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Acquisitions and Divestitures | 12 Months Ended
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Dec. 31, 2020
Acquisitions and Divestitures |
Acquisitions and Divestitures | 18. Acquisitions and Divestitures Acquisitions We continue to pursue the acquisition of businesses that are accretive to our Solid Waste business and enhance and expand our existing service offerings. During the year ended December 31, 2020, we acquired four businesses related to our Solid Waste business, including the acquisition of Advanced Disposal discussed further below. Total consideration, net of cash acquired of $36 million, for all acquisitions was $4.1 billion, none of which related to other consideration such as purchase price holdbacks. In 2020, we paid $3 million of holdbacks, all of which related to prior year acquisitions. Contingent consideration obligations are primarily based on achievement by the acquired businesses of certain negotiated goals, which generally include targeted financial metrics. Advanced Disposal — On October 30, 2020, we completed the acquisition of all outstanding shares of Advanced Disposal for $30.30 per share in cash, pursuant to an Agreement and Plan of Merger dated April 14, 2019, as amended on June 24, 2020. Total enterprise value of the acquisition was $4.6 billion when including approximately $1.8 billion of Advanced Disposal’s net debt. This acquisition grows our footprint and allows us to provide differentiated, sustainable waste management and recycling services to approximately three million new commercial, industrial and residential customers, primarily located in the Eastern half of the U.S. The acquisition was funded using our 364-day revolving credit facility and our commercial paper program, as discussed further in Note 7. For the year ended December 31, 2020, we incurred $156 million of acquisition and integration related costs, which are primarily classified as “Selling, general and administrative, expenses”. The post-closing operating results of Advanced Disposal have been included in our consolidated financial statements, within our existing reportable segments. Since the acquisition date, Advanced Disposal has recognized $205 million, $142 million and $60 million of revenue, operating expenses and selling, general and administrative expenses, respectively, which are included in our Consolidated Statement of Operations. Our consolidated financial statements have not been retroactively restated to include Advanced Disposal’s historical financial position or results of operations. The acquisition is accounted for as a business combination. In accordance with the purchase method of accounting, the purchase price paid has been allocated to the assets and liabilities acquired based upon their estimated fair values as of the acquisition date, with the excess of the purchase price over the net assets acquired recorded as goodwill. The Company valued the customer relationship asset using an income approach; specifically, the multi-period excess earnings method. The significant assumptions used to value customer relationships included, among others, attrition rates, revenue growth rate, and discount rate. The Company valued the landfill assets using an income approach; specifically, the multi-period excess earnings method. The significant assumptions used to value landfill assets included, among others, the forecasted revenue and revenue growth (including forecasted waste volumes and rate per ton), discount rate, and forecasted capital expenditures. We are in the process of valuing all of the assets and liabilities acquired in the acquisition, and, until we have completed our valuation process, there may be adjustments to our estimates of fair value and resulting preliminary purchase price allocation. Goodwill of $2.5 billion was calculated as the excess of the consideration paid over the net assets recognized and represents the future economic benefits expected to arise from other assets acquired that could not be individually identified and separately recognized. Goodwill has been assigned to our Areas that have integrated these operations as they are benefitting from the synergies of the combination. Goodwill related to this acquisition is not deductible for income tax purposes. The allocation of the purchase price for the Advanced Disposal acquisition is preliminary and subject to change based on the finalization of our detailed valuations. The following table shows the preliminary purchase price allocation (in millions):
​ | ​ | ​ | ​
​ | ​ | ​ | October 30, 2020
Accounts and other receivables | ​ | $ | 159
Parts and supplies |  |  | 8
Other current assets | ​ | ​ | 17
Assets held for sale (a) | ​ | ​ | 1,022
Property and equipment | ​ | ​ | 1,278
Goodwill | ​ | ​ | 2,470
Other intangible assets | ​ | ​ | 604
Investments in unconsolidated entities | ​ | ​ | 9
Other assets | ​ | ​ | 27
Accounts payable | ​ | ​ | (107)
Accrued liabilities | ​ | ​ | (155)
Deferred revenues | ​ | ​ | (19)
Current portion of long-term debt | ​ | ​ | (12)
Liabilities held for sale (a) | ​ | ​ | (234)
Long-term debt, less current portion (b) | ​ | ​ | (441)
Landfill and environmental remediation liabilities | ​ | ​ | (242)
Deferred income taxes | ​ | ​ | (223)
Other liabilities | ​ | ​ | (79)
Total purchase price | ​ | $ | 4,082
(a) | In connection with our acquisition of Advanced Disposal, we were required by the U.S. Department of Justice to divest assets, including a portion of the assets acquired from Advanced Disposal. Upon acquisition these assets met the criteria for reporting discontinued operations and were classified as held for sale and included within the “Assets held for sale” and “Liabilities held for sale” line items in the above preliminary allocation of purchase price. In accordance with the Divesture Agreement, we sold the net assets to GFL Environmental for total consideration of $856 million as discussed further in the Divestitures section below.
​
(b) | At the time of acquisition, Advanced Disposal had outstanding $425 million of 5.625% senior notes due November 2024, the fair value of which was $438 million. In November 2020, we redeemed the notes pursuant to an optional redemption feature. See Note 7 for additional information.
​ The preliminary allocation of $604 million for other intangibles includes $575 million for customer relationships with an amortization period of 15 years and $29 million of other intangibles with a weighted average amortization period of 7 years. The unaudited pro forma financial information in the table below summarizes the combined results of operations for Waste Management and Advanced Disposal as though the companies had been combined as of January 1, 2019. Examples of adjustments made to arrive at the pro forma amounts include, but are not limited to, the following:
| ● | The effect of divestitures required by the U.S. Department of Justice;
| ● | Intercompany true-ups based on acquisition/divestiture activity;
| ● | Transaction expenses incurred by us and Advanced Disposal;
| ● | Adjustments to depreciation and amortization expense due to step-up in fair value of the acquired assets; and
| ● | Interest expense adjustments.
​ The following unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved as if the acquisition had taken place as of January 1, 2019 for the year ended December 31 (in millions, except per share amounts): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019
Operating revenues | ​ | $ | 16,192 | ​ | $ | 16,660
Net income attributable to Waste Management, Inc. | ​ |  | 1,685 | ​ |  | 1,472
Basic earnings per common share | ​ | ​ | 3.99 | ​ | ​ | 3.47
Diluted earnings per common share | ​ | ​ | 3.96 | ​ | ​ | 3.44
Weighted average common shares outstanding: | ​ | ​ | ​ | ​ | ​ | ​
Basic | ​ |  | 423 | ​ |  | 425
Diluted | ​ |  | 425 | ​ |  | 428
​ During the year ended December 31, 2019, we acquired 18 businesses, including Petro Waste Environmental LP (“Petro Waste”) discussed below, primarily related to our Solid Waste business. Total consideration, net of cash acquired, for all acquisitions was $515 million, which included $501 million in cash paid and other consideration of $14 million, primarily purchase price holdbacks. In 2019, we paid $6 million of contingent consideration, of which $4 million was related to acquisitions completed prior to 2019. In addition, we paid $20 million of holdbacks, of which $9 million related to current year acquisitions. Contingent consideration obligations are primarily based on achievement by the acquired businesses of certain negotiated goals, which generally include targeted financial metrics. Total consideration for our 2019 acquisitions was primarily allocated to $350 million of property and equipment, $53 million of other intangible assets and $111 million of goodwill. Other intangible assets included $38 million of customer and supplier relationships and $15 million of covenants not-to-compete. The goodwill was primarily a result of expected synergies from combining the acquired businesses with our existing operations and was tax deductible. Petro Waste — On March 8, 2019, Waste Management Energy Services Holdings, LLC, an indirect wholly-owned subsidiary of WM, acquired Petro Waste. The acquired business provides comprehensive oilfield environmental services and solid waste disposal facilities in the Permian Basin and the Eagle Ford Shale. The acquisition has expanded our offerings and enhanced the quality of solid waste disposal services for oil and gas exploration and production operations in Texas. Our purchase price was primarily allocated to seven landfills, which are included in our property and equipment. The acquisition was funded using commercial paper borrowings, and the acquisition accounting for this transaction was finalized in 2019. The operating results of the acquired business did not have a material impact to our consolidated financial statements for the periods presented herein. Given the significant change in energy market dynamics since the time of the acquisition, we have seen a decline in the fair value of certain of these assets. The impairment recognized during 2020 is discussed further in Note 12. During the year ended December 31, 2018, we acquired 32 businesses primarily related to our Solid Waste business. Total consideration, net of cash acquired, for all acquisitions was $471 million, which included $440 million in cash paid and $31 million of other consideration, primarily purchase price holdbacks. In 2018, we paid $6 million of contingent consideration associated with acquisitions completed prior to 2018. In addition, we paid $20 million of holdbacks, of which $15 million related to current year acquisitions. Total consideration for our 2018 acquisitions was primarily allocated to $115 million of property and equipment, $141 million of other intangible assets and $248 million of goodwill. Other intangible assets included $124 million of customer and supplier relationships, $16 million of covenants not-to-compete and $1 million of other intangible assets. The goodwill is primarily a result of expected synergies from combining the acquired businesses with our existing operations and substantially all is tax deductible. Divestitures In 2020, 2019 and 2018, the aggregate sales price for divestitures of certain landfill assets, as well as hauling and ancillary operations, was $856 million, $8 million and $153 million, and we recognized net gains of $33 million, net losses of less than $1 million and net gains of $96 million, respectively. Divestitures made in 2020 primarily consisted of assets required to be sold by the U.S. Department of Justice in connection with our acquisition of Advanced Disposal, as discussed above. In 2019 and 2018, the divestitures were made as part of our continuous focus on improving or divesting certain non-strategic or underperforming operations. The remaining amounts reported in the Consolidated Statements of Cash Flows generally relate to the sale of fixed assets.

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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 http://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 http://asc.fasb.org/topic&trid=2303972 + Details
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