,332)		—		(685)		(4,017)
Lease obligation	—		(1,774)		(799)				(2,573)



Goodwill	953		—		3,010		7,245		11,208
Gain on bargain purchase	—		(1,363)		—		—		(1,363)
Total purchase consideration exchanged, net of cash acquired	$	6,501	$	19,016	$	11,902	$	13,220	$	50,639
Cash consideration	$	6,501	$	16,264	$	3,545	$	7,626	$	33,936
Seller's notes	—		—		8,357		1,400		9,757
Shared based payments	—		2,752		—		4,194		6,946
Total purchase consideration exchanged, net of cash acquired	$	6,501	$	19,016	$	11,902	$	13,220	$	50,639

A gain on bargain purchase related to the acquisition of NEF was recognized within Other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income (Loss) in the fourth quarter of 2021. The gain of $1.4 million was calculated as the excess of net assets recognized over the consideration transferred. The bargain purchase was primarily attributable to owners that were highly motivated to sell.

Other Acquisitions Pro Forma Information - The pro forma information for other acquisitions was included in the estimated unaudited pro forma consolidated financial information for DSG, which is presented above under Pro Forma Information.

The following table presents actual results attributable to our business combinations that were included in the consolidated financial statements for the years ended December 31, 2022 and 2021. The 2022 and 2021 results only reflect the results attributable to the acquisitions completed in those respective years. The results of DSG's legacy Lawson business are included only subsequent to the April 1, 2022 Merger Date, and the results for other acquisitions are only included subsequent to their respective acquisition dates provided above.







	Year Ended December 31, 2022						Year Ended December 31, 2021
(in thousands)	Lawson		Other Acquisitions		Total		Lawson		Other Acquisitions		Total
Revenue	$	373,738	$	151,217	$	524,955	$	—	$	10,847	$	10,847
Net Income	$	15,283	$	8,670	$	23,953	$	—	$	(391)	$	(391)