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ACQUISITIONS AND DIVESTITURES OF BUSINESSES | 12 Months Ended
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Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DIVESTITURES OF BUSINESSES | ACQUISITIONS AND DIVESTITURES OF BUSINESSES Acquisition of Power Distribution, Inc. On February 25, 2020, Eaton acquired Power Distribution, Inc. a leading supplier of mission critical power distribution, static switching, and power monitoring equipment and services for data centers and industrial and commercial customers. The company is headquartered in Richmond, Virginia and is reported within the Electrical Americas business segment. Sale of Lighting business On March 2, 2020, Eaton sold its Lighting business to Signify N.V. for a cash purchase price of $1.4 billion. As a result of the sale, the Company recognized a pre-tax gain of $221 million in 2020. The Lighting business, which had sales of $1.6 billion in 2019 as part of the Electrical Americas business segment, served customers in commercial, industrial, residential, and municipal markets. Acquisition of Tripp Lite On March 17, 2021, Eaton acquired Tripp Lite for $1.65 billion, net of cash received. Tripp Lite is a leading supplier of power quality products and connectivity solutions including single-phase uninterruptible power supply systems, rack power distribution units, surge protectors, and enclosures for data centers, industrial, medical, and communications markets in the Americas. Tripp Lite is reported within the Electrical Americas business segment. The acquisition of Tripp Lite has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. During the measurement period which ended in March 2022, opening balance sheet adjustments were made to finalize Eaton's fair value estimates based on the final valuations received, which are summarized in the table below. The measurement period adjustments did not have a material impact to the Consolidated Statements of Income.
(In millions) |  |  |  | Preliminary Allocation |  | Measurement Period Adjustments |  | Final Allocation
Short-term investments |  |  |  | $ | 5 |  |  | $ | — |  |  | $ | 5 |
Accounts receivable |  |  |  | 94 |  |  | (1) |  |  | 93 |
Inventory |  |  |  | 184 |  |  | (5) |  |  | 179 |
Prepaid expenses and other current assets |  |  |  | 6 |  |  | (1) |  |  | 5 |
Property, plant and equipment |  |  |  | 6 |  |  | (5) |  |  | 1 |
Other intangible assets |  |  |  | 630 |  |  | (26) |  |  | 604 |
Other assets |  |  |  | — |  |  | 2 |  |  | 2 |
Accounts payable |  |  |  | (13) |  |  | — |  |  | (13) |
Other current liabilities |  |  |  | (32) |  |  | (2) |  |  | (34) |
Other noncurrent liabilities |  |  |  | (157) |  |  | (10) |  |  | (167) |
Total identifiable net assets |  |  |  | 723 |  |  | (48) |  |  | 675 |
Goodwill |  |  |  | 928 |  |  | 48 |  |  | 976 |
Total consideration, net of cash received |  |  |  | $ | 1,651 |  |  | $ | — |  |  | $ | 1,651 |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Tripp Lite. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. The estimated fair values of the customer relationships, trademarks and technology intangible assets of $539 million, $33 million, and $32 million, respectively, were determined using either the relief-from-royalty model or the multi-period excess earnings model, which are discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The estimated useful lives for customer relationships, trademarks and technology intangible assets were 20 years, 15 years, and 5 years, respectively. See Note 6 for additional information about goodwill and other intangible assets. Eaton's 2021 Consolidated Financial Statements include Tripp Lite’s results of operations, including segment operating profit of $139 million on sales of $419 million, from the date of acquisition through December 31, 2021. Acquisition of Green Motion SA On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $106 million, including $49 million of cash paid at closing and an initial estimate of $57 million for the fair value of contingent future consideration based on 2023 and 2024 revenue performance. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in revenue estimates and discount rates, with a maximum possible undiscounted value of $111 million. As of December 31, 2022, the fair value of the contingent future payments has been reduced to $44 million based primarily on anticipated reductions in projected 2023 revenue compared to the initial estimates at closing. This reduction is presented in Other expense (income) - net on the Consolidated Statements of Income. Acquisition of a 50% stake in HuanYu High Tech On March 29, 2021, Eaton acquired a 50 percent stake in HuanYu High Tech, a subsidiary of HuanYu Group that manufactures and markets low-voltage circuit breakers and contactors in China, and throughout the Asia-Pacific region. HuanYu High Tech has production operations in Wenzhou, China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment. Acquisition of Mission Systems On June 1, 2021, Eaton acquired Mission Systems for $2.8 billion, net of cash received. Mission Systems is a leading manufacturer of air-to-air refueling systems, environmental systems, and actuation primarily for defense markets. Mission Systems is reported within the Aerospace business segment. The acquisition of Mission Systems has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. During the measurement period which ended in June 2022, opening balance sheet adjustments were made to finalize Eaton's fair value estimates based on the final valuations received, which are summarized in the table below. The measurement period adjustments did not have a material impact to the Consolidated Statements of Income.
(In millions) |  |  |  | Preliminary Allocation |  | Measurement Period Adjustments |  | Final Allocation
Accounts receivable |  |  |  | $ | 84 |  |  | $ | — |  |  | $ | 84 |
Inventory |  |  |  | 179 |  |  | (1) |  |  | 178 |
Prepaid expenses and other current assets |  |  |  | 45 |  |  | 5 |  |  | 50 |
Property, plant and equipment |  |  |  | 86 |  |  | 11 |  |  | 97 |
Other intangible assets |  |  |  | 1,575 |  |  | (113) |  |  | 1,462 |
Other assets |  |  |  | 19 |  |  | (4) |  |  | 15 |
Accounts payable |  |  |  | (40) |  |  | — |  |  | (40) |
Other current liabilities |  |  |  | (159) |  |  | (43) |  |  | (202) |
Other noncurrent liabilities |  |  |  | (77) |  |  | (31) |  |  | (108) |
Total identifiable net assets |  |  |  | 1,712 |  |  | (176) |  |  | 1,536 |
Goodwill |  |  |  | 1,088 |  |  | 176 |  |  | 1,264 |
Total consideration, net of cash received |  |  |  | $ | 2,800 |  |  | $ | — |  |  | $ | 2,800 |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Mission Systems. As a result of the acquisition, goodwill of $572 million recognized in the United States is expected to be deductible for tax purposes. The estimated fair values of the customer relationships, technology, and backlog intangible assets of $764 million, $612 million, and $86 million, respectively, were determined using either the relief-from-royalty model or the multi-period excess earnings model, which are discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The estimated fair value of technology intangibles is also based on the selection of royalty rates used in the valuation model. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The estimated useful lives for customer relationships, technology, and backlog intangible assets were 22 years, 21 years, and 2 years, respectively. See Note 6 for additional information about goodwill and other intangible assets. Eaton's 2021 Consolidated Financial Statements include Mission Systems’ results of operations, including segment operating profit of $128 million on sales of $450 million, from the date of acquisition through December 31, 2021. Acquisition of a 50% stake in Jiangsu YiNeng Electric's busway business On June 25, 2021, Eaton acquired a 50 percent stake in Jiangsu YiNeng Electric's busway business, which manufactures and markets busway products in China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment. Sale of Hydraulics business On August 2, 2021, Eaton completed the sale of the Hydraulics business to Danfoss A/S. As a result of the sale, the Company received $3.1 billion, net of cash sold, and recognized a pre-tax gain of $617 million in 2021. According to the terms of the sale agreement, the Company finalized negotiations of post-closing adjustments with Danfoss A/S during the first quarter of 2022. As a result of these negotiations, the Company recognized an additional pre-tax gain of $24 million and received cash of $22 million from Danfoss A/S to fully settle all post-closing adjustments. The business had sales of $1.3 billion in 2021 through the date of the sale. Acquisition of Royal Power Solutions On January 5, 2022, Eaton acquired Royal Power Solutions for $610 million, net of cash received. Royal Power Solutions is a U.S. based manufacturer of high-precision electrical connectivity components used in electric vehicle, energy management, industrial and mobility markets. Royal Power Solutions is reported within the eMobility business segment. The acquisition of Royal Power Solutions has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. During the measurement period which ended in December 2022, opening balance sheet adjustments were made to finalize Eaton's fair value estimates based on the final valuations received, which are summarized in the table below. The measurement period adjustments did not have a material impact to the Consolidated Statements of Income.
(In millions) |  | Preliminary Allocation |  | Measurement Period Adjustments |  | Final Allocation
Accounts receivable |  | $ | 36 |  |  | $ | (1) |  |  | $ | 35 |
Inventory |  | 43 |  |  | 3 |  |  | 46 |
Prepaid expenses and other current assets |  | 1 |  |  | — |  |  | 1 |
Property, plant and equipment |  | 25 |  |  | 6 |  |  | 31 |
Other intangible assets |  | 306 |  |  | 35 |  |  | 341 |
Other assets |  | 21 |  |  | (13) |  |  | 8 |
Accounts payable |  | (24) |  |  | (1) |  |  | (25) |
Other current liabilities |  | (10) |  |  | (4) |  |  | (14) |
Other noncurrent liabilities |  | (70) |  |  | 2 |  |  | (68) |
Total identifiable net assets |  | 328 |  |  | 27 |  |  | 355 |
Goodwill |  | 284 |  |  | (29) |  |  | 255 |
Total consideration, net of cash received |  | $ | 612 |  |  | $ | (2) |  |  | $ | 610 |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Royal Power Solutions. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. The estimated fair values of the customer relationships, technology, trademarks, and other intangible assets of $230 million, $90 million, $16 million, and $5 million, respectively, were determined using either the relief-from-royalty model, the multi-period excess earnings model, or the lost income model, which are discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The estimated fair value of technology and trademark intangibles are also based on the selection of royalty rates used in the valuation model. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The estimated useful lives for customer relationships, technology, trademarks, and other intangible assets were 17 years, 16 years, 15 years, and 2 years, respectively. See Note 6 for additional information about goodwill and other intangible assets. Eaton's 2022 Consolidated Financial Statements include Royal Power Solutions' results of operations, including segment operating profit of $21 million on sales of $158 million, from the date of acquisition through December 31, 2022. Russia During the second quarter of 2022, in light of the ongoing war with Ukraine, the Company decided to exit its business operations in Russia and recorded charges of $29 million presented in Other expense (income) - net on the Consolidated Statements of Income. The charges consisted primarily of write-downs of accounts receivable, inventory and other assets, and accruals for severance. Acquisition of a 50% stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business On July 1, 2022, Eaton acquired a 50 percent stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business, which manufactures and markets low-voltage circuit breakers in China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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