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Acquisitions
 9 Months Ended
Sep. 30, 2025
Business Combination [Abstract]  
Acquisitions

Note 3. Acquisitions

2024 Acquisition

On October 31, 2024, the Company completed the acquisition of Sterling Check Corp. (“Sterling” and such acquisition, the “Sterling Acquisition”), a leading provider of background screening and identity verification services. The cash-and-stock transaction valued Sterling at approximately $2.2 billion and was financed through cash on hand and the issuance of new debt and common stock as described in Note 6, “Debt”. The acquisition extended First Advantage’s high-quality and cost-effective background screening, identity, and verification technology solutions for the benefit of both companies' customers across industry verticals and geographies.

Sterling was determined to constitute a business and the Company was deemed to be the acquirer under ASC 805. The Company recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of October 31, 2024.

During the nine months ended September 30, 2025, the Company recorded measurement period adjustments related to its preliminary allocation of the purchase price. The measurement period adjustments were due to revisions to estimates for working capital and tax balances, resulting in a $0.7 million decrease to current assets, a $5.8 million increase to current liabilities, a $0.1 million increase to deferred tax liabilities, and a $0.2 million decrease to other liabilities. The net impact of these adjustments was a $6.4 million increase to goodwill. The allocation was finalized as of June 30, 2025.

The following table summarizes the consideration paid and the amounts recognized for the assets acquired and liabilities assumed as of September 30, 2025 (in thousands):

Consideration

 

 

 

Cash consideration

 

$

1,152,163

 

Plus: fair value of assumed Sterling equity awards to receive cash attributable to pre-combination service

 

 

15,905

 

Plus: repayment of Sterling's outstanding debt

 

 

535,046

 

Plus: fair value of First Advantage common stock issued

 

 

490,098

 

Plus: fair value of assumed Sterling equity awards to receive equity awards attributable to pre-combination service

 

 

4,487

 

Total fair value of consideration transferred

 

$

2,197,699

 

Current assets

 

$

226,800

 

Property and equipment, including software developed for internal use

 

 

273,370

 

Intangible assets

 

 

717,000

 

Deferred tax asset

 

 

58,100

 

Other assets

 

 

12,516

 

Current liabilities

 

 

(155,596

)

Deferred tax liability

 

 

(238,221

)

Other liabilities

 

 

(16,075

)

Total identifiable net assets

 

$

877,894

 

Goodwill

 

$

1,319,805

 

The fair values and useful lives of the acquired intangible assets by category were as follows (in thousands):

 

 

Balance Sheet Location

 

Estimated Fair Values

 

 

Useful Life
(in years)

Customer lists

 

Intangible assets, net

 

$

655,000

 

 

14 years

Software developed for internal use

 

Property and equipment, net

 

 

259,000

 

 

5 years

Trade names

 

Intangible assets, net

 

 

62,000

 

 

5 years

Goodwill recognized is not deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s Sterling segment since the date of acquisition.

Pro Forma Results

The following summary, prepared on a pro forma basis pursuant to ASC 805, presents the Company’s consolidated results of operations for the three and nine months ended September 30, 2024, as if the Sterling Acquisition had been completed on January 1, 2023. The pro forma results below include the impact of certain adjustments related to the amortization of intangible assets, transaction-related costs incurred as of the acquisition date, and interest expense on related borrowings, and in each case, the related income tax effects, as well as certain other post-acquisition adjustments attributable to the Sterling Acquisition. This pro forma presentation does not include any impact of transaction synergies. The pro forma results are not necessarily indicative of the results of operations that actually would have been achieved had the Sterling Acquisition been consummated as of January 1, 2023.

(in thousands, unaudited)

 

Three Months
Ended
September 30, 2024

 

 

Nine Months
Ended
September 30, 2024

 

Revenue

 

$

394,356

 

 

$

1,134,287

 

Net loss

 

$

(46,979

)

 

$

(105,681

)