Acquisitions

6 Months Ended

Jul. 01, 2023

5 Acquisitions

On May 16, 2023, the Company acquired all of the issued and outstanding equity interests of Wyatt for $1.3 billion, net of cash acquired. Wyatt is a pioneer in innovative light scattering and field-flow fractionation instruments, software, accessories and services. The acquisition will expand Waters’ portfolio and increase exposure to large molecule applications. As a result of the acquisition, the results of Wyatt are included in the Company’s consolidated financial statements from the acquisition date.

The Company preliminarily allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The purchase price allocation was based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. The Company is in the ongoing process of conducting a valuation of the assets acquired and liabilities assumed related to the acquisition. The final fair value of the net assets acquired may result in adjustments to these assets and liabilities, including goodwill.

The intangible assets were valued with input from valuation specialists. The Company used variations of the income approach, which uses Level 3 inputs, in determining the fair value of intangible assets acquired in the Wyatt acquisition. Specifically, the customer relationships were valued using the multi-period excess earnings method under the income approach. The Company utilized the relief from royalty method to determine the fair value of the tradename and the developed technology. The following table presents the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of May 16, 2023 (in thousands):


Purchase Price
Cash p aid	$	1,311,531
Less: c ash acquired		(25,624	)

Net cash consideration		1,285,907

Identifiable Net Assets (Liabilities) Acquired
Accounts receivable		20,099
Inventory		14,706
Prepaid and other assets		1,327
Property, plant and equipment		9,056
Operating lease assets		5,204
Intangible assets		418,100
Accounts payable and accrued expenses		(31,664	)
Operating lease liabilities		(5,204	)
Tax liabilities		(3,871	)
Deferred revenue		(15,219	)
Other liabilities		(5,728	)

Total identifiable net assets acquired		406,806
Goodwill		879,101

Net cash consideration	$	1,285,907

The details of the purchase price allocated to the intangible assets acquired and the estimated useful lives are as follows (dollars in thousands):


	Amount		Weighted-Average Life
Developed technology	$	80,000		10 years
Customer relationships		330,600		10 years
Trade name		7,500		5 years

Total	$	418,100

The Company allocated $879 million of the purchase price to goodwill which is deductible for tax purposes and has been allocated to the Waters Division operating segment. The goodwill arising from the acquisition consists largely of the value of intangible assets that do not qualify for separate recognition such as workforce in place and cash flows from the integration of acquired technology, distribution channels and products with the Company’s products, which are higher than if the acquired companies’ technology, customer access or products were utilized on a stand-alone basis.

During the three and six months ended July 1, 2023, the Company’s consolidated results included net sales of $16 million and a net operating loss of $3 million since the acquisition closed on May 16, 2023. The Company also incurred transaction related costs of $4 million and $12 million during the three and six months ended July 1, 2023, respectively.

The pro forma effect on the ongoing operations of the Company as though this acquisition had occurred on January 1, 2022 was considered immaterial to the consolidated financial statements.

In conjunction with the Wyatt acquisition, the Company entered into retention agreements with certain employees, in which the Company agreed to pay a total of $40 million, in two equal installments upon the first and second anniversary of the acquisition date. As these employees are earning their individual cash award by providing service over the

two-year

period that benefit the Company, the $40 million will be recognized within total costs and operating expenses in the consolidated statements of operations over the

two-year

service period. The Company has recorded $4 million of expense in the consolidated statement of operations for the three and six months ended July 1, 2023.