Business Acquisitions and Divestitures

12 Months Ended

Mar. 31, 2020

During 2020, the Company did not complete any material acquisitions. During 2020 and 2019, the Company did not complete any material divestitures aside from the separation of the Change Healthcare JV, as described in more detail in Financial Note 2, “Investment in Change Healthcare Joint Venture.”

Acquisitions

2019 Acquisition

Medical Specialties Distributors LLC (“MSD”)

On June 1, 2018, the Company completed its acquisition of MSD for the net purchase consideration of $784 million, which was funded from cash on hand. MSD is a leading national distributor of infusion and medical-surgical supplies as well as a provider of biomedical services to alternate site and home health providers. The financial results of MSD have been included in the Company’s consolidated statements of operations within its Medical-Surgical Solutions segment since the acquisition date.

The fair value of assets acquired and liabilities assumed as of the acquisition date were finalized upon completion of the measurement period in the first quarter of 2020. The final purchase price allocation included acquired identifiable intangibles of $326 million primarily representing customer relationships with a weighted average life of 18 years.

The following table summarizes the final recording of the fair value of the assets acquired and liabilities assumed for this acquisition as of the acquisition date as well as adjustments made during the measurement period.



(In millions)	Amounts Previously Recognized as of Acquisition Date (Provisional as Adjusted) ⁽¹⁾			FY20 Measurement Period Adjustments			Amounts Recognized as of the Acquisition Date ⁽²⁾
Receivables	$	113		$	(1	)	$	112
Other current assets, net of cash and cash equivalents acquired	72			(1		)	71
Goodwill	381			7			388
Intangible assets	326			—			326
Other long-term assets	55			1			56
Current liabilities	(72		)	—			(72		)
Other long-term liabilities	(91		)	(6		)	(97		)
Net assets acquired, net of cash and cash equivalents	$	784		$	—		$	784


(1)	Provisional amounts as of March 31, 2019.


(2)	Final amounts as of May 31, 2019.

2018 Acquisitions

RxCrossroads

On January 2, 2018, the Company completed its acquisition of RxCrossroads for the net purchase consideration of $720 million, which was funded from cash on hand. The financial results of RxCrossroads have been included in the consolidated statements of operations within the Company’s U.S. Pharmaceutical and Specialty Solutions segment since the acquisition date.

The fair value of assets acquired and liabilities assumed as of the acquisition date were finalized upon completion of the measurement period. As of December 31, 2018, the final amounts of fair value recognized for assets acquired and liabilities assumed as of the acquisition date, excluding goodwill and intangibles, were $129 million and $57 million. Approximately $386 million of the final purchase price allocation was assigned to goodwill, which reflects the expected future benefits from certain synergies and intangible assets that do not qualify for separate recognition. The final purchase price allocation included acquired identifiable intangibles of $262 million primarily representing customer relationships and trade names with a weighted average life of 14 years.

CoverMyMeds LLC (“CMM”)

On April 3, 2017, the Company completed its acquisition of CMM for the net purchase consideration of $1.3 billion, which was funded from cash on hand. The fair value of assets acquired and liabilities assumed as of the acquisition date were finalized upon completion of the measurement period in the first quarter of 2019. The financial results of CMM have been included in the Company’s consolidated statements of operations within Other since the acquisition date.

Pursuant to the agreement, McKesson may pay up to an additional $160 million of contingent consideration based on CMM’s financial performance for 2018 and 2019. As a result, the Company recorded a liability for this remaining contingent consideration at its estimated fair value of $113 million as of the acquisition date in its consolidated balance sheet. The contingent consideration was estimated using a Monte Carlo simulation, which utilized Level 3 inputs under the fair value measurement and disclosure guidance, including estimated financial forecasts. The contingent liability was re-measured at fair value at each reporting date until the liability was extinguished and changes in fair value were recorded in the Company’s consolidated statements of operations. The initial fair value of this contingent consideration was a non-cash investing activity. Pursuant to the agreement, the Company paid additional contingent consideration of $69 million and $68 million in May 2019 and May 2018. As of March 31, 2020 and 2019, the related liability was nil and $69 million.

Other

During 2018, the Company also completed acquisitions of intraFUSION, Inc. (“intraFUSION”), BDI Pharma, LLC (“BDI”) and Uniprix Group (“Uniprix”) for net cash consideration of $485 million, which was funded from cash on hand. The fair value of assets acquired and liabilities assumed of intraFUSION, BDI and Uniprix as of the acquisition dates were finalized upon completion of the measurement period. As of September 30, 2018, the final amounts of fair value recognized for the assets acquired and liabilities assumed for these acquisitions as of the acquisition dates, excluding goodwill and intangibles, were $292 million and $160 million. Approximately $246 million of the final purchase price allocation was assigned to goodwill, which reflects the expected future benefits of certain synergies and intangible assets that do not qualify for separate recognition. The final purchase price allocation included acquired identifiable intangibles of $118 million primarily representing customer relationships. The financial results of intraFUSION and BDI have been included within the Company’s U.S. Pharmaceutical and Specialty Solutions segment since the acquisition dates. The financial results of Uniprix have been included within Other since the acquisition date.

Other Acquisitions

During the three years presented, the Company also completed a number of other de minimis acquisitions within its operating segments. Financial results for the Company’s business acquisitions have been included in the Company’s consolidated financial statements since their respective acquisition dates. Purchase prices for business acquisitions have been allocated based on estimated fair values at the respective acquisition dates.

Goodwill recognized for business acquisitions is generally not expected to be deductible for tax purposes. However, if the assets of another company are acquired, the goodwill may be deductible for tax purposes.

Divestiture

Fiscal 2018

Enterprise Information Solutions

On August 1, 2017, the Company entered into an agreement with a third party to sell its Enterprise Information Solutions (“EIS”) business included in Other for $185 million, subject to adjustments for net debt and working capital. On October 2, 2017, the transaction closed upon satisfaction of all closing conditions including the termination of the waiting period under U.S. antitrust laws. McKesson received net cash proceeds of $169 million after $16 million of assumed net debt by the third party. The Company recognized a pre-tax gain of $109 million ($30 million after-tax) upon the disposition of this business in the third quarter of 2018 in operating expenses.