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Turner & Townsend Acquisition | 12 Months Ended
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Dec. 31, 2021
Business Combinations [Abstract] |
Turner & Townsend Acquisition | Turner & Townsend Acquisition On November 1, 2021, we acquired a 60% ownership interest in, and entered into a strategic partnership with Turner & Townsend Holdings Limited (Turner & Townsend). Turner & Townsend is a leading professional services company specializing in program management, project management, cost and commercial management and advisory services across the real estate, infrastructure and natural resources sectors, and is reported in our Global Workplace Solutions segment. The combined partnership is expected to generate strategic growth opportunities in the project management space for both entities. The Turner & Townsend Acquisition was treated as a business combination under ASC 805 and was accounted for using the acquisition method of accounting. We were deemed the accounting acquirer as we obtained control through an all-cash transaction and were the larger entity by revenue and by assets. Operating results for Turner & Townsend are included in the consolidated statements of operations for the year ended December 31, 2021 from the date of the acquisition. The Turner & Townsend Acquisition was funded with cash on hand. The following summarizes the consideration transferred at closing for the Turner & Townsend Acquisition (dollars in thousands):
Cash consideration (1) | $ | 722,595 |
Deferred consideration (2) | 494,349 |
Total consideration | $ | 1,216,944 |
_______________ (1)Represents cash paid at closing (2)Represents the fair value of deferred consideration, to be settled in cash, with the only remaining condition on such payments being the passage of time The deferred consideration amount above represents a total payment of $591.2 million less a discount of $96.9 million which will be accreted through the payment date. A portion of the discount is attributable to the time value associated with the contractual payment dates of 3-4 years and will be recorded as interest expense. The remaining discount is attributable to the time value associated with the deferred payment date (10 th anniversary of closing) if a seller is no longer employed on the contractual payment date and will be recorded as compensation expense. The following represents the summary of the excess purchase price over the fair value of net assets acquired and fair value of non-controlling interest (dollars in thousands):
Purchase price | $ | 1,216,944 |
Less: Estimated fair value of net assets acquired (see table below) | 152,027 |
Plus: Estimated fair value of non-controlling interest (1) | 32,416 |
Excess purchase price over estimated fair value of net assets acquired | $ | 1,097,333 |
_______________ (1)Represents fair value of legacy non-controlling interest of Turner & Townsend The preliminary purchase accounting adjustments related to the Turner & Townsend Acquisition have been recorded in the accompanying consolidated financial statements. The excess purchase price over the fair value of net assets acquired and non-controlling interest has been recorded to goodwill. The goodwill arising from the Turner & Townsend Acquisition consists largely of the synergies and opportunities to deliver a premier project, program and cost management services. The goodwill recorded in connection with the Turner & Townsend Acquisition was not deductible for tax purposes. The acquired assets and assumed liabilities of Turner & Townsend were recorded at their estimated fair values. The purchase price allocation for the business combination is preliminary, primarily for intangibles, and subject to change within the respective measurement period which will not extend beyond one year from the acquisition date. Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined. Any such adjustments may be material. The following table summarizes the preliminary fair values assigned to the identified assets acquired and liabilities assumed at the acquisition date on November 1, 2021.
(Dollars in thousands) |
Assets Acquired: |
Cash and cash equivalents | $ | 44,007 |
Trade and other receivables | 239,269 |
Prepaid expenses | 7,969 |
Other current assets | 19,359 |
Property and equipment, net | 57,138 |
Other intangible assets, net | 1,104,968 |
Operating lease assets | 44,249 |
Other assets, net | 8,427 |
Total assets acquired | 1,525,386 |
Liabilities Assumed: |
Accounts payable and accrued expenses | 59,986 |
Compensation and employee benefits | 34,557 |
Operating lease liabilities | 11,144 |
Contract liabilities | 44,943 |
Other current liabilities | 126,034 |
Non-current operating lease liabilities | 30,939 |
Deferred tax liability | 291,634 |
Total liabilities assumed | 599,237 |
Non-controlling Interest Acquired | 774,122 |
Estimated Fair Value of Net Assets Acquired | $ | 152,027 |
In connection with the Turner & Townsend Acquisition, below is a summary of the preliminary value allocated to the intangible assets acquired (dollars in thousands):
|  |  |  |  |  | December 31, 2021
Asset Class |  | Amortization Period |  | Amount Assigned at Acquisition Date |  | Accumulated Amortization and Foreign Currency Translation |  | Net Carrying Value
Customer relationships |  | 5-11 years |  | $ | 753,935 |  |  | $ | 21,577 |  |  | $ | 732,358 |
Backlog |  | 2-4 years |  | 75,407 |  |  | 5,255 |  |  | 70,152 |
Trademark |  | Indefinite |  | 275,626 |  |  | 3,202 |  |  | 272,424 |
The accompanying consolidated statement of operations for the year ended December 31, 2021 includes revenue, operating income and net loss of $194.0 million, $0.5 million and $0.5 million, respectively, attributable to the Turner & Townsend Acquisition. This does not include direct transaction and integration costs of $44.6 million which were incurred during the year ended December 31, 2021 in connection with the Turner & Townsend Acquisition. The fair value of customer relationships and backlog was determined using the Multi-Period Excess Earnings Method (MPEEM), a form of the Income Approach. The MPEEM is a specific application of the Discounted Cash Flow Method. The principle behind the MPEEM is that the value of an intangible asset is equal to the present value of the incremental cash flows attributable only to the subject intangible asset. This estimation used certain unobservable key inputs such as timing of projected cash flows, growth rates, customer attrition rates, discount rates, and the assessment of useful life. The fair value of the trademark was determined by using the Relief-from-Royalty Method, a form of the Income Approach, and relied on key unobservable inputs such as timing of the projected cash flows, growth rates, and royalty rates. The basic tenet of the Relief-from-Royalty Method is that without ownership of the subject intangible asset, the user of that intangible asset would have to make a stream of payments to the owner of the asset in return for the rights to use that asset. By acquiring the intangible asset, the user avoids these payments. The fair value of the non-controlling interest was estimated by multiplying the implied value of a 100 percent equity interest in Turner & Townsend Holdings Limited by 40 percent. A discount for lack of marketability was not applied as the equity owners from Turner & Townsend Partners LLP maintain a significant equity stake and remain actively involved in the day to day operations of the business. Unaudited pro forma results, assuming the Turner & Townsend Acquisition had occurred as of January 1, 2020 for purposes of the pro forma disclosures for the years ended December 31, 2021 and 2020 are presented below. They include certain adjustments for increased amortization expense related to the intangible assets acquired (approximately $81.3 million and $97.5 million in 2021 and 2020, respectively) as well as increased depreciation expense related to the fixed assets acquired (approximately $5.5 million and $6.6 million in 2021 and 2020, respectively). Direct transaction and integration costs of $44.6 million as well as the tax impact of all pro forma adjustments are also included in the pro forma results. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the Turner & Townsend Acquisition occurred on January 1, 2020 and may not be indicative of future operating results (dollars in thousands, except share data):
| Year Ended December 31,
| 2021 |  | 2020
Revenue | $ | 28,545,833 |  |  | $ | 24,715,787 |
Operating income | 1,705,982 |  |  | 944,102 |
Net income attributable to CBRE Group, Inc. | 1,873,426 |  |  | 705,375 |
Basic income per share: |  |  |
Net income per share attributable to CBRE Group, Inc. | $ | 5.59 |  |  | $ | 2.10 |
Weighted average shares outstanding for basic income per share | 335,232,840 |  |  | 335,196,296 |
Diluted income per share: |  |  |
Net income per share attributable to CBRE Group, Inc. | $ | 5.51 |  |  | $ | 2.08 |
Weighted average shares outstanding for diluted income per share | 339,717,401 |  |  | 338,392,210 |

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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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