Business Combinations

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

2022 Business Combination

On December 15, 2022, the Company acquired 100% ownership of FormSwift, a cloud-based service that gives individuals and businesses a simple solution to create, complete, edit, and save critical business forms and agreements. The Company believes the combination of Dropbox, Dropbox Sign, DocSend, and FormSwift will help customers across industries manage end-to-end document workflows—from content collaboration to sharing and e-signature—giving them more control over their most important agreements. The results of FormSwift's operations have been included in the Company’s consolidated results of operations since the date of acquisition.

The purchase consideration transferred consisted of the following:


	Purchase consideration
Cash paid to stockholders	$	50.0
Cash paid for extinguishing shadow stock units	3.2
Transaction costs paid by Dropbox on behalf of FormSwift	2.0
Cash purchase consideration	$	55.2
Indemnification holdback (1)	14.3
Purchase price adjustments	(0.2)
Total purchase consideration	$	69.3

(1) Approximately $14.3 million of the total purchase consideration was withheld as an indemnification holdback to be used for the purpose of satisfying any indemnification claims made by the Company for a period of 18 months following the transaction close date. Any remaining indemnity will be released to the seller's representative following the 18 month period.

In addition to the total purchase consideration above, the Company has compensation agreements with key FormSwift personnel consisting of $25.7 million in cash payments subject to ongoing employee service. The related expenses are recognized within research and development expenses over the required service period of three years. The cash payment was transferred to a paying agent escrow account immediately upon the acquisition close date. The related payments will be paid out by the escrow agent as they vest.

The purchase consideration was allocated to the tangible and intangible assets and liabilities acquired as of the acquisition date, with the excess recorded to goodwill as shown below. The fair value of assets and liabilities acquired may change as additional information is received during the measurement period. The measurement period will end no later than one-year from the acquisition date.


Assets acquired:
Cash and cash equivalents	$	0.4
Acquisition-related intangible assets	41.2
Accounts receivable, prepaid and other assets	3.4
Total assets acquired	$	45.0

Liabilities assumed:
Accounts payable, accrued and other liabilities	$	4.6
Deferred revenue	6.6
Total liabilities assumed	11.2
Net assets acquired, excluding goodwill	33.8
Total purchase consideration	69.3
Goodwill (2)	$	35.5

(2) The goodwill recognized was primarily attributable to the opportunity to expand the user base of the Company's platform. A portion of the goodwill is deductible for U.S. federal income tax purposes.

The fair value of the separately identifiable finite-lived intangible assets acquired and estimated weighted average useful lives as of the acquisition date are as follows:


	Estimated fair values		Estimated weighted average useful lives (In years)
Developed technology	$	24.2	5.0
Customer relationships	16.4		2.0
Trade name	0.6		1.0
Total acquisition-related intangible assets	$	41.2

The fair values of the acquisition-related intangible assets were determined using the following methodologies: the multi-period excess earnings method for developed technology, the with and without method for customer relationships, and the relief from royalty method for the trade name, respectively. The valuation model inputs required the application of significant judgment by management. The acquired intangible assets had a total weighted average amortization period of 3.7 years.