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Business combinations | 9 Months Ended
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Sep. 30, 2021
Business Combinations [Abstract] |
Business combinations | Business combinations PRA Health Sciences, Inc. - Merger Completion On July 1, 2021 (the "Merger Date"), ICON plc announced the completion of its Merger with PRA Health Sciences, Inc. ("PRA"). The combined company has retained the name ICON and brings together approximately 37,960 employees across 53 countries, creating the world’s most advanced healthcare intelligence and clinical research organization. The Merger was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The combined company leverages its enhanced operations to transform clinical trials and accelerate biopharma customers’ commercial success through the development of much needed medicines and medical devices. The new ICON has a renewed focus on leveraging data, applying technology and accessing diverse patient populations to speed up drug development. Upon completion of the Merger, pursuant to the terms of the merger agreement, PRA became a wholly owned subsidiary of ICON plc. Under the terms of the Merger, PRA shareholders received per share $80 in cash and 0.4125 shares of ICON stock. The trading of PRA common stock on NASDAQ was suspended prior to market open on July 1, 2021. In the nine months ended September 30, 2021, the Company incurred $182.3 million of Merger-related expenses which were accounted for separately from the business combination and expensed as incurred within the “Transaction and integration related expenses” line item of the condensed consolidated statements of operations. These costs consisted primarily of investment banker fees, advisory fees, legal costs, accounting and consulting fees, share-based compensation expense, and employee retention bonuses. The Company also incurred approximately $78.2 million of financing fees which are included in the “Interest expense” line item in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021. The Company deferred $76.2 million of financing costs incurred as a result of the Senior Secured Credit Facility and Senior Secured Notes. These costs will be amortized over the term of the related debt. The purchase accounting associated with the PRA Merger remains ongoing and we continue to review the acquisition balance sheet. We expect to conclude the purchase accounting exercise by June 30, 2022. The preliminary Merger Date fair value of the consideration transferred consisted of the following:
| (in thousands)
Fair value of cash consideration | $ | 5,308,646 |
Fair value of ordinary shares issued to acquiree stockholders | 5,658,126 |
Fair value of replacement share-based awards issued to acquiree employees | 209,399 |
Repayment of term loan obligations and accrued interest * | 865,800 |
| $ | 12,041,971 |
* This represents the portion of PRA debt paid by ICON. PRA also paid $401.6 million from available cash to settle debt obligations that existed at the Merger Date. The following table summarizes the preliminary allocation of the consideration transferred based on management’s estimates of Merger Date fair values of assets acquired and liabilities assumed, with the excess of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill:
| July 1,
| 2021
| (in thousands)
Cash and cash equivalents | $ | 259,971 |
Accounts receivable and unbilled revenue | 934,308 |
Other current assets | 110,691 |
Fixed assets, net | 162,988 |
Operating lease right-of-use assets | 192,345 |
Goodwill * | 8,013,878 |
Intangible assets, net | 4,875,000 |
Deferred tax assets | 172,229 |
Other assets | 35,094 |
Accounts payable | (50,259) |
Accrued expenses and other current liabilities | (342,552) |
Current portion of operating lease liabilities | (38,371) |
Unearned revenue | (758,901) |
Non-current portion of operating lease liabilities | (157,658) |
Non-current deferred tax liabilities | (1,313,599) |
Other non-current liabilities | (53,193) |
Net assets acquired | $ | 12,041,971 |
* The goodwill in connection with the Merger is primarily attributable to the assembled workforce of PRA and the expected synergies of the Merger. None of the goodwill recognized is expected to be deductible for income tax purposes. The following table summarizes the preliminary estimates of the fair value of identified intangible assets and their respective useful lives as of the Merger Date (in thousands, except for estimated useful lives):
| Estimated Fair Value | Estimated Useful Life
Customer relationship | 3,905,000 |  | 23 years
Order backlog | 489,000 |  | 3 years
Trade names | 202,000 |  | 3 years
Patient database | 168,000 |  | 7 years
Technology | 111,000 |  | 5 years
| 4,875,000 |  |
Since July 1, 2021, PRA has earned revenue of $1,019.7 million and pre-tax net income of $113.4 million in the three months ended September 30, 2021. Pro forma financial information The following pro forma financial information was derived from the historical financial statements of the Company and PRA and presents the combined results of operations as if the Merger had occurred on January 1, 2020. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results that would have actually occurred had the Merger been completed on January 1, 2020. In addition, the pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may result from the Merger, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of PRA. Consequently, actual future results of the Company will differ from the pro forma financial information presented below:
| Nine months ended | Year ended
| September 30 | December 31
| 2021 | 2020
| (in thousands, except per share data)
Revenue | $ | 5,580,879 |  | $ | 5,964,653 |
Net income/(loss) | $ | 231,442 |  | $ | (151,209) |
The pro forma adjustments primarily relate to the amortization of acquired intangible assets, interest expense and amortization of deferred financing costs related to the new financing arrangements. In addition, the pro forma net income for the nine months ended September 30, 2021 was adjusted to exclude certain merger-related nonrecurring adjustments; these adjustments were included in the year ended December 31, 2020 giving effect to the Merger as if it had occurred on January 1, 2020. The nonrecurring merger related adjustments include transaction costs, share-based compensation expense related to the acceleration of share-based compensation awards and replacement share-based awards, and financing fees. The merger related adjustment were tax effected using the Company's effective tax rate. Acquisitions – MedPass Group ("MedPass") On January 22, 2020 a subsidiary of the Company, ICON Investments Limited acquired 100% of the equity share capital of the MedPass Group. MedPass is the leading European medical device CRO, regulatory and reimbursement consultancy, that specializes in medical device development and market access. The acquisition of MedPass further enhances ICON’s Medical Device and Diagnostic Research services, through the addition of new regulatory and clinical capabilities in Europe. The integration of MedPass’s services brings noted expertise in complex class 3 medical devices, interventional cardiology and structural heart devices. Accounting for the acquisition of MedPass was finalized in the period ended December 31, 2020. The acquisition of MedPass has been accounted for as a business combination in accordance with ASC 805 'Business Combinations'. The Company has made an assessment of the fair value of assets acquired and liabilities assumed as at that date. The following table summarizes the Company’s fair values of the assets acquired and liabilities assumed:
| January 22,
| 2020
| (in thousands)
Cash & cash equivalents | $ | 10,170 |
Property, plant and equipment | 45 |
Operating right of use assets | 539 |
Goodwill * | 27,191 |
Customer relationships | 11,725 |
Order backlog | 2,883 |
Accounts receivable | 3,033 |
Prepayments and other current assets | 158 |
Accounts payable | (368) |
Unearned revenue | (989) |
Other liabilities | (2,202) |
Current lease liabilities | (219) |
Non-current lease liabilities | (320) |
Non-current deferred tax liability | (4,090) |
Net assets acquired | $ | 47,556 |
Cash outflows | $ | 46,992 |
Working capital adjustment paid | 564 |
Contingent consideration ** | — |
Total consideration | $ | 47,556 |
* Goodwill represents the acquisition of an established workforce that specializes in medical device development and market access. None of the goodwill recognized is expected to be deductible for income tax purposes. ** The fair value of the contingent consideration was estimated at the date of acquisition as $Nil. Depending on performance of MedPass for the 12 month period ended December 31, 2020, the total consideration could have increased by a maximum of $6.7 million in contingent consideration. In January 2021, the contingent consideration was finalized and a value of $Nil was payable.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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