XML 22 R12.htm IDEA: XBRL DOCUMENT
v3.22.4

Business Combinations | 9 Months Ended
--- | ---
Dec. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations Merger with Avast On August 10, 2021, we announced a transaction under which we intended to acquire the entire issued and to be issued share capital of Avast plc, a public company incorporated in England and Wales (Avast and such transaction, the Merger). The Merger was implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006 (the Scheme). Under the terms of the Merger, Avast shareholders were entitled to elect to receive, for each ordinary share of Avast held, in respect of their entire holding of Avast shares, either: (i) $7.61 in cash and 0.0302 of a new share of our common stock (such option, the Majority Cash Option); or (ii) $2.37 in cash and 0.1937 of a new share of our common stock (such option, the Majority Stock Option). Each Avast Director who held Avast shares elected for the Majority Stock Option in respect to their entire beneficial holdings of Avast shares. The Merger was approved by our Board of Directors and by our shareholders, the Board of Directors and shareholders of Avast, and regulators including the Federal Trade Commission under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) and in Europe, the German Federal Cartel Office, the Spanish National Markets and Competition Commission and the U.K. Competition and Markets Authority. Closing of Merger with Avast On September 12, 2022 (the Closing Date), we completed the Merger with Avast, and as a result, we have changed our corporate name to Gen Digital Inc. and have become dual headquartered in Tempe, Arizona and Prague, Czech Republic. Prior to the Merger, Avast was a global leader in consumer cybersecurity, offering a comprehensive range of digital security and privacy products and services that protected and enhanced users’ online experiences. With this Merger, we are positioned to provide a broad and complementary consumer product portfolio with greater geographic diversification and access to a larger user base. Upon completion of the Merger, we acquired all of the outstanding common stock of Avast. Based on the election of the Avast shareholders, we paid cash consideration of approximately $6,910 million and issued 94,201,223 shares o f our common stock to Avast shareholders. As a result, immediately following the closing of the Merger, Avast shareholders owned approximately 14% of our outstanding common stock. The fair value of our common stock provided on September 12, 2022 in exchange for all outstanding ordinary shares of Avast was approximately $2,141 million. Consideration transferred The total consideration for the Merger with Avast was approximately $8,688 million, net of cash acquired, and consisted of the following:
(In millions) | September 12, 2022
Cash and equity consideration for outstanding Avast common shares (1) | $ | 8,109 |
Repayment of outstanding Avast debt (2) | 942 |
Total consideration | 9,051 |
Cash acquired | 363 |
Net consideration transferred | $ | 8,688 |
(1) Represents the total value of cash paid and our common stock issued to Avast shareholders pursuant to the Majority Cash/Stock Option in the Scheme. (2) Represents the cash consideration paid concurrent with the close of the Merger to retire certain Avast debt, including repayment of the associated principal, accrued interest, premiums and other costs. Fair value of assets acquired and liabilities assumed We accounted for the Merger as a business combination. The identifiable assets acquired and liabilities assumed of Avast were recorded at their estimated fair values as of the acquisition date and consolidated with those of our company. The allocation of purchase price requires management to make significant estimates and assumptions in determining the fair values of the assets acquired and liabilities assumed, especially with respect to intangible assets. Third-party valuation specialists were also utilized for certain estimates. Our preliminary allocation of the aggregate purchase price, based on the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date, is as follows:
(In millions) | September 12, 2022
Assets: |
Accounts receivable | $ | 63 |
Other current assets | 18 |
Property and equipment | 29 |
Operating lease assets | 18 |
Intangible assets | 2,383 |
Goodwill | 7,265 |
Other long-term assets | 10 |
Total assets acquired | 9,786 |
Liabilities: |
Current liabilities | 181 |
Contract liabilities | 508 |
Operating lease liabilities | 18 |
Long-term deferred tax liabilities | 345 |
Other long-term obligations | 46 |
Total liabilities assumed | 1,098 |
Total purchase price | $ | 8,688 |
The allocation of the purchase price is based upon a preliminary valuation, and as additional information becomes available, our estimates and assumptions may be subject to refinement within the measurement period, which may be up to one year from the acquisition date. Adjustments to the purchase price may require adjustments to goodwill prospectively. The primary areas of preliminary purchase price allocation that are not yet finalized include intangible assets and certain tax and litigation matters. The preliminary goodwill of $7,265 million represents the excess of the consideration transferred over the fair values of the assets acquired and liabilities assumed. It is attributable to the expected synergies of the Merger, including future cost savings from planned integration of infrastructure, facilities, personnel and systems, and other benefits that are anticipated to be generated by combining both companies. Goodwill is allocated to our single reportable segment. Substantially all of the goodwill recognized is expected to be deductible for U.S. tax purposes. See Note 6 for further information on goodwill. Preliminary identified intangible assets and their respective useful lives, as of September 12, 2022, are as follows:
(In millions, except for useful lives) | Fair Value |  | Weighted-Average Estimated Useful Life (Years)
Customer relationships (1) | $ | 1,055 |  |  | 7 years
Developed technology (2) | 1,244 |  |  | 6 years
Finite-lived trade names (2) | 84 |  |  | 10 years
Total identified intangible assets | $ | 2,383 |  |  |
(1) Customer relationships were valued using the multi-period excess earnings method, which is a form of the income approach that primarily considers customer retention rate. (2) Developed technology and finite-lived trade names were valued using the relief-from-royalty method, which is a form of the income approach that primarily considers technology migration and probability of use, respectively. Financing In connection with the Merger, on September 12, 2022, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $1,500 million revolving credit facility (Revolving Facility), a $3,910 million term loan A facility (Term A Facility), (iii) a $3,690 million term loan B facility (Term B Facility) and (iv) a $750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the Merger’s close. The proceeds were or will be used (i) to finance the cash consideration payable for the Merger, (ii) to repay in full and terminate all commitments under Avast’s credit facility, (iii) to pay expenses relating to the Merger, (iv) to add cash to the balance sheet and (v) for general corporate purposes and on-going business activities. See Note 10 for further information about these debt instruments and the related debt covenants. In connection with the financing provided by the Term B Facility, we incurred customary ticking fees with respect to the undrawn commitments that began accruing on the 61st day post-syndication. The ticking fees were payable at the per annum rate of (i) 50% of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans for 61-90 days from January 28, 2022, the syndication date, and (ii) 100% of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans on and after 91 days from the syndication date. Ticking fees were payable on the Closing Date of the Merger. During the nine months ended December 30, 2022, we paid $31 million in ticking fees. Impact on operating results The operating results of Avast have been included in our Condensed Consolidated Statements of Operations beginning September 12, 2022. Our results of operations for the three and nine months ended December 30, 2022 include $234 million and $282 million, respectively, of net revenues booked through the Avast enterprise resource planning system. This total post-acquisition revenue extracted from the legacy Avast system is not comparable to pre-acquisition results due to our product integration strategy, cross-selling activities and the reallocation of performance marketing spend deployed to maximize total GEN revenue and not revenue by brand. It is also impracticable to provide income before income taxes attributable to Avast subsequent to the Merger due to the integration of our operations. The Company does not consider it to be a separate operating unit or a separate reporting segment, pursuing an integrated brand, selling and marketing strategy, and is in the advanced stages of completing the full integration of Avast with our ongoing operations. We recognized transaction and integration costs of $5 million and $7 million for the three months ended December 30, 2022 and December 31, 2021, respectively, and $71 million and $28 million for the nine months ended December 30, 2022 and December 31, 2021, respectively. These costs were primarily associated with legal and professional services and other regulatory closing fees, which were expensed as incurred and included in general and administrative expenses in our Condensed Consolidated Statements of Operations. On the Closing Date of the Merger, we incurred $145 million of debt issuance costs associated with the senior credit facilities, of which $132 million was capitalized and recorded as a reduction of outstanding debt balances and $10 million was capitalized and included in Other long-term assets in our Condensed Consolidated Balance Sheets. The remaining $3 million was capitalized but immediately extinguished in conjunction with the termination of the Bridge Loan. Unaudited pro forma information The following unaudited pro forma financial information represents the combined historical results for the three and nine months ended December 30, 2022 and December 31, 2021, as if the Merger had been completed on April 3, 2021, the first day of fiscal 2022. The results presented below include adjustments to conform Avast financial information, prepared in accordance with International Financial Reporting Standards (IFRS), to U.S. GAAP as well as the impacts of material, nonrecurring pro forma adjustments, including amortization of acquired intangible assets, interest on debt issued to finance the Merger, and acquisition-related transaction costs, and the income tax effect of the other pro forma adjustments. The unaudited pro forma results do not include any anticipated synergies or other expected benefits of the Merger. The following table summarizes the unaudited pro forma financial information:
| Three Months Ended |  | Nine Months Ended
(In millions) | December 30, 2022 |  | December 31, 2021 |  | December 30, 2022 |  | December 31, 2021
Net revenues | $ | 936 |  |  | $ | 939 |  |  | $ | 2,857 |  |  | $ | 2,784 |
Net income (loss) | $ | 204 |  |  | $ | 113 |  |  | $ | 323 |  |  | $ | 341 |
The unaudited pro forma financial information is provided for informational purposes only and are not indicative of future operations or results that would have been achieved had the Merger been completed as of the beginning of fiscal 2022. Fiscal 2022 acquisition On September 15, 2021, we completed an acquisition of an online reputation management and digital privacy solutions company for total aggregate consideration of $39 million, net of $1 million cash acquired. The purchase price was primarily allocated to intangible assets and goodwill. Our estimates and assumptions were subject to refinement within the measurement period, which is up to one year from the acquisition date. Adjustments to the purchase price during the measurement period required adjustments to be made to goodwill. The measurement period ended on September 14, 2022.

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 business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_MergersAcquisitionsAndDispositionsDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration