XML 23 R11.htm IDEA: XBRL DOCUMENT
v3.24.3

J&J Worldwide Services Acquisition | 9 Months Ended
--- | ---
Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
J&J Worldwide Services Acquisition | J&J Worldwide Services Acquisition On February 27, 2024, we acquired a 100% ownership interest in J&J Worldwide Services (J&J), a leading provider of engineering services, base support operations and facilities maintenance for the U.S. federal government. J&J primarily serves the U.S. Department of Defense through long-term, fixed-price contracts and is reported as part of our Global Workplace Solutions (GWS) segment. The acquisition is consistent with key elements of our M&A strategy that focus on enhancing our technical services capabilities, increasing revenue resilience and secular growth, and expanding our government client base within our GWS segment. The J&J acquisition was treated as a business combination under FASB Accounting Standards Codification (ASC) Topic 805, “Business Combinations,” and was accounted for using the acquisition method of accounting. We financed the acquisition with a new issuance in February 2024 of $500 million in aggregate principal amount of 5.500% senior notes due April 1, 2029; (ii) borrowings under our existing revolving credit facility under our 2023 Credit Agreement; and (iii) cash on hand. See Note 8 for more information on the above-mentioned debt instruments. The following summarizes the consideration transferred at closing for the J&J acquisition (dollars in millions):
Cash consideration | $ | 808 |
Deferred and contingent consideration | 11 |
Total consideration | $ | 819 |
The purchase price included $7 million of contingent consideration, representing the acquisition date fair value recognized for up to $250 million gross of potential future earnout payments based on the achievement of certain performance thresholds during calendar years 2025 and 2026. The following represents the summary of the excess purchase price over the fair value of net assets acquired (dollars in millions):
Purchase price | $ | 819 |
Less: Estimated fair value of net assets acquired (see table below) | 347 |
Excess purchase price over estimated fair value of net assets acquired | $ | 472 |
The preliminary purchase accounting adjustments related to the J&J 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 J&J acquisition consists largely of the synergies and opportunities to deliver premier engineering services, base support operations and facilities maintenance services. Of the goodwill generated, approximately $115 million is deductible for tax purposes. The acquired assets and assumed liabilities of J&J 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 February 27, 2024 (dollars in millions):
Assets Acquired: |  |
Cash and cash equivalents |  | $ | 26 |
Receivables, net |  | 91 |
Contract assets |  | 19 |
Prepaid expenses |  | 2 |
Other current assets |  | 2 |
Property and equipment, net |  | 11 |
Other intangible assets, net |  | 297 |
Operating lease assets |  | 6 |
Investments in unconsolidated subsidiaries |  | 20 |
Other assets, net |  | 9 |
Total assets acquired |  | 483 |
Liabilities Assumed: |  |
Accounts payable and accrued expenses |  | 54 |
Compensation and employee benefits payable |  | 8 |
Contract liabilities |  | 1 |
Income taxes payable |  | 1 |
Other current liabilities |  | 3 |
Non-current operating lease liabilities |  | 3 |
Deferred tax liabilities, net |  | 57 |
Other liabilities |  | 3 |
Total liabilities assumed |  | 130 |
Non-controlling Interest Acquired |  | 6 |
Estimated Fair Value of Net Assets Acquired |  | $ | 347 |
In connection with the J&J acquisition, below is a summary of the preliminary value allocated to the intangible assets acquired (dollars in millions):
|  |  |  |  |  | As of September 30, 2024
Asset Class |  | Amortization Period |  | Amount Assigned at Acquisition Date |  | Accumulated Amortization |  | Net Carrying Value
Customer relationships |  | 9-12 years |  | $ | 174 |  |  | $ | 9 |  |  | $ | 165 |
Backlog |  | 4-6 years |  | 111 |  |  | 15 |  |  | 96 |
Trademark |  | 3 years |  | 10 |  |  | 2 |  |  | 8 |
Technology |  | 5 years |  | 2 |  |  | — |  |  | 2 |
The accompanying consolidated statements of operations for the three months ended September 30, 2024 includes revenue, operating loss and net loss of $115 million, $3 million and $5 million, respectively, and for the nine months ended September 30, 2024 includes revenue, operating loss and net loss of $262 million, $8 million and $8 million, respectively, attributable to the J&J acquisition. This does not include the total direct transaction and integration costs of $17 million, $1 million, and $4 million incurred during the first, second and third quarters of 2024, respectively, in connection with the J&J acquisition, which are included in the unaudited pro forma results. 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, expected contract renewal probabilities, discount rates, and the assessment of useful life. The fair value of the trademark and the existing technology 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. Unaudited pro forma results, assuming the J&J acquisition had occurred as of January 1, 2023 for purposes of the pro forma disclosures for the three and nine months ended September 30, 2024 and 2023 are presented below. They include certain adjustments for increased amortization expense related to the intangible assets acquired (approximately $5 million for the three months ended September 30, 2023, and approximately $3 million and $14 million for the nine months ended September 30, 2024 and 2023, respectively) as well as increased interest expense related to the long-term financing ($7 million for the three months ended September 30, 2023, and approximately $4 million and $21 million for the nine months ended September 30, 2024 and 2023, respectively). Direct transaction and integration costs of $4 million incurred during the third quarter of 2024, $1 million incurred during the second quarter of 2024, $17 million incurred during the first quarter of 2024, and $2 million incurred during the fourth quarter of 2023 as well as the tax impact of all pro forma adjustments are also included in the unaudited 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 J&J acquisition occurred on January 1, 2023 and may not be indicative of future operating results (dollars in millions, except share and per share data):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenue | $ | 9,036 |  |  | $ | 7,986 |  |  | $ | 25,434 |  |  | $ | 23,341 |
Operating income | 373 |  |  | 272 |  |  | 833 |  |  | 581 |
Net income attributable to CBRE Group, Inc. | 229 |  |  | 190 |  |  | 490 |  |  | 469 |
Basic income per share: |  |  |  |  |  |  |
Net income per share attributable to CBRE Group, Inc. | $ | 0.75 |  |  | $ | 0.62 |  |  | $ | 1.60 |  |  | $ | 1.51 |
Weighted average shares outstanding for basic income per share | 306,253,811 |  |  | 307,854,518 |  |  | 306,269,264 |  |  | 309,716,456 |
Diluted income per share: |  |  |  |  |  |  |
Net income per share attributable to CBRE Group, Inc. | $ | 0.74 |  |  | $ | 0.61 |  |  | $ | 1.59 |  |  | $ | 1.49 |
Weighted average shares outstanding for diluted income per share | 308,305,013 |  |  | 312,221,133 |  |  | 308,281,111 |  |  | 313,944,855 |
Other acquisitions During the nine months ended September 30, 2024, the company completed six in-fill business acquisitions, including two in the Advisory Services segment and four in the GWS segment, with an aggregate purchase price of approximately $295 million in cash and non-cash consideration. Assets acquired and liabilities assumed are primarily working capital in nature. The results of operations of all acquisitions completed during the nine months ended September 30, 2024 have been included in the company’s consolidated financial results since their respective acquisition dates. These acquisitions were not significant in relation to the company’s consolidated financial results and, therefore, pro-forma financial information has not been presented. The following table identifies the company’s allocation of purchase price to goodwill and other intangible assets by category (dollars in millions):
|  | Amount Assigned at Acquisition Date |  | Weighted-Average Life (in years)
Goodwill |  | $ | 114 |  |  | N/A
Customer relationships |  | 146 |  |  | 12 years
Other intangible assets |  | 8 |  |  | 4 years
Total |  | $ | 268 |  |  |

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration