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Business combination | 12 Months Ended
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Jan. 31, 2020
Business Combinations [Abstract] |
Business combination | Business combination Acquisition of WageWorks Overview and total consideration paid On August 30, 2019, the Company closed the Acquisition of WageWorks for $51.35 per share in cash, or approximately $2.0 billion to WageWorks stockholders. The Company financed the transaction through a combination of $816.9 million cash on hand plus net borrowings of approximately $1.22 billion, after deducting lender fees of approximately $30.5 million, under a term loan facility (see Note 8—Indebtedness). Pursuant to the Merger Agreement, the Company replaced certain outstanding restricted stock units originally granted by WageWorks with the Company’s equivalent awards. The outstanding WageWorks vested and unvested stock options, and certain unvested restricted stock units, were settled in cash as specified in the Merger Agreement. The portion of the fair value of partially vested awards associated with pre-acquisition service of WageWorks award recipients represented a component of the total consideration, as presented below. The Acquisition was accounted for under the acquisition method of accounting for business combinations. Under this accounting method, the total consideration paid was:
(in millions) |  |
Aggregate fair value of WageWorks stock acquired |  |  | $ | 2,018.8 |
Fair value of previously owned investment in WageWorks stock |  |  | 81.4 |
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service |  |  | 18.1 |
Fair value of equity awards replaced attributable to pre-Acquisition service |  |  | 3.8 |
Total consideration paid |  |  | $ | 2,122.1 |
Consideration paid was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the Acquisition date. Management estimated the fair value of tangible and intangible assets and liabilities in accordance with the applicable accounting guidance for business combinations and utilized the services of third-party valuation consultants to value acquired intangible assets. The initial allocation of the consideration paid was based on a preliminary valuation and is subject to potential adjustment during the measurement period (up to one year from the Acquisition date). Balances subject to adjustment primarily include the valuations of acquired assets (tangible and intangible) and liabilities assumed, as well as tax-related matters. The Company expects the allocation of the consideration transferred to be finalized within the measurement period. The following table summarizes the Company's current allocation of the consideration paid:
(in millions) |  | Initial Allocation |  | Adjustments |  | Updated Allocation
Cash and cash equivalents |  |  | $ | 406.8 |  |  |  | $ | (14.5) |  |  |  | $ | 392.3 |
Other current assets |  |  | 56.5 |  |  |  | 1.0 |  |  |  | 57.5 |
Property, plant, and equipment |  |  | 26.6 |  |  |  |  |  |  |  | 26.6 |
Operating lease right-of-use assets |  |  | 42.5 |  |  |  |  |  |  |  | 42.5 |
Intangible assets |  |  | 715.3 |  |  |  |  |  |  |  | 715.3 |
Goodwill |  |  | 1,330.5 |  |  |  | (2.5) |  |  |  | 1,328.0 |
Other assets |  |  | 5.9 |  |  |  |  |  |  |  | 5.9 |
Client-held funds obligation |  |  | (237.5) |  |  |  | 17.8 |  |  |  | (219.7) |
Other current liabilities |  |  | (69.1) |  |  |  | (2.9) |  |  |  | (72.0) |
Other long-term liabilities |  |  | (26.7) |  |  |  |  |  |  |  | (26.7) |
Deferred tax liability |  |  | (128.7) |  |  |  | 1.1 |  |  |  | (127.6) |
Total consideration paid |  |  | $ | 2,122.1 |  |  |  | $ | — |  |  |  | $ | 2,122.1 |
The Acquisition resulted in $1.33 billion of goodwill, which is attributable to several strategic, operational and financial benefits expected from the Acquisition, including custodial and interchange revenue synergies based on current contractual relationships, as well as operational cost synergies resulting from increased scale in service delivery and elimination of duplicative management functions and other back-office operational efficiencies. The adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired, liabilities assumed, and tax-related matters. The goodwill created in the Acquisition is not expected to be deductible for tax purposes. The preliminary allocation of consideration exchanged to acquired identified intangible assets is as follows:
(in millions) |  | Fair value |  | Weighted-average remaining amortization period (years)
Customer relationships |  |  | $ | 598.5 |  |  | 15.0
Developed technology |  |  | 96.9 |  |  | 4.5
Trade names & trademarks |  |  | 12.3 |  |  | 3.0
Identified intangible assets subject to amortization |  |  | 707.7 |  |  | 13.4
In-process software development costs |  |  | 3.8 |  |  | n/a
Total acquired intangible assets |  |  | $ | 711.5 |  |  |
The Company preliminary valued the acquired assets utilizing the discounted cash flow method, a form of the income approach. The significant assumptions used in the discounted cash flow analyses include future revenue growth and attrition rates, projected margins, royalty rates, technological obsolescence, discount rates used to present value future cash flows, and the amount of revenue and cost synergies expected from the Acquisition. In connection with the transaction, for the year ended January 31, 2020, the Company incurred approximately $40.8 million of acquisition costs, which are recorded as other expense, net. For the year ended January 31, 2020, WageWorks contributed revenue of approximately $184.7 million Pro forma information The unaudited pro forma results presented below include the effects of the Acquisition as if it had been consummated as of February 1, 2018, with adjustments to give effect to pro forma events that are directly attributable to the Acquisition, which include adjustments related to the amortization of acquired intangible assets, interest income and expense, and depreciation. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the integration of WageWorks. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations. The estimated pro forma revenue and net income includes the alignment of accounting policies, the effect of fair value adjustments related to the Acquisition, associated tax effects and the impact of the borrowings to finance the Acquisition and related expenses.
|  | Year ended January 31, |  |
(in thousands) |  | 2020 |  | 2019
Revenue |  | $ | 798,253 |  |  | $ | 765,801 |
Net income |  | $ | 23,101 |  |  | $ | 6,419 |

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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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- References No definition available. + Details
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