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Business Combinations | 12 Months Ended
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Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | 4. Business Combinations (a)IAA Acquisition On March 20, 2023, the Company completed its acquisition of IAA for a total purchase price of approximately $6.6 billion. The Company acquired IAA to create a leading omnichannel marketplace for vehicle buyers and sellers. On November 7, 2022, the Company had entered into an Agreement and Plan of Merger and Reorganization, which was subsequently amended on January 22, 2023 (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, IAA stockholders received $12.80 per share in cash and 0.5252 shares of the Company for each share of IAA common stock they owned (the “Exchange Ratio”). As such, the Company paid $1.7 billion in cash consideration and issued 70.3 million shares of its common stock. In addition, the Company repaid $1.2 billion of IAA’s net debt, which included all outstanding borrowings and unpaid fees under IAA’s credit agreement and $500.0 million principal amount of IAA senior notes, at a redemption price equal to 102.75% of the principal amount plus accrued and unpaid interest. IAA’s outstanding equity awards were also cancelled and exchanged into equivalent outstanding equity awards relating to the Company’s common stock, based on the equity award exchange ratio of 0.763139. The purchase price was determined as follows:
Cash consideration | $ | 1,714.2 |
Fair value of common shares issued | 3,712.9 |
Fair value of exchanged IAA equity awards attributable to pre-combination service | 13.1 |
Reimbursement of sell-side acquisition costs | 48.8 |
Repayment of IAA net debt | 1,157.1 |
Total fair value of consideration transferred | $ | 6,646.1 |
The acquisition was accounted for in accordance with ASC 805, Business Combinations. The identifiable assets acquired and liabilities assumed have been recorded at their estimated preliminary acquisition date fair values. The excess purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed. IAA Preliminary Purchase Price Allocation
Purchase price | $ | 6,646.1 |
Assets acquired: |
Cash and cash equivalents | 166.6 |
Trade and other receivables | 496.8 |
Inventory | 57.1 |
Other current assets | 28.0 |
Income taxes receivable | 0.6 |
Property, plant and equipment | 618.5 |
Operating lease right-of-use assets | 1,281.0 |
Other non-current assets | 34.8 |
Intangible assets | 2,712.1 |
Liabilities assumed: |
Auction proceeds payable | 60.7 |
Trade and other liabilities | 258.4 |
Current operating lease liability | 75.2 |
Income taxes payable | 3.7 |
Long-term operating lease liability | 1,186.3 |
Other non-current liabilities | 23.8 |
Deferred tax liabilities | 688.5 |
Fair value of identifiable net assets acquired | 3,098.9 |
Goodwill acquired on acquisition | $ | 3,547.2 |
The following table summarizes the preliminary fair values of the identifiable intangible assets acquired:
Asset |  | Preliminary fair value at acquisition |  | Weighted average amortization period
Customer relationships |  | $ | 2,293.5 |  |  | 15 years
Developed technology |  | 245.2 |  |  | 4 years
Trade names and trademarks |  | 166.6 |  |  | 5 years
Software under development |  | 6.8 |  |  | — |
Total |  | $ | 2,712.1 |  |  | 13.4 years
The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value estimates of assets acquired and liabilities assumed is still preliminary pending the completion of various items, including obtaining further information regarding the identification and completeness of all assets acquired and liabilities assumed, the completion of the independent valuation reports, and final management review. The remaining procedures to complete the final acquisition date valuation including final review of the preliminary valuations of property, plant, and equipment, operating lease right-of-use assets and related lease liabilities, and income taxes. Accordingly, management considers these balances to be preliminary, and there could be adjustments to the consolidated financial statements, including changes to depreciation and amortization expense related to the property, plant, and equipment acquired and their respective useful lives, among other adjustments. The final determination of the fair values of the assets acquired and liabilities assumed will be completed in the first quarter of 2024. Measurement period adjustments Significant measurement period adjustments recorded from the date of acquisition to December 31, 2023 included: i.$28.5 million increase to operating lease right-of-use assets and $20.3 million increase to long-term operating lease liability related to further information received regarding future cash flow assumptions for certain leases; ii.$372.1 million increase to intangible assets and $37.2 million decrease to property, plant, and equipment related to the receipt of further information regarding certain assets and certain revised assumptions in the preliminary valuation reports; iii.$84.3 million increase to deferred tax liabilities related to the adjustments in (i) and (ii) above, and other less significant adjustments; and iv.$241.6 million decrease to goodwill related to the adjustments noted in (i) through (iii) above, and other less significant adjustments. The consolidated income statement for the year ended December 31, 2023 reflects the above measurement period adjustments as if they were recognized on the acquisition date. Goodwill Goodwill recognized includes synergies expected to be achieved from the operations of the combined company, the assembled workforce of IAA, and intangible assets that do not qualify for separate recognition. Expected synergies include both increased revenue opportunities and the cost savings from the planned integration of platform infrastructure, facilities, personnel, and systems. The transaction is considered a non-taxable business combination and the goodwill is not deductible for tax purposes. Contributed Revenue and Net Income The results of IAA’s operations are included in these consolidated financial statements from the date of acquisition. From the date of acquisition to December 31, 2023, the amount of IAA revenue and net income included in the consolidated income statement was approximately $1.8 billion and $208.0 million, respectively. The following table includes unaudited pro forma financial information that presents the combined results of operations as if the IAA acquisition, the acquisition debt financing, and certain other related transactions had occurred on January 1, 2022, the beginning of the comparable annual period. The unaudited pro forma information includes adjustments to amortization for intangible assets acquired, adjustments to interest expense for the additional indebtedness incurred to complete the acquisition, and transaction costs. The unaudited pro forma financial information for the twelve months ended December 31, 2022 also includes one-time acquisition-related expenses of $247.2 million, of which $60.0 million were IAA pre-acquisition transaction costs. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisition.
|  | Year ended December 31,
|  | 2023 |  | 2022
Revenue |  | $ | 4,155.2 |  |  | $ | 3,832.7 |
Net income |  | 374.4 |  |  | 127.1 |
The unaudited pro forma information presented is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred on January 1, 2022, nor of the results of our future operations of the combined business. The pro forma results are based on the preliminary purchase price allocation and will be updated to reflect the final amounts as the allocation is finalized during the measurement period. (b)VeriTread Acquisition On January 3, 2023, the Company acquired 8,889,766 units of VeriTread, for $25.1 million cash consideration from its existing unitholders and acquired another 1,056,338 units through an investment of $3.0 million cash. As a result, the Company increased its investment in VeriTread to 75% and obtained control of VeriTread pursuant to an amended operating agreement on January 18, 2023. Immediately prior to the acquisition, the Company owned 11% of VeriTread, with an acquisition date fair value of $4.3 million based on the per unit purchase price, and therefore, upon remeasurement of its previously held interest, the Company recorded a gain of $1.4 million in other income, net at acquisition. VeriTread is a transportation technology company that provides an online marketplace solution for open deck transport, connecting shippers and service providers. Concurrently, the Company entered into a put/call agreement with one of the minority unitholders of VeriTread for its remaining units, another 21% ownership interest. Pursuant to this agreement, the minority unitholder has rights, in certain circumstances, to put or sell its remaining units of VeriTread to the Company, subject to VeriTread achieving certain performance targets at a predetermined value or fair value, depending on the timing and targets achieved. The Company also has the right to call or purchase the remaining units of the minority unitholder upon achievement of certain integration milestones at fair value. The redeemable non-controlling interest is classified in temporary equity on the consolidated balance sheet, as the minority unitholder of VeriTread can put the remaining units to the Company for cash upon the achievement of certain performance targets, which is not within the control of the Company and is considered probable. An additional non-controlling interest of 4% held in VeriTread is classified within equity as that interest does not contain put/call options. At the end of each reporting period, if redemption of the redeemable non-controlling interest continues to be probable, then the carrying value of the redeemable non-controlling interest is adjusted to its estimated redemption value. The valuation of the redemption value at acquisition, and at each reporting period, requires management to assess whether VeriTread and the Company will be able to successfully achieve certain integration milestones and performance targets over a three-year period. At December 31, 2023 the Company determined that redemption of the redeemable non-controlling interest remains probable and that there has been no material change to the estimated redemption value. The acquisition was accounted for in accordance with ASC 805, Business Combinations. The following table summarizes the fair value of consideration transferred at the date of acquisition, as well as the final price allocation of the fair value of assets acquired and liabilities assumed. VeriTread Purchase Price Allocation
Total cash consideration paid | $ | 28.1 |
Fair value of previously held interest | 4.3 |
Purchase price | $ | 32.4 |
Assets acquired: |
Cash and cash equivalents | 3.4 |
Trade and other receivables, and other current assets | 0.9 |
Intangible assets | 14.7 |
Liabilities assumed: |
Trade and other liabilities | 1.1 |
Fair value of identifiable net assets acquired | 17.9 |
Redeemable non-controlling interest | (8.9) |
Non-controlling interest | (1.8) |
Goodwill acquired on acquisition | $ | 25.2 |
The following table summarizes the fair values of the identifiable intangible assets acquired:
Asset |  | Fair value at acquisition |  | Weighted average amortization period
Customer relationships |  | $ | 7.2 |  |  | 5 years
Software and technology assets |  | 7.1 |  |  | 7 years
Trade names and trademarks |  | 0.4 |  |  | 2 years
Total |  | $ | 14.7 |  |  | 5.9 years
The results of VeriTread’s operations are included in these consolidated financial statements from the date of acquisition. Pro forma results have not been presented as such financial information would not be significantly different from historical results. Goodwill Goodwill relates to benefits expected from the acquisition of VeriTread’s business, its assembled workforce and associated technical expertise, as well as anticipated synergies from applying VeriTread’s transportation platform, network of transport carriers, equipment database and services to the Company’s customer base. This acquisition is expected to accelerate the Company’s marketplace strategy, which brings services, insights, and transaction solutions together to improve the overall customer experience. The transaction is considered a non-taxable business combination and the goodwill is not deductible for tax purposes.

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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://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
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