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Acquisitions | 9 Months Ended
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Sep. 30, 2023
Business Combinations [Abstract] |
Acquisitions | 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 paid |  | $ | 1,311,531 |
Less: cash 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 nine months ended September 30, 2023, the Company’s consolidated results included net sales of $ 29 million and $ 45 million , respectively, and a net operating loss of $ 6 million and $ 9 million , respectively, since the acquisition closed on May 16, 2023. The Company also incurred transaction related costs of $13 million during the nine months ended September 30, 2023 , which are recorded in selling and administrative expenses in the consolidated statement of operations. Unaudited Pro Forma Financial Information The following unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the actual results of operations that actually would have been realized had the entities been a single company as of January 1, 2022 or the future operating results of the combined entity. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies. The following unaudited pro forma information shows the results of the Company’s operations for the nine months ended September 30, 2023 and October 1, 2022, as if the acquisition had occurred on January 1, 2022 (in thousands):
|  | September 30, 2023 |  |  | October 1, 2022 |
Revenue |  | $ | 2,174,209 |  |  | $ | 2,197,028 |
Net income |  |  | 426,238 |  |  |  | 448,102 |
The impact of the unaudited pro forma information for the three months ended September 30, 2023 and October 1, 2022 was immaterial to the consolidated financial statements. To reflect the acquisition of Wyatt as if it had occurred on January 1, 2022, the unaudited pro forma information includes adjustments to reflect, among other things, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset of Wyatt and the interest expense from debt financings obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the Company’s historical statutory rates in effect for the respective periods. Pro forma net income for the nine months ended September 30, 2023, was adjusted to exclude certain non-recurring expenses related to transaction costs incurred and the fair value adjustment of inventory. These non-recurring expenses were reclassified to the prior period and included in the pro forma net income for the nine months ended October 1, 2022. 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 $8 million and $11 million of expense in the consolidated statement of operations for the three and nine months ended September 30, 2023 , respectively.

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