BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2023

The Company regularly evaluates potential acquisitions that strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into a new and attractive business area. Acquisitions are accounted for as business combinations using the acquisition method of accounting. As such, the Company makes a preliminary allocation of the purchase price to the tangible assets and identifiable intangible assets acquired and liabilities assumed. In the months after closing, as the Company obtains additional information about the acquired assets and liabilities and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. Purchase price is allocated to acquired assets and liabilities assumed based upon their estimated fair values, with limited exceptions as permitted pursuant to U.S. GAAP, as determined based on estimates and assumptions deemed reasonable by the Company. The Company engages third-party valuation specialists to assist with preparation of critical assumptions and calculations of the fair value of acquired tangible and intangible assets in connection with significant acquisitions. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Goodwill is attributable to the workforce of the acquired businesses, the complementary strategic fit and resulting synergies these businesses bring to existing operations, and the opportunities in new markets expected to be achieved from the expanded platform.

2023 Acquisitions

On June 30, 2023, the Company completed an acquisition included within the Safety Services segment ("Acquisition A23"). The results of the A23 business are reported within the Company's Safety Services segment. Consideration for Acquisition A23 included cash paid at closing of $30, cash deposited into escrow for future deferred payments of $5, and accrued consideration of $3.

On December 29, 2023, the Company completed an acquisition included within the Safety Services segment ("Acquisition B23"). The results of the B23 business are reported within the Company's Safety Services segment. Consideration for Acquisition B23 included cash paid at closing of $27 and accrued consideration of $5.

During 2023, the Company completed five individually immaterial acquisitions for aggregate consideration transferred of $24, made up of cash paid at closing of $22 and accrued consideration of $2.

The results of operations of these acquisitions are included in the Company’s consolidated statements of operations from their respective dates of acquisition and were not material.

The Company has not finalized its accounting for the acquisitions and will make appropriate adjustments to the purchase price allocation prior to completion of the measurement periods, as required. Based on preliminary estimates, the total amount of goodwill from acquisitions expected to be deductible for tax purposes is $47. See Note 8 – “Goodwill and Intangibles” for the provisional goodwill assigned to each segment.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the dates of acquisition:


	Acquisition A23		Acquisition B23		Other 2023 acquisitions
Cash paid at closing	$	30	$	27	$	22
Cash deposited into escrow	5		—		—
Accrued consideration	3		5		2
Total net consideration	$	38	$	32	$	24

Cash and cash equivalents	—		1		—
Accounts receivable	8		7		—
Contract assets	1		2		—
Other current assets	—		2		1
Intangible assets	13		12		9
Goodwill	19		12		16
Other accrued liabilities	—		(2)		—
Contract liabilities	(3)		(2)		(2)
Net assets acquired	$	38	$	32	$	24

2022 Chubb Acquisition

During 2022, the Company completed the acquisition of Chubb fire and security business (the "Chubb Acquisition"). The Chubb fire and security business (the "Chubb business" or "Chubb") is a globally recognized fire safety and security services provider, offering customers complete and reliable services from design and installation to monitoring and on-going maintenance and recurring services. The Chubb business is headquartered in the United Kingdom, and has operations in 17 countries, expanding the Company's geographic footprint to a total of over 20 countries. The results of the Chubb business are reported within the Company's Safety Services segment.

During 2022, the Company incurred transaction costs of $24, which were expensed and included as a component of selling, general, and administrative expenses in the consolidated statements of operations.

The Chubb Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values, with the exception of the following: (1) pre-acquisition contingencies which are recognized and measured in accordance with ASC 450, Contingencies, if fair value cannot be determined; (2) deferred income tax assets acquired and liabilities assumed are recognized and measured in accordance with ASC 740, Income Taxes; (3) pensions and other post-retirement benefits other than pensions are recognized and measured in accordance with ASC 715, Compensation – Retirement Benefits; (4) contract assets and liabilities are measured and recognized in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"); and (5) certain lease related assets and liabilities which are measured and recognized in accordance with ASC 842, Leases ("ASC 842").

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the date of the Chubb Acquisition:


Cash paid at closing	$	2,935
Working capital and net indebtedness adjustment	(42)
Total net consideration	$	2,893

Cash	60
Accounts receivable	426
Inventories	68
Contract assets	183
Other current assets	25
Property and equipment	73
Operating lease right of use assets	146
Pension and post-retirement assets	626
Other noncurrent assets	8
Intangible assets	1,200
Goodwill	1,367
Accounts payable	(192)
Contract liabilities	(162)
Accrued expenses	(255)
Finance and operating lease liabilities	(148)
Pension and post-retirement obligations	(56)
Deferred tax liabilities	(383)
Other noncurrent liabilities	(93)
Net assets acquired	$	2,893

The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The Company has assigned final goodwill of $1,367 to its Safety Services reportable segment (see Note 8 - "Goodwill and Intangibles"). Based on U.S. income tax principles related to acquisitions of non-U.S. entities, the Company does not expect any of the amount of goodwill to be deductible for U.S. income tax purposes.

Intangible assets

The Company has identified the following significant intangible assets: customer relationships, trade names and trademarks, and contractual backlog. As of the effective date of the Chubb Acquisition, identifiable intangible assets are required to be measured at fair value, and these assets could include assets that are not intended to be used or sold or that are intended to be used in a manner other than their highest and best use. For purposes of these consolidated financial statements, the fair value and weighted-average useful lives of these intangible assets have been estimated using variations of the income approach.

Specifically, the excess earnings method was utilized to estimate the fair value of the customer relationships and the contractual backlog. The relief from royalty method was utilized to estimate the fair value of the trade names and trademarks. Significant inputs used to value these intangible assets include projections of future cash flows, long-term growth rates, customer attrition rates, discount rates, royalty rates, and applicable income tax rates.

The following table summarizes the fair value of the identifiable intangible assets:


Customer relationships	$	695
Trade names and trademarks	450
Contractual backlog	55
Total intangibles	$	1,200

The estimated useful lives over which the intangible assets will be amortized are as follows: customer relationships (fifteen years), trade names and trademarks (fifteen years), and contractual backlog (two years).

The results of operations for the Chubb business are included in the consolidated financial statements of the Company from the date of acquisition.

Accrued consideration

The Company’s acquisition purchase agreements typically include deferred payment provisions, often to sellers who become employees of the Company or its subsidiaries. The provisions are made up of three general types of arrangements, contingent compensation and contingent consideration (both of which are contingent on the future performance of the acquired entity) and deferred payments related to indemnities. Contingent compensation arrangements are typically contingent on the former owner’s future employment with the Company, and the related amounts are recognized over the required employment period, which is typically one to four years. Contingent consideration arrangements are not contingent on employment and are included as part of purchase consideration at the time of the initial acquisition and are paid over a one to four years year period. The liability for deferred payments is recognized at the date of acquisition based on the Company’s best estimate and is typically payable over a one to three years year period. Deferred payments are not contingent on any future performance or employment obligations and can be offset for working capital true-ups, and representations and warranty items.

The total contingent compensation arrangement liability was $9 and $19 at December 31, 2023 and 2022, respectively. The maximum payout of these arrangements upon completion of the future performance periods was $15 and $25, inclusive of the $9 and $19, accrued as of December 31, 2023 and 2022, respectively. The contingent compensation liability is included in contingent consideration and compensation liabilities in the consolidated balance sheets for all periods presented. The Company primarily determines the contingent compensation liability based on forecasted cumulative earnings compared to the cumulative earnings target set forth in the arrangement. Compensation expense associated with these arrangements is recognized ratably over the required employment period.

The contingent consideration obligations are measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings. For additional considerations regarding the fair value of the Company's contingent consideration liabilities, see Note 9 - "Fair Value of Financial Instruments."

The total liability for deferred payments was $17 and $9 at December 31, 2023 and 2022, respectively, and is included in contingent consideration and compensation liabilities in the consolidated balance sheets for all periods presented.