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ACQUISITIONS

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Zego

On June 10, 2021, we acquired Zego, a real estate technology company that provides a comprehensive resident experience management software and digital commerce solutions to property managers, primarily in the United States. Zego’s real estate software and payments solutions support property managers and residents throughout the real estate lifecycle. This acquisition aligns with our technology-enabled, software driven strategy and expands our business into a new vertical market. We paid cash consideration of approximately $933 million, which we funded with cash on hand and by drawing on our revolving credit facility.

The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, are as follows:


	Provisional Amounts at Acquisition Date		Measurement-Period Adjustments		Provisional Amounts at December 31, 2021
	(in thousands)
Cash and cash equivalents	$	67,374	$	—	$	67,374
Accounts receivable	1,033		(16)		1,017
Identifiable intangible assets	410,443		62,557		473,000
Property and equipment	3,634		(3,059)		575
Other assets	9,141		(90)		9,051
Accounts payable and accrued liabilities	(65,753)		(5,253)		(71,006)
Deferred income tax liabilities	(10,709)		(3,193)		(13,902)
Other liabilities	(8,268)		258		(8,010)
Total identifiable net assets	406,895		51,204		458,099
Goodwill	525,929		(50,782)		475,147
Total purchase consideration	$	932,824	$	422	$	933,246

This transaction was accounted for as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. As of December 31, 2021, we considered these amounts to be provisional because we were still in the process of gathering and reviewing information to support the valuation of assets acquired and liabilities assumed and to evaluate the differences in the bases of assets and liabilities for financial reporting and tax purposes. We made measurement-period adjustments, as shown in the table above, that decreased the amount of provisional goodwill by $50.8 million. The effects of the measurement-period adjustments on our consolidated statement of income for the year ended December 31, 2021 were not material.

Goodwill of $475.1 million arising from the acquisition, included in the Merchant Solutions segment, is attributable to expected growth opportunities, potential synergies from combining our existing businesses and an assembled workforce. We expect that substantially all of the goodwill will be deductible for income tax purposes.

The following table reflects the provisional estimated fair values of the identified intangible assets of Zego and the respective weighted-average estimated amortization periods:


	Estimated Fair Value		Weighted-Average Estimated Amortization Periods
	(in thousands)		(years)
Customer-related intangible assets	$	208,000	13
Contract-based intangible assets	119,000		20
Acquired technologies	124,000		6
Trademarks and trade names	22,000		15
Total estimated identifiable intangible assets	$	473,000	14

Other business acquisitions

During the year ended December 31, 2021, we completed other business acquisitions that were insignificant, individually and in the aggregate, to the consolidated financial statements for an aggregate purchase price of $963 million. The assets acquired and liabilities assumed were recorded based on the provisional estimated fair values, including intangible assets of $438 million and goodwill of $514 million. See "Note 5—Goodwill and Intangible Assets" for the aggregate allocation of goodwill to the respective segments. The operating results of each acquisition have been included in the consolidated financial statements since the respective acquisition dates.

Total System Services, Inc.

On September 18, 2019, we acquired all of the outstanding common stock of TSYS. Prior to the Merger, TSYS was a leading global payments provider, offering seamless, secure and innovative solutions to issuers, merchants and consumers.

Holders of TSYS common stock received 0.8101 shares of Global Payments common stock for each share of TSYS common stock they owned at the effective time of the Merger (the "Exchange Ratio"). In addition, certain TSYS equity awards held by employees who were not executive officers, pursuant to their terms, vested automatically at closing ("Single-Trigger Awards") and were converted into the right to receive a number of shares of Global Payments common stock determined based on the Exchange Ratio. Also, pursuant to the Merger Agreement, we granted equity awards for approximately 2.2 million shares of Global Payments common stock to certain TSYS equity awards holders ("Replacement Awards"). Each such Replacement Award is subject to the same terms and conditions (including vesting and exercisability or payment terms) as applied to the corresponding TSYS equity award. We apportioned the fair value of the Replacement Awards between purchase consideration and amounts to be recognized in periods following the Merger as share-based compensation expense over the requisite service period of the Replacement Awards.

The purchase consideration transferred to TSYS shareholders was valued at $23.8 billion. Total purchase consideration also included the amount of borrowings outstanding under TSYS' unsecured revolving credit facility together with accrued interest and fees that we were required to repay upon consummation of the Merger.

The fair value of total purchase consideration was determined as follows (in thousands, except per share data):


Shares of TSYS common stock issued and outstanding (including Single-Trigger Awards)	177,643
Exchange Ratio	0.8101
Shares of Global Payments common stock issued to TSYS shareholders	143,909
Price per share of Global Payments common stock	$	163.74
Fair value of common stock issued to TSYS shareholders(1)	23,563,568
Value of Replacement Awards attributable to purchase consideration	207,821
Cash paid to TSYS shareholders in lieu of fractional shares	1,352
Total purchase consideration transferred to TSYS shareholders	23,772,741
Repayment of TSYS' unsecured revolving credit facility (including accrued interest and fees)	702,212
Total purchase consideration	$	24,474,953

(1) Fair value of common stock issued to TSYS shareholders does not equal the product of shares of Global Payments common stock issued to TSYS shareholders and price per share of Global Payments common stock as presented in the table above due to the rounding of the number of shares in thousands.

The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, were as follows (in thousands):


	Provisional Amounts at December 31, 2019		Measurement- Period Adjustments		Final

	(in thousands)

Cash and cash equivalents	$	446,009	$	—	$	446,009
Accounts receivable	442,848		(2,660)		440,188
Identified intangible assets	10,980,000		978		10,980,978
Property and equipment	644,084		(978)		643,106
Other assets	1,474,825		(2,969)		1,471,856
Accounts payable and accrued liabilities	(614,060)		(11,899)		(625,959)
Debt	(3,295,342)		4,787		(3,290,555)
Deferred income tax liabilities	(2,687,849)		52,598		(2,635,251)
Other liabilities	(314,415)		(173)		(314,588)
Total identifiable net assets	7,076,100		39,684		7,115,784
Goodwill	17,398,853		(39,684)		17,359,169
Total purchase consideration	$	24,474,953	$	—	$	24,474,953

This transaction was accounted for as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. During the year ended December 31, 2020, we made measurement-period adjustments, as shown in the table above, that decreased the amount of provisional goodwill by $39.7 million. The decrease in deferred income tax liabilities for the year ended December 31, 2020 primarily related to a refined analysis of the outside bases of partnerships. The effects of the measurement-period adjustments on our consolidated statement of income for the year ended December 31, 2020 were not material.

As of December 31, 2020, goodwill arising from the acquisition of $17.4 billion was included in our reportable segments as follows: $7.1 billion in the Merchant Solutions segment, $7.9 billion in the Issuer Solutions segment and $2.4 billion in the Business and Consumer Solutions segment. Goodwill was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing business. Substantially all of the goodwill from this acquisition is not deductible for income tax purposes.

The following table reflects the estimated fair values of the identified intangible assets of TSYS and the respective weighted-average estimated amortization periods:


	Estimated Fair Values		Weighted-Average Estimated Amortization Periods

	(in thousands)		(years)

Customer-related intangible assets	$	6,420,000	15
Contract-based intangible assets	1,800,000		18
Acquired technologies	1,810,000		7
Trademarks and trade names	950,000		11
Total estimated identified intangible assets	$	10,980,000	13

For the year ended December 31, 2020, the acquired operations of TSYS contributed $4,205.2 million to our consolidated revenues and $538.0 million to our consolidated operating income. From the acquisition date through December 31, 2019, the acquired operations of TSYS contributed $1,215.0 million to our consolidated revenues and $78.7 million to operating income.

Transaction costs directly related to the Merger were $68.9 million for the year ended December 31, 2019.

The following unaudited pro forma information shows the results of our operations for the year ended December 31, 2019 as if the Merger had occurred on January 1, 2018. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of what would have occurred if the Merger had occurred as of that date. The unaudited pro forma information is also not intended to be a projection of future results due to the integration of the acquired operations of TSYS. The unaudited pro forma information reflects the effects of applying our accounting policies and certain pro forma adjustments to the combined historical financial information of Global Payments and TSYS. The pro forma adjustments include:

•incremental amortization expense associated with identified intangible assets;

•a reduction of revenues and operating expenses associated with fair value adjustments made to acquired assets and assumed liabilities, such as contract cost assets and contract liabilities;

•a reduction of interest expense resulting from financing of the Merger, the repayment of TSYS' secured revolving credit facility and fair value adjustments applied to TSYS debt that we assumed; and

•the income tax effects of the pro forma adjustments.


	Year Ended December 31, 2019
	Actual		Pro Forma

	(in thousands)

Total revenues	$	4,911,892	$	7,854,282
Net income attributable to Global Payments	$	430,613	$	711,658

Valuation of Identified Intangible Assets

For the acquisitions discussed above, the estimated fair values of customer-related and contract-based intangible assets were generally determined using the income approach, which was based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rates used represented a risk adjusted market participant weighted-average cost of capital, derived using customary market metrics. Acquired technologies were valued using the replacement cost method, which required us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital.