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Business Combinations | 9 Months Ended
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Jun. 25, 2022
Business Combinations [Abstract] |
Business Combinations | Business Combinations Fiscal 2022 Acquisitions Bolder Surgical On November 29, 2021, the Company completed the acquisition of Bolder Surgical Holdings, Inc. ("Bolder"), for a purchase price of $160.1 million. Bolder, located in Louisville, Colorado, is a developer and manufacturer of energy vessel sealing surgical devices used in both laparoscopic and open procedures. Bolder's results of operations are reported in the Company's GYN Surgical reportable segment from the date of acquisition. The total purchase price was allocated to Bolder's preliminary tangible and identifiable intangible assets and liabilities based on the estimated fair values as of November 29, 2021, as set forth below.
Cash |  | $ | 1.9 |
Accounts receivable | 1.3 |
Inventory | 3.3 |
Other assets | 3.0 |
Accounts payable and accrued expenses | (3.2) |
Identifiable intangible assets: |
| Developed technology | 73.6 |
| Customer relationship | 21.7 |
| Trade names | 1.4 |
Deferred income taxes, net | (13.8) |
Goodwill | 70.9 |
Purchase Price | $ | 160.1 |
In performing the preliminary purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Bolder's business. The allocation of the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities, including, but not limited to, the estimate of fair value of identifiable intangible assets and deferred income taxes. As part of the preliminary purchase price allocation, the Company determined the identifiable intangible assets are developed technology, customer relationships and trade names. The preliminary fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a 16.0% rate. The cash flows were based on estimates used to price the transaction, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The developed technology assets are comprised of know-how, patents and technologies embedded in Bolder's products and relate to currently marketed products. The developed technology assets comprise the primary product families under the JustRight and CoolSeal technology platforms. The preliminary estimate of the weighted average life for the developed technology, customer relationship, and trade name assets is 10 years. The preliminary calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the preliminary amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the Bolder acquisition. These benefits include expanding the Company's surgical portfolio and utilizing GYN Surgical's sales and regulatory expertise to drive adoption and revenue growth. None of the goodwill is expected to be deductible for income tax purposes. Fiscal 2021 Acquisitions Mobidiag On June 17, 2021, the Company completed the acquisition of Mobidiag Oy ("Mobidiag"), for a purchase price of $729.6 million. Mobidiag, located in Finland, manufactures molecular diagnostic solutions for gastrointestinal infections, antimicrobial resistance management and other infections. Mobidiag's results of operations are reported in the Company's Diagnostics reportable segment from the date of acquisition. The total purchase price was allocated to Mobidiag's tangible and identifiable intangible assets and liabilities based on the estimated fair values as of June 17, 2021, as set forth below.
Cash |  | $ | 7.0 |
Accounts receivable | 4.2 |
Inventory | 12.1 |
Other assets | 29.6 |
Accounts payable and accrued expenses | (16.5) |
Other liabilities | (12.2) |
Identifiable intangible assets: |
| Developed technology | 285.0 |
| In-process research and development | 74.0 |
| Customer relationships | 20.9 |
| Trade names | 20.0 |
Long-term debt | (66.1) |
Deferred income taxes, net | (56.1) |
Goodwill | 427.7 |
Purchase Price | $ | 729.6 |
In performing the purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Mobidiag's business. As part of the purchase price allocation, the Company determined the identifiable intangible assets are development technology, in-process research and development ("IPR&D"), customer relationships and trade names. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 15.0% to 19.0%. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The developed technology assets are comprised of know-how, patents and technologies embedded in Mobidiag's products and relate to currently marketed products. The developed technology assets comprise the primary product families under the Novodiag and Amplidiag technology platforms. The IPR&D project relates to an in-process project that had not reached technological feasibility as of the acquisition date and has no future alternative use. The primary basis for determining technological feasibility of the project is obtaining regulatory approval to market the underlying product. The asset recorded relates to one project, and the Company expects to complete the project in approximately three years. Given the uncertainties inherent with product development and introduction, there can be no assurance that the Company's product development efforts will be successful, completed on a timely basis or within budget, if at all. The IPR&D asset was valued using the income approach. The estimate of the weighted average life for the developed technology assets was 11.7 years, for customer relationships was 9.1 years, and for tradenames was 11.6 years. The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the Mobidiag acquisition. These benefits include expanding the Company's molecular diagnostics portfolio into the near-patient testing market and utilizing Diagnostic's commercial sales, manufacturing and regulatory expertise to drive adoption and revenue growth. None of the goodwill is expected to be deductible for income tax purposes. Biotheranostics On February 22, 2021, the Company completed the acquisition of Biotheranostics, Inc. ("Biotheranostics"), for a purchase price of $231.3 million. Biotheranostics, located in San Diego, California, manufactures molecular diagnostic tests that support physicians in the treatment of breast cancer and all metastatic cancers and performs the lab testing procedures at its Clinical Laboratory Improvement Amendments ("CLIA") certified laboratory. Biotheranostics' results of operations are reported in the Company's Diagnostics reportable segment from the date of acquisition and its revenues are reported within Service and other revenue in the Company's Consolidated Statements of Income and within service revenue in the disclosure of disaggregated revenue in Note 2. The total purchase price was allocated to Biotheranostics' tangible and identifiable intangible assets and liabilities based on the estimated fair values as of February 22, 2021, as set forth below.
Cash |  | $ | 9.6 |
Accounts receivable | 6.6 |
Other assets | 6.5 |
Accounts payable and accrued expenses | (8.2) |
Other liabilities | (8.1) |
Identifiable intangible assets: |
| Developed technology | 160.3 |
| Trade names | 2.1 |
Deferred income taxes, net | (18.4) |
Goodwill | 80.9 |
Purchase Price | $ | 231.3 |
In performing the purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Biotheranostics' business. As part of the purchase price allocation, the Company determined the identifiable intangible assets are developed technology and trade names. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a 18.0% rate. The cash flows were based on estimates used to price the transaction, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The weighted average life of developed technology and trade names was 10 years. The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated synergistic benefits of adding Biotheranostics' CLIA lab to the Company's portfolio of offerings and utilizing Diagnostic's marketing and regulatory expertise to drive adoption and revenue growth. None of the goodwill is expected to be deductible for income tax purposes. Diagenode On March 1, 2021, the Company completed the acquisition of Diagenode SA ("Diagenode") for a purchase price of $155.1 million. Diagenode, located in Belgium, is a developer and manufacturer of molecular diagnostic assays based on PCR (polymerase chain reaction) technology to detect infectious diseases of bacterial, viral and parasite origin. Diagenode's results of operations are reported in the Company's Diagnostics reportable segment from the date of acquisition. The total purchase price was allocated to Diagenode's tangible and identifiable intangible assets and liabilities based on the estimated fair values as of March 1, 2021, as set forth below.
Cash |  | $ | 5.6 |
Accounts receivable | 9.3 |
Inventory | 9.0 |
Other assets | 13.9 |
Accounts payable and accrued expenses | (16.7) |
Other liabilities | (9.2) |
Identifiable intangible assets: |
| Developed technology | 69.8 |
| Customer relationships | 9.2 |
Deferred income taxes, net | (19.3) |
Goodwill | 83.5 |
Purchase Price | $ | 155.1 |
In performing the purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Diagenode's business. As part of the purchase price allocation, the Company determined the identifiable intangible assets are developed technology and customer relationships. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a 14.5% rate for developed technology and a 13.5% rate for customer relationships. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The weighted average life of developed technology and customer relationships was 10 years. The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the amount of goodwill were based on anticipated synergistic benefits of Diagenode's products broadening the Diagnostics portfolio of molecular diagnostics products primarily in the transplant and acute care gastrointestinal and respiratory space as customers seek a broader menu of tests, utilizing Diagnostic's sales force to drive menu expansion and revenue growth and gaining additional PCR assay development expertise. None of the goodwill is expected to be deductible for income tax purposes. Somatex Medical Technologies On December 30, 2020, the Company completed the acquisition of Somatex Medical Technologies GmbH ("Somatex") for a purchase price of $62.9 million. Somatex, located in Germany, is a manufacturer of biopsy site markers, including the Tumark product line of tissue markers, which were distributed by the Company in the U.S. prior to the acquisition. The allocation of the purchase price was based on the Company's valuation, and it allocated $38.0 million to the value of developed technology with a weighted average life of 8 years, $1.2 million to customer relationships, $0.9 million to trade names and $32.4 million to goodwill. The remaining $9.6 million of the purchase price was allocated to the net acquired tangible assets and liabilities. Somatex's results of operations are reported in the Company's Breast Health reportable segment from the date of acquisition. None of the goodwill is expected to be deductible for income tax purposes. NXC Imaging On September 28, 2020, the Company completed the acquisition of assets from NXC Imaging, for a purchase price of $5.6 million. NXC Imaging was a long-standing distributor of the Company's Breast and Skeletal products in the U.S. The majority of the purchase price was allocated to a customer relationships intangible asset with a useful life of 5 years. Contingent Consideration The Company has a contingent consideration liability related to its acquisition of Acessa Health, Inc. ("Acessa"), which occurred in August 2020. Acessa was the developer of the ProVu laparoscopic radiofrequency ablation system. The Company estimated the fair value of this liability to be $81.8 million at the date of acquisition. The contingent payments are based on a multiple of annual incremental revenue growth over a three-year period ending annually in December of each of 2021, 2022, and 2023. There is no maximum earnout. Pursuant to ASC 805, Business Combinations (ASC 805), the Company recorded its estimate of the fair value of the contingent consideration liability utilizing the Monte Carlo simulation based on future revenue projections of Acessa, revenue growth rates of comparable companies, implied volatility and applying a risk adjusted discount rate. Each quarter the Company is required to remeasure the fair value of the liability as assumptions change and such adjustments are recorded in operating expenses. This fair value measurement was based on significant inputs not observable in the market and thus represented a Level 3 measurement as defined in ASC 820, Fair Value Measurements. This fair value measurement is directly impacted by the Company's estimate of future incremental revenue growth of the business. Accordingly, if actual revenue growth is higher or lower than the estimates within the fair value measurement, the Company would record additional charges or benefits, respectively. During the three and nine months ended June 25, 2022, the Company remeasured the contingent consideration liability and recorded a gain of $35.4 million and $39.5 million, respectively, to record the liability at fair value as of June 25, 2022. The reduction in fair value was primarily due to a decrease in forecasted revenues over the measurement period and to a much lesser extent an increase in the discount rate driven by market rates. For the nine month period ended June 26, 2021, the Company remeasured the contingent consideration liability and recorded a gain of $10.1 million to record the liability at fair value. The reduction in fair value was primarily due to a decrease in forecasted revenues over the measurement period. As of September 25, 2021, the contingent consideration liability was $75.1 million. During the three months ended December 25, 2021, the first measurement period was completed, and the Company recorded a gain of $4.1 million to decrease the contingent consideration liability to fair value based on actual revenue results in the first earn-out period. During the second quarter of fiscal 2022, the Company made a payment of $12.2 million for the first earn-out period. As of June 25, 2022, the contingent consideration liability was $23.4 million.

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