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Acquisitions and Dispositions | 12 Months Ended
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Dec. 31, 2020
Business Combinations [Abstract] |
Acquisitions and Dispositions | Acquisitions and Dispositions Acquisition of First Data On July 29, 2019, the Company acquired First Data, a global leader in commerce-enabling technology and solutions for merchants, financial institutions and card issuers, by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition. The acquisition, included within the Acceptance and Payments segments, increases the Company’s footprint as a global payments and financial technology provider by expanding the portfolio of services provided to financial institutions, corporate and merchant clients and consumers. As a result of the acquisition, First Data stockholders received 286 million shares of common stock of Fiserv, Inc., at an exchange ratio of 0.303 shares of Fiserv, Inc. for each share of First Data common stock, with cash paid in lieu of fractional shares. The Company also converted 15 million outstanding First Data equity awards into corresponding equity awards relating to common stock of Fiserv, Inc. in accordance with the exchange ratio as described in further detail within Note 16. In addition, concurrent with the closing of the acquisition, the Company made a cash payment of $16.4 billion to repay existing First Data debt. The Company funded the transaction-related expenses and the repayment of First Data debt through a combination of available cash on-hand and proceeds from debt issuances as discussed in Note 12. The total purchase price paid for First Data is as follows:
(In millions) |
Fair value of stock exchanged for shares of Fiserv, Inc. (1) | $ | 29,293 |
Repayment of First Data debt | 16,414 |
Fair value of vested portion of First Data stock awards exchanged for Fiserv, Inc. awards (2) | 768 |
Total purchase price | $ | 46,475 |
(1)The fair value of the 286 million shares of the Company’s common stock issued as of the acquisition date was determined based on a per share price of $102.30, which was the closing price of the Company’s common stock on July 26, 2019, the last trading day before the acquisition closed the morning of July 29, 2019. This includes a nominal amount of cash paid in lieu of fractional shares. (2)Represents the portion of the fair value of the replacement awards related to services provided prior to the acquisition. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period. See Note 16 for additional information. The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is deductible for tax purposes. Goodwill is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from duplicative overhead, streamlined operations and enhanced operational efficiency. The assets and liabilities of First Data have been measured at estimated fair value as of the acquisition date. During the current year through the measurement period ended July 29, 2020, the Company identified and recorded measurement period adjustments to the preliminary purchase price allocation, which were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date. These measurement period adjustments resulted in an increase to goodwill of $304 million. The offsetting amounts to the change in goodwill were primarily related to customer relationship intangible assets, noncontrolling interests, property and equipment, payables and accrued expenses including legal contingency reserves, and deferred income taxes. The Company recorded a measurement period adjustment of $155 million to reduce the fair value of customer relationship intangible assets as a result of refinements to attrition rates. A measurement period adjustment of $126 million was recorded to reduce the fair value of noncontrolling interests based on changes to the fair value of the underlying customer relationship intangible assets and the incorporation of additional facts and circumstances that existed as of the acquisition date. A measurement period adjustment of $25 million was recorded to reduce the fair value of property and equipment to the estimated fair value of certain real property acquired. Measurement period adjustments were recorded to increase payables and accrued expenses by $37 million, reduce investments in unconsolidated affiliates by $23 million, and increase other long-term liabilities by $21 million. The remaining $169 million of adjustments were primarily comprised of deferred tax adjustments related to the measurement period adjustments. Such measurement period adjustments did not have a material impact on the consolidated statements of income. The allocation of purchase price recorded for First Data was finalized in the third quarter of 2020 as follows:
(In millions) |
Assets acquired (1) |
Cash and cash equivalents | $ | 310 |
Trade accounts receivable | 1,747 |
Prepaid expenses and other current assets | 1,047 |
Settlement assets | 10,398 |
Property and equipment | 1,156 |
Customer relationships | 13,458 |
Other intangible assets | 2,814 |
Goodwill | 30,811 |
Investments in unconsolidated affiliates | 2,676 |
Other long-term assets | 1,191 |
Total assets acquired | $ | 65,608 |
Liabilities assumed (1) |
Accounts payable and accrued expenses | $ | 1,613 |
Short-term and current maturities of long-term debt (2) | 243 |
Contract liabilities | 71 |
Settlement obligations | 10,398 |
Deferred income taxes | 3,671 |
Long-term contract liabilities | 16 |
Long-term debt and other long-term liabilities (3) | 1,261 |
Total liabilities assumed | $ | 17,273 |
Net assets acquired | $ | 48,335 |
Redeemable noncontrolling interests | 252 |
Noncontrolling interests | 1,608 |
Total purchase price | $ | 46,475 |
(1)In connection with the acquisition of First Data, the Company acquired two businesses which it intended to sell and subsequently sold in October 2019. Therefore, such businesses were classified as held for sale and were included within prepaid expenses and other current assets and accounts payable and accrued expenses in the above allocation of purchase price (see Note 5). (2)Includes foreign lines of credit, current portion of finance lease obligations and other financing obligations (see Note 12). (3)Includes the receivable securitized loan and the long-term portion of finance lease obligations (see Note 12). The fair values of the assets acquired and liabilities assumed were determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, growth and attrition rates, future expected cash flows and other future events that are judgmental. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. Intangible assets consisting of customer relationships, technology and trade names were valued using the multi-period excess earnings method (“MEEM”), or the relief from royalty (“RFR”) method, both are forms of the income approach. A cost and market approach was applied, as appropriate, for property and equipment, including land. •Customer relationship intangible assets were valued using the MEEM method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors. •Technology and trade name intangible assets were valued using the RFR method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue attributable to the asset, applicable tax rate, royalty rate, and other factors such as technology related obsolescence rates), the discount rate, reflecting the risks inherent in the future cash flow stream, and the tax amortization benefit, among other factors. •The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. •The market approach, which estimates value by leveraging comparable land sale data/listings and qualitatively comparing them to the in-scope properties, was used to value the land. •An income approach was applied to derive fair value for both consolidated investments with a noncontrolling interest and equity method investments accounted for under the equity method of accounting. The significant assumptions used include the estimated annual cash flows, the discount rate, the long-term growth rate, and operating margin, among other factors. The Company believes that the information provided a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities. The amounts allocated to intangible assets are as follows:
(In millions) | Gross Carrying Amount |  | Weighted-Average Useful Life
Customer relationships | $ | 13,458 |  |  | 15 years
Acquired software and technology | 2,324 |  |  | 7 years
Trade names | 490 |  |  | 9 years
Total | $ | 16,272 |  |  | 14 years
The financial results of First Data are included in the consolidated results of the Company from July 29, 2019, the date of acquisition. For the year ended December 31, 2019, the results of operations for First Data, included within the accompanying consolidated statement of income, consisted of $4.1 billion of revenue and $1.0 billion of operating income. The Company incurred transaction expenses of approximately $175 million for the year ended December 31, 2019. Approximately $77 million of these expenses were included in selling, general and administrative expenses and $98 million were included in debt financing activities within the Company’s consolidated statement of income for the year ended December 31, 2019. The following unaudited supplemental pro forma combined financial information presents the Company’s results of operations for the years ended December 31, 2019 and 2018 as if the acquisition of First Data had occurred on January 1, 2018. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the Company’s operating results that may have actually occurred had the acquisition of First Data been completed on January 1, 2018. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of First Data.
(In millions, except for per share data) | 2019 |  | 2018
Total revenue | $ | 15,775 |  |  | $ | 15,284 |
Net income | 1,520 |  |  | 1,125 |
Net income attributable to Fiserv, Inc. | 1,457 |  |  | 1,040 |
Net income per share attributable to Fiserv, Inc.: |  |  |
Basic | $ | 2.14 |  |  | $ | 1.50 |
Diluted | $ | 2.10 |  |  | $ | 1.47 |
The unaudited pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the acquisition had occurred on January 1, 2018 to give effect to certain events the Company believes to be directly attributable to the acquisition. These pro forma adjustments primarily include: •a net increase in amortization expense that would have been recognized due to acquired intangible assets; •an adjustment to interest expense to reflect (i) the additional borrowings of the Company in conjunction with the acquisition and (ii) the repayment of First Data’s historical debt in conjunction with the acquisition; •a reduction in expenses for the year ended December 31, 2019 and a corresponding increase in the year ended December 31, 2018 for acquisition-related transaction costs and other one-time costs directly attributable to the acquisition; •a reduction in operating revenues due to the elimination of deferred revenues assigned no value at the acquisition date; •an adjustment to stock compensation expense to reflect the cost of the replacement awards as if they had been issued on January 1, 2018; and •the related income tax effects of the adjustments noted above. Acquisition of Elan Assets On October 31, 2018, the Company acquired the debit card processing, ATM Managed Services, and MoneyPass® surcharge-free network of Elan Financial Services, a unit of U.S. Bancorp (“Elan”), for approximately $659 million. Such purchase price includes an initial cash payment of $691 million, less post-closing working capital adjustments of $57 million, plus contingent consideration related to earn-out provisions estimated at a fair value of $12 million (see Note 10) and future payments under a transition services agreement estimated to be in excess of fair value of $13 million. This acquisition, included within the Payments segment, deepens the Company’s presence in debit card processing, broadens its client reach and scale and provides new solutions to enhance the value proposition for its existing debit solution clients. During 2019, the Company identified and recorded measurement period adjustments to the preliminary purchase price allocation, which were the result of additional analysis performed and information identified based on facts and circumstances that existed as of the acquisition date. The measurement period adjustments resulted in a decrease in goodwill of $24 million with an offset to intangible assets and prepaid expenses and other current assets. The following allocation of purchase price for Elan was finalized in 2019:
(In millions) |
Trade accounts receivable | $ | 20 |
Prepaid expenses and other current assets | 98 |
Property and equipment | 9 |
Intangible assets | 373 |
Goodwill | 214 |
Accounts payable and other current liabilities | (55) |
Total purchase price | $ | 659 |
Goodwill, deductible for tax purposes, is primarily attributed to synergies, including the migration of Elan’s clients to the Company’s debit platform, and the anticipated value created by selling the Company’s products and services outside of card payments to Elan’s existing client base. The amounts allocated to intangible assets are as follows:
(In millions) | Gross Carrying Amount |  | Weighted-Average Useful Life
Customer relationships | $ | 370 |  |  | 15 years
Trade name | 3 |  |  | 8 years
Total | $ | 373 |  |  | 15 years
In conjunction with the acquisition, the Company entered into a transition services agreement for the provision of certain processing, network, administrative and managed services for a period of two years. The financial results of Elan are included in the consolidated results of the Company from October 31, 2018, the date of acquisition. For the year ended December 31, 2018, the results of operations for Elan, included within the accompanying consolidated statement of income, consisted of $29 million of revenue and $6 million of operating income. Pro forma information for this acquisition is not provided because it did not have a material effect on the Company’s consolidated results of operations. Other Acquisitions On March 2, 2020, the Company acquired MerchantPro Express LLC (“MerchantPro”), an independent sales organization that provides processing services, point-of-sale equipment and merchant cash advances to businesses across the United States. MerchantPro is included within the Acceptance segment and further expands the Company’s merchant services business. On March 18, 2020, the Company acquired Bypass Mobile, LLC (“Bypass”), an independent software vendor and innovator in enterprise point-of-sale systems for sports and entertainment venues, food service management providers and national restaurant chains. Bypass is included within the Acceptance segment and further enhances the Company’s omni-commerce capabilities, enabling enterprise businesses to deliver a seamless customer experience that spans physical and digital channels. On May 11, 2020, the Company acquired Inlet, LLC (“Inlet”), a provider of secure digital delivery solutions for enterprise and middle-market billers’ invoices and statements. Inlet is included within the Payments segment and further enhances the Company’s digital bill payment strategy. The Company acquired these businesses for an aggregate purchase price of $167 million, net of $2 million of acquired cash, and including earn-out provisions estimated at a fair value of $45 million (see Note 10). The purchase price allocations for these acquisitions resulted in software and customer intangible assets totaling approximately $46 million, residual buyout intangible assets of approximately $35 million, goodwill of approximately $90 million, and net assumed liabilities of approximately $4 million. The purchase price allocation for the MerchantPro acquisition was finalized in the third quarter of 2020, and for the Bypass and Inlet acquisitions in the fourth quarter of 2020. Measurement period adjustments did not have a material impact on the consolidated statements of income. The goodwill recognized from these transactions is primarily attributed to synergies and the anticipated value created by selling the Company’s products and services to the acquired businesses’ existing client base. Approximately $36 million of goodwill is expected to be deductible for tax purposes. The amounts allocated to intangible assets are as follows:
(In millions) | Gross Carrying Amount |  | Weighted-Average Useful Life
Customer relationships | $ | 32 |  |  | 14 years
Residual buyouts | 35 |  |  | 9 years
Acquired software and technology | 14 |  |  | 8 years
Total | $ | 81 |  |  | 11 years
The results of operations for these acquired businesses have been included in the accompanying consolidated statements of income from the dates of acquisition. Pro forma information for these acquisitions is not provided because they did not have a material effect on the Company’s consolidated results of operations. On January 22, 2021, the Company acquired Ondot Systems, Inc., a digital experience platform provider for financial institutions. This acquisition, to be included within the Payments segment, will further expand the Company’s digital capabilities, enhancing its suite of integrated solutions spanning card-based payments, digital banking platforms, core banking, and merchant solutions to enable clients of all sizes to deliver frictionless, digital-first and personalized experiences to their customers. Dispositions Effective July 1, 2020, the Company and Bank of America (“BANA”) dissolved the Banc of America Merchant Services joint venture (“BAMS” or the “joint venture”), of which the Company maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation. The remaining activities of the joint venture will consist of supporting the transition of the business to each party and an orderly wind down of remaining BAMS assets and liabilities. Pursuant to the separation agreement, the joint venture retains the responsibility for certain contingencies that may arise from pre-dissolution activities, including potential credit losses for specified merchants in excess of established reserves and certain legal claims and contingencies. The Company may be obligated to fund a proportionate share of any such losses as incurred. The transfer of value to BANA was accounted for at fair value as a non pro rata distribution of nonmonetary assets, resulting in the recognition of a pre-tax gain of $36 million, with a related tax expense of $13 million. The pre-tax gain included the revaluation of client contracts allocated to BANA to a fair value of $700 million, as well as an estimated $24 million for certain additional consideration due from the Company to BANA in connection with the dissolution. The pre-tax net gain is recorded within gain on sale of businesses and the tax expense is recorded within the income tax provision in the consolidated statement of income for the year ended December 31, 2020. Noncontrolling interests of the Company have been reduced by $726 million and the Company’s additional paid-in capital was reduced by $36 million to account for the wind down of the joint venture and the transfer of a proportionate share of the joint venture’s fair value to BANA. The transfer of value to the Company was accounted for at carryover basis as the Company maintains control of such assets. The business transferred to the Company will continue to be operated and managed within the Company’s Acceptance segment. The fair value of the client contracts upon dissolution of the joint venture was determined using the MEEM method, a form of the income approach. The determination of the fair values required estimates about discount rates, growth and attrition rates, future expected cash flows and other future events that are judgmental in nature. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, retention rate, applicable tax rate, and contributory asset charges, among other factors), the discount rate, reflecting the risks inherent in the future cash flow stream, an assessment of the asset’s life cycle, and the tax amortization benefit, among other factors. The Company will continue to provide merchant processing and related services to former BAMS clients allocated to BANA, at BAMS pricing, through June 2023. The Company will also provide processing and other support services to new BANA merchant clients pursuant to a five-year non-exclusive agreement which, after June 2023, will also apply to the former BAMS clients allocated to BANA. In addition, both the Company and BANA are entitled to certain transition services, at fair value, from each other through June 2023. On February 18, 2020, the Company sold a 60% controlling interest of its Investment Services business, subsequently renamed as Tegra118, LLC (“Tegra118”), which is reported within Corporate and Other following the Segment Realignment. The Company received pre-tax proceeds of $578 million, net of related expenses, resulting in a pre-tax gain on the sale of $428 million, with the related tax expense of $112 million recorded through the income tax provision, in the consolidated statement of income for the year ended December 31, 2020. The pre-tax gain included $176 million related to the remeasurement of the Company’s 40% retained interest based upon the enterprise value of the business. The revenues, expenses and cash flows of the Investment Services business were consolidated into the Company’s financial results through the date of the sale transaction. In conjunction with the sale transaction, the Company also entered into transition services agreements to provide, at fair value, various administration, business process outsourcing, technical and data center related services for defined periods to Tegra118 (see Note 20). The Company’s remaining ownership interest in Tegra118 is accounted for as an equity method investment (see Note 9). On February 2, 2021, Tegra118 completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined new entity, Wealthtech Holdings, LLC. On March 29, 2018, the Company sold a 55% controlling interest of each of Fiserv Automotive Solutions, LLC and Fiserv LS LLC, which were subsidiaries of the Company that owned its Lending Solutions business (collectively, the “Lending Joint Ventures”). The Lending Joint Ventures, which were reported within the Fintech segment, included all of the Company’s automotive loan origination and servicing products, as well as its LoanServ™ mortgage and consumer loan servicing platform. The Company received gross sale proceeds of $419 million from the transactions. In 2018, the Company recognized a pre-tax gain on the sale of $227 million, with the related tax expense of $77 million recorded through the income tax provision, in the consolidated statement of income. The pre-tax gain included $124 million related to the remeasurement of the Company’s 45% retained interests based upon the estimated enterprise value of the Lending Joint Ventures. In 2019, the Company recognized a pre-tax gain on the sale of $10 million, with the related tax expense of $2 million recorded through the income tax provision, as contingent special distribution provisions within the transaction agreement were resolved and thereby realized. In August 2019, the Sagent Auto, LLC joint venture, formerly known as Fiserv Automotive Solutions, LLC, completed a merger with a third party, resulting in a dilution of the Company’s ownership interest in the combined entity, defi SOLUTIONS Group, LLC (“defi SOLUTIONS”). The Company recognized a pre-tax gain of $14 million within income from investments in unconsolidated affiliates in the consolidated statement of income, with related tax expense of $3 million, in 2019, reflecting the Company’s 31% ownership interest in defi SOLUTIONS. The Company’s remaining ownership interests in the Lending Joint Ventures are accounted for as equity method investments (see Note 9). See Note 20 for information regarding transition service agreements with the Lending Joint Ventures.

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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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