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Business Acquisitions and Divestitures | 12 Months Ended
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Mar. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
Business Acquisitions and Divestitures | Business Acquisitions and Divestitures Acquisitions Rx Savings Solutions, LLC On November 1, 2022, the Company completed its acquisition of 100% of the shares of Rx Savings Solutions, LLC (“RxSS”), a privately-owned company headquartered in Overland Park, Kansas, to further connect biopharma and payer services to patients. RxSS is a prescription price transparency and benefit insight company that offers affordability and adherence solutions to health plans and employers. The purchase consideration included a payment of $600 million in cash made upon closing and a maximum of $275 million of contingent consideration based on RxSS’ operational and financial performance through calendar year 2025. The payment made upon closing was funded from cash on hand. The financial results of RxSS are included in the Company’s RxTS segment as of the acquisition date. The transaction was accounted for as a business combination. The Company recorded a liability for the contingent consideration at its fair value of $92 million as of the acquisition date. As of March 31, 2023, the current portion of $83 million is included within “Other accrued liabilities” and the long-term portion of $9 million is included within “Other non-current liabilities” in the Company’s Consolidated Balance Sheet. The fair value of the contingent consideration liability was estimated using a Monte Carlo simulation model, utilizing internal cash flow projections which are Level 3 inputs under Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures. The contingent liability will be remeasured to fair value at each reporting date until the liability is resolved with changes in fair value being recognized within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statements of Operations. Recognition of the initial fair value of this contingent consideration is a non-cash investing activity. The purchase price allocation included acquired identifiable intangible assets of $229 million, primarily representing customer relationships and technology with a weighted average amortization period of 12 years, and goodwill of $463 million. Goodwill has been allocated to the Company’s RxTS segment, which reflects the expected future benefits from certain synergies and intangible assets that do not qualify for separate recognition. Goodwill attributable to the acquisition is deductible for tax purposes. The following table summarizes the preliminary purchase price allocation for this acquisition:
(In millions) | Amounts Recognized as of Acquisition Date
Purchase consideration: |
Cash | $ | 600 |
Contingent consideration | 92 |
Total purchase consideration | $ | 692 |
Identifiable assets acquired and liabilities assumed: |
Current assets | $ | 5 |
Intangible assets | 229 |
Other non-current assets | 3 |
Current liabilities | (8) |
Total identifiable net assets | 229 |
Goodwill | 463 |
Net assets acquired | $ | 692 |
SCRI Oncology, LLC On October 31, 2022, the Company completed a transaction with HCA to form SCRI Oncology, an oncology research business, combining McKesson’s USOR and HCA’s SCRI based in Nashville, Tennessee, to advance cancer care and increase access to oncology clinical research. Upon consummation of the transaction, McKesson owns a 51% controlling interest in the combined business, and the financial results are consolidated by the Company and reported within its U.S. Pharmaceutical segment as of the acquisition date. Transaction consideration included the transfer of full ownership interest in USOR to the combined business and $173 million of cash paid to HCA, which was funded from cash on hand. The transaction was accounted for as a business combination. The purchase price allocation included acquired identifiable intangible assets of $177 million, primarily representing customer relationships as well as trademarks and trade names with a weighted average amortization period of 17 years, and goodwill of $120 million. Goodwill has been allocated to the Company’s U.S. Pharmaceutical segment, which reflects the expected future benefits from certain synergies and intangible assets that do not qualify for separate recognition. Goodwill attributable to the acquisition of $49 million is deductible for tax purposes. The Company recorded noncontrolling interest of $225 million as a component of equity, which includes HCA’s proportionate interest in the identifiable net assets of SCRI at fair value of $205 million and its proportionate interest in the contributed net assets of USOR at carrying value of $20 million. The difference between the fair value of the Company’s acquired interest in SCRI net assets and the $173 million of cash paid to HCA was recognized as additional paid in capital, as well as the Company’s reduction in ownership interest in USOR net assets. The following table summarizes the preliminary purchase price allocation for this acquisition:
(In millions) | Amounts Recognized as of Acquisition Date
Purchase consideration: |
Cash | $ | 173 |
Contribution of USOR | 40 |
Total purchase consideration | $ | 213 |
Identifiable assets acquired and liabilities assumed: |
Receivables | $ | 224 |
Property, plant, and equipment | 22 |
Operating lease right-of-use assets | 31 |
Intangible assets | 177 |
Current liabilities | (42) |
Long-term operating lease liabilities | (29) |
Other non-current liabilities | (43) |
Total identifiable net assets | 340 |
Noncontrolling interest | (225) |
Additional paid-in capital | (22) |
Goodwill | 120 |
Net assets acquired | $ | 213 |
The fair value of the acquired identifiable intangible assets from the acquisitions discussed above were determined by applying the income approach, using a discounted cash flow model in which cash flows anticipated over several periods are discounted to their present value using an appropriate rate that is commensurate with the risk inherent with the transaction. These inputs are considered Level 3 inputs under the fair value measurements and disclosure guidance. Due to the recent timing of these acquisitions, the amounts presented above are subject to change as the Company’s fair value assessments are finalized. Pro forma financial information has not been provided as these acquisitions did not have a material impact, individually, or in the aggregate, to the Company’s consolidated results of operations. Divestitures In July 2021, the Company announced its intention to exit its businesses in Europe (“European Divestiture Activities”), as discussed in more detail below. Assets and liabilities of $4.5 billion and $4.7 billion, respectively as of March 31, 2022, met the criteria for classification as held for sale in the Company’s Consolidated Balance Sheet, primarily consisting of disposal groups related to the Company’s European Divestiture Activities within the International segment. At March 31, 2023, the Company had no assets or liabilities related to these divestiture activities that met the classification of held for sale and the decrease in these amounts during fiscal 2023 was driven by the divestiture of the Company’s E.U. disposal group (as defined below) in October 2022 and U.K. disposal group (as defined below) in April 2022, each as discussed in more detail below. During the year ended March 31, 2022, the Company recorded charges totaling $1.6 billion primarily to remeasure the assets and liabilities of the disposal groups to fair value less costs to sell. These charges were largely driven by declines in the Euro and British pound sterling. Net gains and charges related to these divestiture activities during the years ended March 31, 2023 and 2021 were not material. The gains and charges for each year were recorded within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations. The Company determined that the disposal groups did not meet the criteria for classification as discontinued operations. European Divestiture Activities On October 31, 2022, the Company completed its previously announced transaction to sell certain of its businesses in the E.U. located in France, Italy, Ireland, Portugal, Belgium, and Slovenia, along with its German headquarters and wound-care business, part of a shared services center in Lithuania, and its ownership stake in a joint venture in the Netherlands (“E.U. disposal group”) to the PHOENIX Group. As part of the transaction, the Company received cash proceeds of $892 million and divested net assets of $1.3 billion, including cash of $319 million, derecognized the carrying value of its noncontrolling interest held by minority shareholders of McKesson Europe AG (“McKesson Europe”) of $382 million, and released $153 million of net accumulated other comprehensive loss. During the years ended March 31, 2023 and 2022, the Company recorded net gains of $66 million and net charges totaling $438 million, respectively, to remeasure the E.U. disposal group to fair value less costs to sell. The charges for the year ended March 31, 2022 also included impairments of individual assets, such as certain internal-use software that will not be utilized in the future, prior to adjusting the E.U. disposal group as a whole and net losses of $151 million related to the accumulated other comprehensive loss balances associated with the E.U. disposal group, driven by declines in the Euro. The charges were recorded within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations. The Company’s measurement of the fair value of the E.U. disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy. The total assets and liabilities of the E.U. disposal group that met the classification of held for sale in the Company’s Consolidated Balance Sheet at March 31, 2022 were as follows:
(In millions) | March 31, 2022
Assets |
Current assets |
Receivables, net | $ | 1,322 |
Inventories, net | 809 |
Prepaid expenses and other | 72 |
Property, plant, and equipment, net | 304 |
Operating lease right-of-use assets | 224 |
Intangible assets, net | 267 |
Other non-current assets | 328 |
Remeasurement of assets of businesses held for sale to fair value less costs to sell (1) | (302) |
Total assets held for sale | $ | 3,024 |
Liabilities |
Current liabilities |
Drafts and accounts payable | $ | 1,826 |
Current portion of long-term debt | 4 |
Current portion of operating lease liabilities | 33 |
Other accrued liabilities | 473 |
Long-term debt | 11 |
Long-term deferred tax liabilities | 55 |
Long-term operating lease liabilities | 180 |
Other non-current liabilities | 138 |
Total liabilities held for sale | $ | 2,720 |
(1)Excludes charges in fiscal 2022 related to the impairment of individual assets, including a $113 million impairment of internally developed software recorded directly against the gross value of the assets impacted. On April 6, 2022, the Company completed the previously announced sale of its retail and distribution businesses in the United Kingdom (“U.K. disposal group”) to Aurelius Elephant Limited for a purchase price of £110 million (or, approximately $144 million), including certain adjustments. As part of the transaction, the Company divested net assets of $615 million and released $731 million of accumulated other comprehensive loss and the buyer assumed and repaid a note payable to the Company of $118 million. During the year ended March 31, 2022, the Company recorded charges totaling $1.2 billion, primarily consisting of adjustments to remeasure the U.K. disposal group to fair value less costs to sell. The remeasurement adjustments included a $734 million loss related to the accumulated other comprehensive loss balances associated with the U.K. disposal group, driven by declines in the British pound sterling. The charges were recorded within “Selling, distribution, general, and administrative expenses” in the Consolidated Statement of Operations. The Company’s measurement of the fair value of the U.K. disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy. The total assets and liabilities of the U.K. disposal group that met the classification of held for sale in the Company’s Consolidated Balance Sheet at March 31, 2022 were as follows:
(In millions) | March 31, 2022
Assets |
Current assets |
Cash and cash equivalents | $ | 531 |
Receivables, net | 931 |
Inventories, net | 563 |
Prepaid expenses and other | 50 |
Property, plant, and equipment, net | 91 |
Operating lease right-of-use assets | 270 |
Intangible assets, net | 117 |
Other non-current assets | 88 |
Remeasurement of assets of businesses held for sale to fair value less costs to sell | (1,159) |
Total assets held for sale | $ | 1,482 |
Liabilities |
Current liabilities |
Drafts and accounts payable | $ | 1,593 |
Current portion of operating lease liabilities | 50 |
Other accrued liabilities | 59 |
Long-term deferred tax liabilities | 16 |
Long-term operating lease liabilities | 262 |
Other non-current liabilities | 38 |
Total liabilities held for sale | $ | 2,018 |
On January 31, 2022, the Company completed the sale of its Austrian business to Quadrifolia Management GmbH in a management-led buyout for a purchase price of €244 million (or, approximately $276 million), including certain adjustments. The Company divested net assets of the Austrian business of $272 million and the buyer assumed a note payable to the Company of approximately $63 million which was paid to McKesson in the fourth quarter of fiscal 2022. During the year ended March 31, 2022, the Company recognized a loss of $32 million which was recorded within “Selling, distribution, general, and administrative expenses” in the Consolidated Statement of Operations. Subsequent to the divestiture activities discussed above, the Company’s European operations primarily consist of its retail and distribution businesses in Norway. German Pharmaceutical Wholesale Joint Venture On November 1, 2020, the Company completed a transaction with Walgreens Boots Alliance (“WBA”) whereby the majority of its German pharmaceutical wholesale business was contributed to a newly formed joint venture in which McKesson had a 30% noncontrolling interest. Transaction consideration for the contribution included a receivable amount of $41 million, primarily related to working capital and net debt adjustments from WBA, which was received in the first quarter of fiscal 2022, and the 30% interest in the newly formed joint venture. At the transaction date, the carrying value of the equity investment in the joint venture was recorded at its fair value, which was measured using inputs that fell within Level 3 of the fair value hierarchy. The carrying value of the investment in the joint venture was nil as of March 31, 2021. The Company accounted for its interest in the joint venture as an equity method investment within the International segment. The joint venture also assumed a note payable to the Company in the amount of approximately $291 million as of the transaction date, which was paid to the Company in fiscal 2021. In conjunction with the contribution, the Company recorded charges of $58 million in the year ended March 31, 2021, which included adjustments to remeasure the assets and liabilities held for sale to fair value less costs to sell. These charges were included within “Selling, distribution, general, and administrative expenses” in the Consolidated Statement of Operations. The Company’s measurement of the fair value of the German pharmaceutical wholesale business disposal group was based on estimates of total consideration to be received by the Company as outlined in the contribution agreement between the Company and WBA. Refer to Financial Note 5, “Other Income, Net,” for information regarding the divestiture of this investment. Other For the periods presented, the Company also completed de minimis acquisitions and divestitures within its operating segments. Financial results for the Company’s business acquisitions have been included in its consolidated financial statements as of their respective acquisition dates. Purchase prices for business acquisitions have been allocated based on estimated fair values at the respective acquisition dates.

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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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