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Business Combinations | 3 Months Ended
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Mar. 31, 2021
Business Combinations [Abstract] |
Business Combinations | Business Combinations Acquisition of Decision Resources Group On February 28, 2020, we acquired 100% of the assets, liabilities and equity interests of Decision Resources Group ("DRG"), a premier provider of high-value data, analytics and insights products and services to the healthcare industry, from Piramal Enterprises Limited ("PEL"), which is a part of global business conglomerate Piramal Group. The acquisition helps us expand our core businesses and provides us with the potential to grow in the Life Sciences Product Line. The aggregate consideration paid in connection with the closing of the DRG acquisition was $964,997, comprised of $900,000 of base cash plus $6,100 of adjusted closing cash paid on the closing date and 2,895,638 of the Company's ordinary shares issued to PEL on March 5, 2021. The contingent stock consideration was valued at $58,897 on the closing date and was revalued at each period end until the issuance date. For the three months ended March 31, 2021, the fair value of the contingent stock consideration decreased by $24,410, which was recorded to selling, general and administrative costs in the Condensed Consolidated Statements of Operations. The corresponding liability was $86,029 as of December 31, 2020 and recorded to Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets. As the liability settled on March 5, 2021 with the Company issuing 2,895,638 ordinary shares valued at $61,619, there was no liability captured within the March 31, 2021 Condensed Consolidated Balance Sheet. See Note 22 - Commitments and Contingencies for more information. The DRG acquisition was accounted for using the acquisition method of accounting. The excess of the purchase price over the net tangible and intangible assets is recorded to Goodwill and primarily reflects the assembled workforce and expected synergies. Goodwill is not deductible for tax purposes. During the three months ended March 31, 2021, total transaction costs incurred in connection with the acquisition of DRG was a net gain of $24,383 due to the decrease to the fair value of the contingent stock consideration between December 31, 2020 and March 5, 2021. Total transaction costs during the three months ended March 31, 2020 were $19,762. The amount of Revenues, net and Net loss resulting from the acquisition that are attributable to the Company's stockholders and included in the Condensed Consolidated Statements of Operations and Comprehensive Loss were as follows:
| Three Months Ended March 31, |
| 2021 |  | 2020 |
Revenues, net (1) | $ | 44,320 |  |  | $ | 17,044 |  |
Net loss attributable to the Company's stockholders | $ | (7,831) |  |  | $ | (606) |  |
(1) Includes $1,534 of a deferred revenue adjustment recognized during the three months ended March 31, 2020. |
The following table summarizes the final purchase price allocation for this acquisition:
| Total
Accounts receivable | $ | 52,193 |
Prepaid expenses | 4,295 |
Other current assets | 68,001 |
Property and equipment, net | 4,136 |
Other intangible assets(1) | 491,366 |
Other non-current assets | 2,960 |
Operating lease right-of-use assets | 25,099 |
Total assets | $ | 648,050 |
Accounts payable | 3,474 |
Accrued expenses and other current liabilities | 88,561 |
Current portion of deferred revenue | 35,126 |
Current portion of operating lease liabilities | 5,188 |
Deferred income taxes(3) | 49,403 |
Non-current portion of deferred revenue | 936 |
Operating lease liabilities | 20,341 |
Total liabilities | 203,029 |
Fair value of acquired identifiable assets and liabilities | $ | 445,021 |
Purchase price, net of cash(2) | 944,220 |
Less: Fair value of acquired identifiable assets and liabilities | 445,021 |
Goodwill | $ | 499,199 |
(1) Includes $3,966 of internally developed software in progress acquired. |
(2) The Company acquired cash of $20,777. |
(3) The Company corrected an understatement of deferred tax liabilities of $1,936 with an offset to goodwill relating to the DRG acquisition opening balance sheet in February 28, 2020. See Note 2 - Basis of Presentation for further details.
The identifiable intangible assets acquired are amortized on a straight-line basis over their estimated useful lives. The following table summarizes the estimated fair value of DRG’s identifiable intangible assets acquired and their remaining amortization period (in years):
| Fair Value as of February 28, 2020 |  | Remaining Range of Years
Customer relationships | $ | 381,000 |  |  | 10-21
Database and content | 50,200 |  |  | 2-7
Trade names | 5,200 |  |  | 4-7
Purchased software | 23,000 |  |  | 3-8
Backlog | 28,000 |  |  | 4
Total identifiable intangible assets | $ | 487,400 |  |  |
During the year ended December 31, 2020, there were additional purchase accounting adjustments of $1,804. These adjustments were related to fixed assets, deferred revenue and legal accrual with a corresponding net decrease to goodwill. Unaudited pro forma information for the Company for the periods presented as if the acquisition had occurred January 1, 2019 is as follows:
| Three Months Ended March 31,
| 2021 |  | 2020
Pro forma revenues, net | $ | 428,430 |  |  | $ | 265,341 |
Pro forma net loss attributable to the Company's stockholders(1) | $ | (55,951) |  |  | $ | (120,070) |
(1) The Pro forma net loss attributable to the Company's stockholders for the three months ended March 31, 2021 and 2020 has been restated. See Note 27 - Restatement of Previously Issued Financial Statements and Note 25 - Restatement of Prior Period Financial Statements for more information, respectively.
The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisition taken place on the date indicated, or the future consolidated results of operations of the Company. The pro forma financial information presented above has been derived from the historical consolidated financial statements of the Company and from the historical accounting records of DRG. The unaudited pro forma results include certain pro forma adjustments to revenue and net loss that were directly attributable to the acquisition, assuming the acquisition had occurred on January 1, 2019, including the following: (i) additional amortization expense that would have been recognized relating to the acquired intangible assets, (ii) adjustments to interest expense to reflect the removal of DRG debt and the additional Company borrowings in conjunction with the acquisition, (iii) acquisition-related transaction costs and other one-time non-recurring costs which reduced expenses by $24,926 for the three months ended March 31, 2020. Acquisition of CPA Global On October 1, 2020, we acquired 100% of the assets, liabilities and equity interests of CPA Global, a global leader in intellectual property software and tech-enabled services from Redtop Holdings Limited ("Redtop"). The acquisition helps Clarivate create a true end-to-end platform supporting the full IP lifecycle from idea generation to commercialization and protection. Clarivate acquired all of the outstanding shares of CPA Global in a cash and stock transaction. The aggregate consideration in connection with the closing of the CPA Global acquisition was $8,541,118, net of $102,443 cash acquired and including an equity holdback consideration of $46,485. The aggregate consideration was composed of (i) $6,565,477 from the issuance of up to 218,183,778 ordinary shares to Redtop Holdings Limited, a portfolio company of Leonard Green & Partners, L.P., representing approximately 35% pro forma fully diluted ownership of Clarivate and (ii) approximately $2,078,084 in cash to fund the repayment of CPA Global's parent company outstanding debt of $2,055,822 and related interest swap termination fee of $22,262. Of the 218,306,663 ordinary shares issuable in the acquisition, Clarivate issued 210,357,918 ordinary shares as of October 1, 2020. There were 6,325,860 shares that were issued to Leonard Green & Partners, L.P. that were returned to Clarivate to fund an Employee Benefit Trust established for the CPA Global Phantom Equity Plan. Accordingly, these shares were excluded from purchase price consideration.
Issuance of 210,357,918 shares |  | $ | 6,565,477 |
Cash paid for repayment of CPA Global's parent company debt and related interest rate swap termination charge |  | 2,078,084 |
Total purchase price |  | 8,643,561 |
Cash acquired |  | (102,443) |
Total purchase price, net of cash acquired |  | $ | 8,541,118 |
The excess of the purchase price over the net tangible and intangible assets is recorded to Goodwill and primarily reflects the assembled workforce and expected synergies. Goodwill is not deductible for tax purposes. Total transaction costs incurred in connection with the acquisition of CPA Global were $525 and $0 for three months ended March 31, 2021 and 2020, respectively. The amount of Revenues, net and Net loss resulting from the acquisition that are attributable to the Company's stockholders and included in the Consolidated Statements of Operations and Comprehensive Loss were as follows:
| Three Months Ended March 31, 2021
Revenues, net(1) | $ | 152,576 |
Net loss attributable to the Company's stockholders(2) | $ | (49,049) |
(1) Includes $3,002 of a deferred revenue adjustment recognized during the three months ended March 31, 2021.
(2) The Net loss attributable to the Company's stockholders for the three months ended March 31, 2021 has been restated. See Note 27 - Restatement of Previously Issued Financial Statements for more information.
The purchase price allocation for the CPA Global acquisition as of the close date of October 1, 2020 is preliminary and may change upon completion of the determination of the fair value of assets acquired and liabilities assumed. The following table summarizes the preliminary purchase price allocation for this acquisition:
| Total
Accounts receivable | $ | 379,346 |
Prepaid expenses | 27,595 |
Other current assets | 38,414 |
Property and equipment, net | 12,288 |
Other intangible assets | 4,920,317 |
Deferred income taxes | 19,310 |
Other non-current assets | 7,280 |
Operating lease right-of-use assets | 30,649 |
Total assets | $ | 5,435,199 |
Accounts payable | 53,501 |
Accrued expenses and other current liabilities | 234,119 |
Current portion of deferred revenue | 179,619 |
Current portion of operating lease liabilities | 7,738 |
Non-current portion of deferred revenue | 16,786 |
Deferred income taxes(2) | 305,635 |
Other non-current liabilities | 24,307 |
Operating lease liabilities | 23,615 |
Total liabilities | 845,320 |
Fair value of acquired identifiable assets and liabilities | $ | 4,589,879 |
Purchase price, net of cash(1) | $ | 8,541,118 |
Less: Fair value of acquired identifiable assets and liabilities | 4,589,879 |
Goodwill | $ | 3,951,239 |
(1) The Company acquired cash of $102,443, including $3,400 of restricted cash to fund fixed cash awards and certain taxes related to the phantom equity compensation plan as part of CPA Global acquisition accounting.
(2) Separate from the CPA Global Equity Plan restatement in Amendment No 2, the Company corrected the understatement of deferred tax liabilities of $3,328 with an offset to goodwill relating to the CPA Global acquisition opening balance sheet on October 1, 2020. See Note 27 - Restatement of Previously Issued Financial Statements for further details.
During the three months ended March 31, 2021, the Company recorded measurement period adjustments related to the valuation of cash, accounts receivables, accrued expenses legal accruals, and deferred revenue with a corresponding net decrease to goodwill in the amount of $8,121. The valuation of CPA Global's opening balance sheet cash and accounts receivable increased by $433 and $6,222, respectively, which decreased CPA Global's Goodwill balance by a similar amount. There was a $1,289 and $361 increase in the legal accrual and deferred income taxes liability, respectively, which increased CPA Global's Goodwill balance. There was a decrease in accrued expenses and deferred revenue in the amount of $2,358 and $756, respectively, which decreased CPA Global's Goodwill balance. The identifiable intangible assets acquired are amortized on a straight-line basis over their estimated useful lives. The following table summarizes the estimated fair value of CPA Global’s identifiable intangible assets acquired and their remaining amortization period (in years):
| Fair Value as of October 1, 2020 |  | Remaining Range of Years
Customer relationships | $ | 4,643,306 |  |  | 17-23
Technology | 266,224 |  |  | 6-14
Trademarks | 10,787 |  |  | 2-17
Total identifiable intangible assets | $ | 4,920,317 |  |  |
Acquisition of Beijing IncoPat On October 26, 2020, the Company acquired 100% of the equity voting interest in Beijing IncoPat Technology Co., Ltd. (“IncoPat”). IncoPat is a leading patent information service provider in China via cash on hand. IncoPat is complementary to Clarivate’s intellectual property portfolio. The Company paid $52,133 in cash to acquire IncoPat. As of December 31, 2020 and March 31, 2021, $6,313 of the consideration is held in escrow and will be paid in a future period. Until this balance is paid it will be held in restricted cash with the offsetting liability within accrued expenses and other current liabilities. The excess of the purchase price over the net tangible and intangible assets is recorded to Goodwill and primarily reflects the assembled workforce and expected synergies. Goodwill is not deductible for tax purposes. Total transactions costs incurred in connection with the acquisition of IncoPat were immaterial and $0 for the three months ended March 31, 2021 and 2020, respectively. IncoPat contributed revenues of $2,236 and a net loss of $73 to the Company's March 31, 2021 results and did not have an impact on March 31, 2020 results. The purchase price allocation for the IncoPat acquisition as of the close date of October 26, 2020 is preliminary and may change upon completion of the determination of the fair value of assets acquired and liabilities assumed. The following table summarizes the preliminary purchase price allocation for the acquisition:
| Total
Accounts receivable | $ | 1,132 |
Prepaid expenses | 168 |
Other current assets | 100 |
Property and equipment, net | 354 |
Other intangible assets | 21,957 |
Other non-current assets | 283 |
Total assets | $ | 23,994 |
Accounts payable | 73 |
Accrued expenses and other current liabilities | 843 |
Current portion of deferred revenue | 6,334 |
Deferred income taxes | 4,802 |
Other non-current liabilities | 283 |
Total liabilities | $12,335
Fair value of acquired identifiable assets and liabilities | $ | 11,659 |
Purchase price, net of cash(1) | 52,133 |
Less: Fair value of acquired identifiable assets and liabilities | 11,659 |
Goodwill | $ | 40,474 |
(1) The Company acquired cash of $844. |
The identifiable intangible assets acquired are amortized on a straight-line basis over their estimated useful lives. The following table summarizes the estimated fair value of Beijing IncoPat’s identifiable intangible assets acquired and their remaining weighted-average amortization period (in years):
| Fair Value as of October 26, 2020 |  | Remaining Amortization Period (in years)
Customer relationships | $ | 19,989 |  |  | 11
Existing technology | $ | 1,892 |  |  | 6
Trade names | $ | 76 |  |  | 2
Total identifiable intangible assets | $ | 21,957 |  |  |
Acquisition of Hanlim IPS Co., LTC On November 23, 2020, the Company acquired 100% of the equity voting interest in Hanlim IPS Co., LTC ("Hanlim IPS") Hanlim IPS is a patent research and consulting services provider in South Korea. The acquisition's purpose is to accelerate innovation in South Korea by offering a more comprehensive range of IP information and insights solutions. The Company paid $9,254 in cash to acquire Hanlim IPS. The excess of the purchase price over the net tangible and intangible assets is recorded to Goodwill and primarily reflects the assembled workforce and expected synergies. Goodwill is not deductible for tax purposes. Total transactions costs incurred in connection with the acquisition of Hanlim were immaterial and $0 for the three months ended March 31, 2021 and 2020, respectively. Hanlim IPS contributed revenue of $291 and net income of $19 to the Company's March 31, 2021 results and did not have an impact on March 31, 2020 results. The purchase price allocation for the Hanlim IPS acquisition as of the close date of November 23, 2020 is preliminary and may change upon completion of the determination of the fair value of assets acquired and liabilities assumed. The following table summarizes the preliminary purchase price allocation for this acquisition:
| Total
Accounts receivable | $ | 44 |
Prepaid expenses | 7 |
Other current assets | 844 |
Property and equipment, net | 75 |
Other intangible assets | 8,805 |
Other non-current assets | 94 |
Total assets | $ | 9,869 |
Accounts payable | 27 |
Accrued expenses and other current liabilities | 1,512 |
Deferred income taxes | 1,937 |
Total liabilities | 3,476 |
Fair value of acquired identifiable assets and liabilities | $ | 6,393 |
Purchase price, net of cash(1) | 9,254 |
Less: Fair value of acquired identifiable assets and liabilities | 6,393 |
Goodwill | $ | 2,861 |
(1)The Company acquired cash of $2,191. |
The identifiable intangible assets acquired are amortized on a straight-line basis over their estimated useful lives. The following table summarizes the estimated fair value of Hanlim’s identifiable intangible assets acquired and their remaining amortization period (in years):
| Fair Value as of November 23, 2020 |  | Remaining Range of Years
Customer relationships | $ | 7,832 |  |  | 11-13
Trade name | 15 |  |  | 2
Non-compete agreements | 958 |  |  | 5
Total identifiable intangible assets | $ | 8,805 |  |  |

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