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Acquisitions | 3 Months Ended
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Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | 3. Acquisitions 2021 Acquisitions Bio-Flex Solutions L.L.C. and Newton T&M Corp. On November 29, 2021, the Company entered into an Equity Purchase Agreement with BioFlex, NTM and each of Ralph Meola and Jason Nisler, to acquire 100% of the outstanding securities of BioFlex and NTM (collectively, the “NTM Acquisition”). The transaction closed on December 16, 2021. NTM, which is headquartered in Newton, New Jersey, is the parent company of BioFlex and focuses on manufacturing of products, while BioFlex, also headquartered in Newton, New Jersey, commercializes branded products to biotech customers. The NTM Acquisition complements and expands the Company's filtration offering paths as the industry migrates to single-use flow paths solutions for monoclonal antibody ("mAb"), vaccine and cell and gene therapy ("C&GT") applications, with a focus on single-use fluid management components, including single-use clamps, adapters, end caps and hose assemblies. The NTM Acquisition streamlines and increases control over many components in the Company's single-use supply chain which ultimately should drive reduced lead-times for Repligen customers in the coming years. Consideration Transferred The NTM Acquisition was accounted for as a purchase of businesses under ASC 805, “Business Combinations” and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired. Under the terms of the Equity Purchase Agreement, all outstanding shares of capital stock of BioFlex were acquired for consideration with a value totaling $31.8 million, which includes $3.0 million deposited into an escrow against which the Company may make claims for indemnification. Under the acquisition method of accounting, the assets acquired and liabilities assumed of BioFlex were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired is estimated to be $4.4 million, the fair value of the intangible assets acquired is estimated to be $17.2 million, and the residual goodwill is estimated to be $10.2 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $1.2 million of transaction and integration costs associated with the NTM Acquisition from the date of acquisition to March 31, 2022, with $0.9 million of transaction and integration costs incurred during the three months ended March 31, 2022. The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended March 31, 2022. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. Fair Value of Net Assets Acquired The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. The purchase accounting for this acquisition is not finalized. As additional information becomes available, the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period. Any such revisions or changes may have a material impact on our accounting treatment of the NTM Acquisition. The final allocation may include changes to: (1) inventory; (2) deferred tax assets, net; (3) allocations to intangible assets such as trademark and tradename, developed technology and customer relationships as well as goodwill; (4) final consideration paid related to working capital adjustments; and (5) other assets and liabilities. The components and estimated allocation of the purchase price consist of the following (amounts in thousands):
Cash and cash equivalents |  | $ | 2,870 |
Accounts receivable |  |  | 1,408 |
Inventory |  |  | 741 |
Prepaid expenses and other current assets |  |  | 126 |
Property and equipment |  |  | 34 |
Operating lease right of use asset |  |  | 1,034 |
Customer relationships |  |  | 13,240 |
Developed technology |  |  | 3,540 |
Trademark and tradename |  |  | 310 |
Non-competition agreements |  |  | 60 |
Goodwill |  |  | 10,184 |
Long term deferred tax asset |  |  | 111 |
Accounts payable |  |  | (224 | )
Accrued liabilities |  |  | (578 | )
Operating lease liability |  |  | (1,030 | )
Operating lease liability, long-term |  |  | (3 | )
Fair value of net assets acquired |  | $ | 31,823 |
During the first quarter of 2022, the Company recorded net working capital adjustments of approximately $4,000 related to pre-acquisition liabilities, which is included in goodwill in the table above. Acquired Goodwill The goodwill of $10.2 million represents future economic benefits expected to arise from anticipated synergies from the integration of BioFlex and NTM into the Company. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the NTM Acquisition. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes. Intangible Assets The following table sets forth the components of the identified intangible assets associated with the NTM Acquisition and their estimated useful lives:
|  | Useful life |  | Fair Value |
|  |  |  | (Amounts in thousands) |
Customer relationships |  | 10 years |  | $ | 13,240 |
Developed technology |  | 11 years |  |  | 3,540 |
Trademark and tradename |  | 15 years |  |  | 310 |
Non-competition agreements |  | 3 years |  |  | 60 |
|  |  |  | $ | 17,150 |
Avitide, Inc. On September 16, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization (“Avitide Merger Agreement”) with Avalon Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of the Company, Avalon Merger Sub LLC, a Delaware limited liability company and a wholly owned direct subsidiary of the Company, Avitide, Inc. ("Avitide"), a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of Avitide's securityholders to purchase Avitide. The transaction closed on September 20, 2021 and on the terms set forth in the Avitide Merger Agreement. Avitide, which is headquartered in Lebanon, New Hampshire, offers diverse libraries and leading technology in affinity ligand discovery and development resulting in best-in-class ligand discovery and development lead-times. The acquisition gives the Company a new platform for affinity resin development, including C&GT, and advances and expands the Company’s proteins and chromatography franchise to address the unique purification needs of gene therapies and other emerging modalities. Consideration Transferred The Avitide Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations” and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired. Under the terms of the Avitide Merger Agreement, all outstanding shares of capital stock of Avitide were cancelled and converted into the right to receive merger consideration with a value totaling up to $275.0 million, which consisted of upfront payments in aggregate of $150.0 million ($149.4 million, net of cash acquired) and up to an additional $125.0 million (undiscounted) in contingent consideration earnout payments if certain performance targets are achieved. Total consideration paid also included $0.8 million deposited into an escrow account against which the Company may make claims for indemnification. The Avitide Acquisition was funded through payment of $75.0 million in cash, the issuance of 271,096 unregistered shares of the Company’s common stock totaling $83.0 million and contingent consideration with fair value of approximately $88.4 million. Under the acquisition method of accounting, the assets acquired and liabilities assumed of Avitide were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired is estimated to be $0.4 million, the fair value of the intangible assets acquired is estimated to be $46.7 million, and the residual goodwill is estimated to be $199.2 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $3.2 m illion of transaction and integration costs associated with the Avitide Acquisition from the date of acquisition to March 31, 2022 with $0.6 million of transaction and integration costs incurred during the three months ended March 31, 2022. The transaction costs are included in operating expenses in the consolidated statements of comprehensive income in this report. During the first quarter of 2022, due to the change in market inputs used to prepare the valuation of the contingent consideration obligation, the Company also recorded a contingent consideration adjustment of ($2.4) million to the Company's consolidated statement of comprehensive income. See Note 2, "Fair Value Measurements" for more information. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. Total consideration transferred is as follows (amounts in thousands):
Cash consideration |  | $ | 74,962 |
Equity consideration |  |  | 82,968 |
Contingent consideration - earnout |  |  | 88,373 |
Fair value of net assets acquired |  | $ | 246,303 |
Fair Value of Net Assets Acquired The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. As additional information becomes available, the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from September 20, 2021). Any such revisions or changes may have a material impact on our accounting treatment of the Avitide Acquisition. The final allocation may include changes to long-term deferred liabilities and goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to our consolidated statement of comprehensive income. The components and estimated allocation of the purchase price consist of the following (amounts in thousands):
Cash and cash equivalents |  | $ | 572 |
Accounts receivable |  |  | 228 |
Inventory |  |  | 332 |
Prepaid expenses and other current assets |  |  | 114 |
Property and equipment |  |  | 1,862 |
Operating lease right of use asset |  |  | 3,648 |
Customer relationships |  |  | 24,580 |
Developed technology |  |  | 20,650 |
Trademark and tradename |  |  | 1,210 |
Non-competition agreements |  |  | 210 |
Goodwill |  |  | 199,245 |
Accounts payable |  |  | (215 | )
Accrued liabilities |  |  | (2,183 | )
Operating lease liability |  |  | (698 | )
Operating lease liability, long-term |  |  | (2,950 | )
Long term deferred tax liability |  |  | (244 | )
Other liabilities |  |  | (58 | )
Fair value of net assets acquired |  | $ | 246,303 |
Acquired Goodwill The goodwill of $199.2 million represents future economic benefits expected to arise from anticipated synergies from the integration of Avitide. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Avitide Acquisition. Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes. Intangible Assets The following table sets forth the components of the identified intangible assets associated with the Avitide Acquisition and their estimated useful lives:
|  | Useful life |  | Fair Value |
|  |  |  | (Amounts in thousands) |
Customer relationships |  | 13 years |  | $ | 24,580 |
Developed technology |  | 15 years |  |  | 20,650 |
Trademark and tradename |  | 18 years |  |  | 1,210 |
Non-competition agreements |  | 3 years |  |  | 210 |
|  |  |  | $ | 46,650 |
Polymem S.A. On June 22, 2021, the Company entered into a Stock Purchase Agreement with Polymem S.A., a company organized under the laws of France, and Jean-Michel Espenan and Franc Saux, acting together jointly and severally as the representatives of the sellers for $47.0 million. The transaction closed on July 1, 2021 (the “Polymem Acquisition”). Polymem, which is headquartered in, Toulouse, France, is a manufacturer of hollow fiber membranes, membrane modules and systems for industrial and bioprocessing applications. Polymem products will complement and expand the Company’s portfolio of hollow fiber systems and consumables. The acquisition substantially increases Repligen’s membrane and module manufacturing capacity and establishes a world-class center of excellence in Europe to address the accelerating global demand for these innovative products. Consideration Transferred The Polymem Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations” and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired. Payment for the transaction was denominated in Euros but is reflected here in U.S. dollars for presentation purposes based on an exchange rate of 0.8437 as of July 1, 2021, the date of acquisition. Total consideration paid was approximately $47.0 million, which included approximately $4.3 million deposited into an escrow account against which the Company may make claims for indemnification. Under the acquisition method of accounting, the assets acquired and liabilities assumed of Polymem were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired is approximately $2.2 million, the fair value of the intangible assets acquired is approximately $9.1 million, and the residual goodwill is approximately $35.7 million. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $4.7 m illion of transaction and integration costs associated with the Polymem Acquisition from the date of acquisition to March 31, 2022, with $1.6 million of transaction and integration costs incurred during the three months ended March 31, 2022. The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended March 31, 2022. Fair Value of Net Assets Acquired The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. As additional information becomes available, the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from July 1, 2021). Any such revisions or changes may have a material impact on our accounting treatment of the Polymem Acquisition. The components and estimated allocation of the purchase price consist of the following (amounts in thousands):
Cash and cash equivalents |  | $ | 353 |
Net working capital (excluding cash and inventory step-up) |  |  | 414 |
Inventory step-up |  |  | 543 |
Operating lease right of use assets |  |  | 1,424 |
Property and equipment |  |  | 3,145 |
Other assets |  |  | 41 |
Developed technology |  |  | 8,274 |
Trademark and tradenames |  |  | 510 |
Non-compete agreements |  |  | 312 |
Goodwill |  |  | 35,680 |
Operating lease liability |  |  | (1,253 | )
Long term deferred tax liability |  |  | (2,327 | )
Other long-term liabilities |  |  | (143 | )
Fair value of net assets acquired |  | $ | 46,973 |
Acquired Goodwill The goodwill of approximately $35.7 million represents future economic benefits expected to arise from anticipated synergies from the integration of Polymem. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Polymem Acquisition. Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes. Intangible Assets The following table sets forth the components of the identified intangible assets associated with the Polymem Acquisition and their estimated useful lives:
|  | Useful life |  | Fair Value |
|  |  |  | (Amounts in thousands) |
Developed technology |  | 13 years |  | $ | 8,274 |
Trademark and tradename |  | 14 years |  |  | 510 |
Non-competition agreements |  | 5 years |  |  | 312 |
|  |  |  | $ | 9,096 |

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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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