ACQUISITIONS (Notes)

12 Months Ended

Oct. 31, 2020

ACQUISITIONS

Acquisition of BioTek and ACEA

On August 23, 2019 we completed the acquisition of privately-owned Lionheart Technologies LLC ("BioTek"), a leader in the design, manufacture and distribution of innovative life science instrumentation for $1.17 billion, under the merger agreement. As a result of the acquisition, BioTek became a wholly-owned subsidiary of Agilent. Accordingly, the results of

BioTek are included in Agilent's consolidated financial statements from the acquisition date. The acquisition of BioTek and its portfolio is another step to expand our position in the cell analysis market.

The consideration paid was $1.17 billion. Agilent funded the acquisition using existing cash of $470 million and debt of $700 million.

The BioTek acquisition was accounted for in accordance with the authoritative accounting guidance. The acquired assets and assumed liabilities were recorded by Agilent at their estimated fair values. Agilent determined the estimated fair values with the assistance of appraisals or valuations performed by third party specialists, discounted cash flow analyses, and estimates made by management. We expect to realize revenue synergies, leverage and expand the existing sales channels and product development resources, and utilize the assembled workforce. These factors, among others, contributed to a purchase price in excess of the estimated fair value of BioTek’s net identifiable assets acquired (see summary of net assets below), and, as a result, we have recorded goodwill in connection with this transaction.

Goodwill acquired was allocated to our operating segments and reporting units as a part of the purchase price allocation. All goodwill was allocated to the life sciences and applied markets reporting unit.

Agilent’s acquisition of BioTek is treated as an asset purchase for tax purposes. The tax basis of the acquired assets equals the fair market value on acquisition date.

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of August 23, 2019 (in millions):


Cash and cash equivalents			$	10
Accounts receivable			28
Inventories			21
Other current assets			2
Property, plant and equipment			8
Intangible assets			641
Goodwill			483
Total assets acquired	$	1,193
Accounts payable			(4)
Deferred revenue			(5)
Employee compensation and benefits			(7)
Other accrued liabilities			(2)
Long-term debt			(4)
Net assets acquired			$	1,171

The fair value of cash and cash equivalents, accounts receivable, other current assets, accounts payable and other accrued liabilities were generally determined using historical carrying values given the short-term nature of these assets and liabilities.

The fair values for acquired intangible assets and deferred revenue were determined with the input from third party valuation specialists.

The fair values of certain other assets, inventory, property, plant and equipment, investments, long-term debt, and certain other long-term liabilities were determined internally using historical carrying values and estimates made by management.

Valuations of intangible assets acquired

The components of intangible assets acquired in connection with the BioTek acquisition were as follows (in millions):


	Fair Value			Estimated Useful Life
Developed product technology		$	387	5-13 years
Customer relationships		202		3-8 years
Backlog		5		2 months
Tradenames and trademarks		43		10 years
Total intangible assets subject to amortization		$	637
In-process research and development		4
Total intangible assets		$	641

As noted above, the intangible assets, including in-process research and development, were valued with input from valuation specialists. Agilent used variations of the income approach in determining the fair value of intangible assets acquired in the BioTek acquisition. Specifically, the developed product technology and in-process research and development were valued using the multi-period excess earnings method under the income approach by discounting forecasted cash flows directly related to the products expecting to result from the projects, net of returns on contributory assets. The company utilized the incremental cash flow method for determining the fair value of the customer relationships acquired, and the relief from royalty method to determine the fair value of the tradename. Order backlog was valued on a direct cash flow basis.

The primary in-process research and development project acquired relates to a next version of a product which was subsequently released to customers in 2020. After release, the asset was moved to developed technology.

Acquisition and integration costs directly related to the BioTek acquisition totaled $12 million and $4 million for the year ended October 31, 2020 and 2019, respectively, and were recorded in operating expenses and cost of sales. Such costs are expensed in accordance with the authoritative accounting guidance.

On November 14, 2018, we acquired 100 percent of the stock of ACEA Biosciences (“ACEA”), a developer of cell analysis tools, for $250 million. The financial results of ACEA have been included in our financial results from the acquisition date.

The following represents the unaudited proforma operating results as if BioTek and ACEA had been included in the company's consolidated statements of operations as of the beginning of fiscal 2018 (in millions, except per share amounts):


	2019		2018
Net revenue	$	5,308	$	5,112
Net income	$	1,012	$	210
Net income per share — basic	$	3.22	$	0.65
Net income per share — diluted	$	3.18	$	0.65

The unaudited proforma financial information assumes that the companies were combined as of November 1, 2017 and include business combination accounting effects from the acquisition including amortization charges from acquired intangible assets, the impact on cost of sales due to the respective estimated fair value adjustments to inventory, changes to interest income for cash used in the acquisition, interest expense associated with debt paid in connection with the acquisition and acquisition related transaction costs and tax related effects. The proforma information as presented above is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2018.

The unaudited proforma financial information for the year ended October 31, 2019 combines the historical results of Agilent for the year ended October 31, 2019 (which includes BioTek and ACEA after the acquisition date) and for BioTek for the ten months ended August 23, 2019.

The unaudited proforma financial information for the year ended October 31, 2018 combines the historical results of

Agilent and ACEA for the year ended October 31, 2018 and BioTek for the year ended December 31, 2018 (due to differences in reporting periods).