ACQUISITION

12 Months Ended

Dec. 31, 2024

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

Benchmark

In November 2023, we invested $10.0 million to acquire a 50.4% equity interest in Benchmark. Headquartered in Austin, Texas, Benchmark is an independent oil and gas company engaged in the acquisition, production and development of oil and gas assets in mature resource plays in Texas and Oklahoma. Acacia has made a control investment in Benchmark and intends to utilize its significant capital base to acquire predictable and shallow decline, cash-flowing oil and gas properties whose value can be enhanced via a disciplined, field optimization strategy, with risk managed through robust commodity hedges and low leverage. Through its investment in Benchmark, the Company, along with the Benchmark management team, will evaluate future growth and acquisitions of oil and gas assets at attractive valuations. As of December 31, 2024, management has finalized the valuations of all acquired assets and liabilities assumed in the acquisition and no measurement period adjustments were recorded during the year ended December 31, 2024.

On April 17, 2024, Benchmark consummated the transaction contemplated in the Revolution Purchase Agreement. At the closing of Revolution Transaction pursuant to the Revolution Purchase Agreement, among other things, Benchmark acquired certain upstream assets and related facilities in Texas and Oklahoma, including approximately 140,000 net acres and an interest in approximately 470 operated producing wells, upon the terms and subject to the conditions of the Revolution Purchase Agreement for a purchase price of $145 million in cash, subject to customary post-closing adjustments. Acacia funded a portion of the Revolution Purchase Price and related fees amounting to $59.9 million with cash on hand. The remainder of the Revolution Purchase Price was funded by a combination of borrowings under the Benchmark Revolving Credit Facility and the remaining being funded through a cash contribution of $15.3 million from other investors. Following closing, the Company’s interest in Benchmark is approximately 73.5%.

The Revolution Transaction is being accounted for as an asset acquisition under ASC 805, Business Combinations as substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets. The accounting for asset acquisitions is accounted for by using a cost accumulation model, where the cost of the acquisition is allocated to the assets acquired on the basis of relative fair values.

Deflecto

On October 18, 2024, Deflecto Purchaser, a wholly-owned subsidiary of Acacia, acquired Deflecto pursuant to the Deflecto Stock Purchase Agreement. Headquartered in Indianapolis, Indiana Deflecto operates domestically and internationally servicing a broad range of wholesale and retail markets within the highly-fragmented specialty plastics industry. Deflecto primarily designs, manufactures and sells (i) “take-one” point of purchase brochure, folder and applications display holders, (ii) plastic injection-molded office supply and arts, crafts and education products, (iii) plastic and aluminum air venting and air control products, (iv) extruded vinyl chair mats, (v) safety reflectors for bicycles and (vi) mud flaps and splash guards for the heavy duty truck market. Deflecto has subsidiaries located in the United States, Canada, United Kingdom, People’s Republic of China, Hong Kong and India to support its sales and services domestically and internationally.

The following unaudited pro forma summary presents consolidated information, as if the business combination had occurred on January 1, 2023:


	Years Ended December 31,
		2024		2023
		(Unaudited, in thousands)
Pro forma:
Revenues		$	246,644	$	313,839
Net (loss) income attributable to Acacia Research Corporation		(24,540)		62,877

We had material, nonrecurring pro forma adjustments directly attributable to the business combination included in the above pro forma revenues and net income. These adjustments included an increase of $10.2 million in property and equipment and an increase of $6.9 million in intangible assets related to the finalization of the valuations. In 2024, we incurred $3.4 million of acquisition-related costs. These expenses are included in general and administrative expenses for the year ended December 31, 2024 and are reflected in pro forma net income for the year ended December 31, 2023, in the table above.

The following table summarizes the consideration transferred to acquire Deflecto and the recognized amounts of identifiable assets and acquired liabilities assumed at the acquisition date (in thousands):


Fair value of consideration transferred:
Cash	$	59,898
Closing indebtedness	21,391
Transaction expenses paid to Sellers	15,290
Adjustment and indemnity escrow amount	2,415
Total consideration	$	98,994

Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	11,316
Accounts receivables	15,705
Inventories	17,617
Prepaid expenses and other current assets	4,498
Deferred tax assets	11,273
Property, plant and equipment, net	23,203
Operating lease, right-of-use assets	8,841

Customer relationships	20,200
Trade names and trademarks	8,600
Developed technology	1,000
Favorable leases	704
Accounts payable	(8,836)
Accrued expenses	(17,172)
Liability for sales tax and fees	(7,000)
Current lease liabilities	(2,614)

Long-term lease liabilities	(6,354)

Deferred tax liabilities	(2,615)
Total identifiable net assets	$	78,366
Goodwill	$	20,628

Intangible Assets and Liabilities

As of December 31, 2024, management has preliminary assessed the valuations of all acquired assets and liabilities assumed in the acquisition. The preliminary estimates are subject to adjustments during the measurement period, not to exceed one year from the date of acquisition. The final purchase price allocation, which is expected to be completed in 2025, will be based on the final working capital adjustments and other analysis of fair values of acquired assets and liabilities. Goodwill of $20.6 million represents the excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed. The goodwill recognized is primarily attributed to the assembled workforce of Deflecto and new customer relationships that did not exist at the time of the transaction. None of the goodwill resulting from the acquisition is deductible for tax purposes. All of the goodwill acquired is allocated to the Deflecto reporting unit. Other intangible assets include $20.2 million of customer relationships, $1.0 million of developed technology, $8.6 million of trade names and trademarks and $704,000 of favorable leases, with useful lives ranging from 2 months to 15 years. Trade names and trademarks include indefinite lived intangible assets. Refer to Note 8 for additional information.

The fair values of all intangibles were estimated using the income approach. Specifically, the multi-period excess earnings method was applied in the valuation of the customer relationships, and the relief-from-royalty method was applied in the valuation of the trade names and trademarks. These fair value measurements are based on significant inputs unobservable in the market and, therefore, represent a Level 3 measurement as defined in ASC 820. The key assumptions in applying the multi-period excess earnings method include the discount rate of 22%, growth rate, attrition rate, estimated profit margin and contributory asset charges. The key assumptions in applying the relief-from-royalty method include the applicable projected revenues, discount rate of 22%, remaining economic life or rate of obsolescence and estimated royalty rate. Refer to Note 13 for additional information related to fair value measurements.