During the three months ended March 31, 2022, Brown & Brown acquired all of the stock of one insurance intermediary, and acquired one book of business (customer accounts) for a total of two acquisitions as well as entered into a definitive agreement, pending regulatory approval, to acquire GRP (Jersey) Holdco Limited and its businesses ("GRP"). Additionally, adjustments were recorded to the purchase price allocation of certain prior acquisitions completed within the last 12 months as permitted by Accounting Standards Codification Topic 805 — Business Combinations (“ASC 805”). Such adjustments are presented in the “Other” category within the following two tables. The recorded purchase price for all acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations will be recorded in the Condensed Consolidated Statements of Income when incurred.

The fair value of earn-out obligations is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. In determining fair value, the acquired business’s future performance is estimated using financial projections developed by management for the acquired business and reflects market participant assumptions regarding revenue growth and/or profitability. The expected future payments are estimated on the basis of the earn-out formula and performance targets specified in each purchase agreement compared to the associated financial projections. These payments are then discounted to present value using a risk-adjusted rate that takes into consideration the likelihood that the forecasted earn-out payments will be made.

Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company’s Condensed Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period, as defined in ASC 805. For the three months ended March 31, 2022, adjustments were made within the permitted measurement period that resulted in a decrease in the aggregate purchase price of the affected acquisitions of $3.0 million. These measurement period adjustments have been reflected as current period adjustments in the three months ended March 31, 2022 in accordance with the guidance in ASU 2015-16 “Business Combinations.” The measurement period adjustments primarily impacted goodwill, with no effect on earnings or cash in the current period.

The following table summarizes the purchase price allocations made as of the date of each acquisition for current year acquisitions and adjustments made during the measurement period for prior year acquisitions. Cash paid for two acquisitions was $479.7 million during the three months ended March 31, 2022. During the measurement periods, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. These adjustments are made in the period in which the amounts are determined, and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.


(in millions)
Name	Business segment	Effective date of acquisition	Cash paid		Common stock issued		Other payable		Recorded earn-out payable		Net assets acquired		Maximum potential earn-out payable
Orchid Intermediate Holdings, L.P.	National Programs	March 31, 2022	$	476.2	$	—	$	—	$	10.8	$	487.0	$	20.0
Other	Various	Various		3.5		—		—		—		3.5		—
Total			$	479.7	$	—	$	—	$	10.8	$	490.5	$	20.0

The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.


(in millions)	Orchid			Other (1)			Total
Cash and equivalents	$	3.2		$	—		$	3.2
Fiduciary cash		40.5			—			40.5
Fiduciary receivables		12.5			—			12.5
Other current assets		3.4			0.5			3.9
Fixed assets		0.6			—			0.6
Goodwill		400.6			4.0			404.6
Purchased customer accounts		119.2			1.7			120.9
Non-compete agreements		—			0.3			0.3
Other assets		1.8			—			1.8
Total assets acquired		581.8			6.5			588.3
Fiduciary liabilities		(53.0	)		—			(53.0	)
Other current liabilities		(11.6	)		(3.0	)		(14.6	)
Deferred income tax, net		(30.2	)		—			(30.2	)
Other liabilities		—			—			—
Total liabilities assumed		(94.8	)		(3.0	)		(97.8	)
Net assets acquired	$	487.0		$	3.5		$	490.5

(1)

The other column represents current year acquisitions with total net assets acquired of less than $20.0 million and adjustments from prior year acquisitions that were made within the permitted measurement period.

The weighted average useful lives for the acquired amortizable intangible assets are as follows: purchased customer accounts, 15 years; and non-compete agreements, 5 years.

Goodwill of $404.6 million, which is net of any opening balance sheet adjustments within the allowable measurement period, was allocated to the Retail and National Programs in the amounts of $2.5 million and $402.1 million, respectively. Of the total goodwill of $404.6 million, the amount currently deductible for income tax purposes is $4.0 million and the remaining $400.6 million is not deductible for income tax purposes.

For the acquisitions completed during 2022, the results of operations since the acquisition dates have been combined with those of the Company. Due to the combination of the size of the transactions and when in the period they closed, the total revenue and income before income taxes included in the Condensed Consolidated Statement of Income from acquisitions completed during the period was insignificant. If the acquisitions had occurred as of the beginning of the respective periods, the Company’s estimated results of operations would be as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.


(UNAUDITED)	Three months ended March 31,
(in millions, except per share data)	2022		2021
Total revenues	$	920.8	$	826.1
Income before income taxes	$	268.7	$	241.7
Net income	$	223.3	$	201.8
Net income per share:
Basic	$	0.79	$	0.71
Diluted	$	0.79	$	0.71
Weighted average number of shares outstanding:
Basic		277.1		275.6
Diluted		278.6		277.0

As of March 31, 2022 and 2021, the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820 - Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables, for the three months ended March 31, 2022 and 2021, were as follows:


	Three months ended March 31,
(in millions)	2022			2021
Balance as of the beginning of the period	$	291.0		$	258.9
Additions to estimated acquisition earn-out payables		10.8			15.0
Payments for estimated acquisition earn-out payables		(46.9	)		(15.5	)
Subtotal		254.9			258.4
Net change in earnings from estimated acquisition earn-out payables:
Change in fair value on estimated acquisition earn-out payables		(4.8	)		(2.7	)
Interest expense accretion		1.4			1.8
Net change in earnings from estimated acquisition earn-out payables		(3.4	)		(0.9	)
Foreign currency translation adjustments during the year		(0.6	)		—
Balance as of March 31,	$	250.9		$	257.5

Of the $250.9 million estimated acquisition earn-out payables as of March 31, 2022, $49.3 million was recorded as accounts payable and $201.6 million was recorded as other non-current liabilities. As of March 31, 2022, the maximum future acquisition contingency payments related to all acquisitions was $452.3 million, inclusive of the $250.9 million estimated acquisition earn-out payables as of March 31, 2022. Included within the additions to estimated acquisition earn-out payables are any adjustments to opening balance sheet items within the allowable measurement period, which may therefore differ from previously reported amounts.