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HD Supply Acquisition | 12 Months Ended
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Jan. 31, 2021
Business Combinations [Abstract] |
HD Supply Acquisition | HD SUPPLY ACQUISITION On November 16, 2020, we announced that we entered into a definitive agreement to acquire HD Supply, a leading national distributor of MRO products in the multifamily and hospitality end markets. We believe the acquisition of HD Supply will help position the Company to accelerate sales growth by better serving both existing and new MRO customers. Under the terms of the merger agreement, a subsidiary of Home Depot made a cash tender offer to purchase all outstanding shares of HD Supply common stock for $56 per share. All of the conditions of the offer were satisfied, and the acquisition was completed on December 24, 2020. The acquisition was funded through cash on hand, a portion of which was replaced with the proceeds from our January 2021 debt issuance. The acquisition was accounted for in accordance with Topic 805 "Business Combinations" and, accordingly, HD Supply’s results of operations have been consolidated in the Company’s financial statements since December 24, 2020, the date of acquisition. We recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of December 24, 2020. Acquisition-related costs were expensed as incurred and totaled $110 million, including the $56 million charge related to the settlement of share-based awards noted below. The following table summarizes total purchase consideration:
in millions |
Total cash consideration for outstanding shares | $ | 8,637 |
Value of share-based awards attributed to services already rendered (1) | 55 |
Total purchase consideration | $ | 8,692 |
————— (1) In connection with the completion of the acquisition, all HD Supply share-based awards were cash settled for an aggregate value of $111 million. As the settlement of the awards was at the discretion of the Company, the portion of the fair value of the awards attributed to services previously provided of $55 million was included as part of purchase consideration, with the remaining $56 million recognized as post-combination expense within SG&A in our consolidated statement of earnings for fiscal 2020. The following table summarizes the estimated preliminary fair values of the assets acquired and liabilities assumed at the date of the acquisition and is subject to final fair value determination:
in millions | Fair Value
Cash | $ | 912 |
Other current assets | 879 |
Goodwill | 4,870 |
Other assets (1) | 3,943 |
Total assets acquired | $ | 10,604 |
Current liabilities | $ | 801 |
Long-term liabilities (2) | 1,111 |
Total liabilities assumed | $ | 1,912 |
————— (1) Includes identifiable intangible assets of $3.3 billion. (2) Includes deferred tax liabilities of $836 million primarily resulting from the difference in book and tax basis related to identifiable intangible assets. Identifiable intangible assets were recognized at their estimated acquisition date fair values. The preliminary fair value of identifiable intangible assets was determined by using certain estimates and assumptions that are not observable in the market. The preliminary fair values were determined using an income based approach, which included significant assumptions such as the amount and timing of projected cash flows, growth rates, customer attrition rates, discount rates, and the assessment of the asset’s life cycle. The preliminary estimated fair value and estimated remaining useful lives of identifiable intangible assets follows:
in millions | Useful Life (Years) |  | Preliminary Fair Value
Customer relationships | 19 |  | $ | 2,630 |
Trade name – indefinite lived | Indefinite |  | 520 |
Trade names – definite lived | 20 |  | 150 |
Identifiable intangible assets |  |  | $ | 3,300 |
The goodwill arising from the acquisition is primarily attributable to operational synergies and acceleration of growth strategy, as well as the assembled workforce. The goodwill generated in the acquisition is not expected to be deductible for U.S. federal and state tax purposes. We have completed preliminary valuation analyses necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the acquisition date. These fair values were based on management’s estimates and assumptions; however, the amounts shown above are preliminary in nature and are subject to adjustment, including income tax related amounts, as additional information is obtained about the facts and circumstances that existed as of the acquisition date. Accordingly, there may be adjustments to the assigned values of acquired assets and liabilities, including, but not limited to, intangible assets and property and equipment and their respective estimated useful lives, that may also give rise to increases or decreases in the amounts of depreciation and amortization expense. The final determination of the fair values and related income tax impacts will be completed as soon as practicable, and within the measurement period of up to one year from the acquisition date as permitted under GAAP. Any adjustments to provisional amounts that are identified during the measurement period will be recorded in the reporting period in which the adjustment is determined. Net sales and net earnings for fiscal 2020 attributable to HD Supply since the completion of the acquisition were immaterial. Pro forma results of operations would not be materially different as a result of the acquisition and therefore are not presented.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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