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Transactions | 12 Months Ended
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Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Transactions | Transactions Business Combinations Implantable Provider Group On August 1, 2022, the Company completed its acquisition of IPG, including 100% of the voting equity interests. IPG is a leader in providing surgical management solutions for musculoskeletal conditions. The transaction is expected to accelerate our strategy to become a leading provider of value-based specialty care solutions as well as diversify our revenue streams with a larger customer portfolio. The transaction is expected to deepen our capabilities, allowing us to cross-sell across customers and enhance our value proposition to partners. Total acquisition consideration, net of cash on hand and certain closing adjustments, was $461.7 million, based on the closing price of the Company’s Class A common stock on the NYSE on August 1, 2022. The acquisition consideration consisted of $256.5 million of cash consideration, 3.7 million shares of Class A common stock, fair valued at $130.2 million as of August 1, 2022, and an earn-out of up to $87.0 million, fair valued at $75.0 million as of August 1, 2022 is payable in cash and/or shares of the Company’s Class A Common Stock, at the Company’s option. See Note 18 for additional information regarding the fair value determination of the earn-out consideration. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of August 1, 2022, as follows (in thousands):
Purchase consideration:
Cash | $ | 256,488 |
Fair value of Class A common stock issued | 130,175 |
Fair value of contingent consideration | 75,000 |
Total consideration | $ | 461,663 |
Tangible assets acquired: |
Accounts receivable | 34,155 |
Prepaid expenses and other current assets | 636 |
Other non-current assets | 1,393 |
Total tangible assets acquired | 36,184 |
Identifiable intangible assets acquired: |
Customer relationships | 154,000 |
Technology | 23,900 |
Corporate trade name | 17,800 |
Total identifiable intangible assets acquired | 195,700 |
Liabilities assumed: |
Accounts payable | 7,997 |
Accrued liabilities | 8,083 |
Accrued compensation and employee benefits | 423 |
Deferred tax liabilities, net | 48,671 |
Deferred revenue | 321 |
Operating lease liabilities | 1,323 |
Total liabilities assumed | 66,818 |
Goodwill | 296,597 |
Net assets acquired | $ | 461,663 |
Pro forma financial information has not been presented for the IPG acquisition as the impact to the Company’s consolidated financial statements was not material. The fair value of the receivables acquired, as shown in the table above, approximates the gross contractual amounts and is expected to be collectible in full. Identifiable intangible assets associated with customer relationships, technology and the corporate trade name will be amortized on a straight-line basis over their preliminary estimated useful lives of 20 years, 5 years, and 15 years, respectively. The customer relationships are primarily attributable to existing contracts with current customers. The technology consists primarily of a proprietary customer relationship management and analytics platform that supports reporting to payors with respect to medical device pricing and associated analytics. The corporate trade name reflects the value that we believe the IPG brand name carries in the market. The fair value of the intangible assets was determined using the income approach and the relief from royalty approach. The income approach estimates fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The relief from royalty approach estimates the fair value of an asset by calculating how much an entity would have to spend to lease a similar asset. Goodwill is calculated as the difference between the acquisition date fair value of the total consideration and the fair value of the net assets acquired and represents the future economic benefits that we expect to achieve as a result of the acquisition. The goodwill is attributable primarily to cross-selling opportunities and the acquired assembled workforce and was all allocated to the Clinical Solutions segment. The Company received carryover tax basis in the assets and liabilities acquired; accordingly, the Company recognized net deferred tax liabilities associated with the difference between the book basis and the tax basis for the assets and liabilities acquired. The goodwill is not deductible for tax purposes. Additionally, a discrete tax benefit of $46.8 million was recorded in the consolidated statements of operations and comprehensive income (loss) for the year December 31, 2022, to account for the valuation allowance release primarily related to the acquired intangible assets, which resulted in a deferred tax liability that provided a source of income supporting realization of other deferred tax assets. The amounts above reflect management’s preliminary estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed. As of December 31, 2022, we had not finalized the determination of fair values allocated to the acquired intangible assets and deferred tax liability. Any necessary adjustments will be finalized within one year from the date of acquisition. Vital Decisions On October 1, 2021, the Company completed its acquisition of Vital Decisions, including 100% of the voting equity interests. Vital Decisions is a leading provider of technology-enabled advance care planning services, ensuring that the care of individuals with serious illness aligns with their values and changing preferences throughout their health journey and, in particular, as they approach end-of-life decisions. The transaction is expected to deepen our capabilities, allowing us to cross-sell across customers and enhance our value proposition to partners. Total acquisition consideration, net of cash on hand and certain closing adjustments, was $117.7 million, based on the closing price of the Company’s Class A common stock on the NYSE on October 1, 2021. The acquisition consideration consisted of $46.5 million of cash consideration, 1.8 million shares of Class A common stock, fair valued at $56.6 million as of October 1, 2021, and an earn-out of up to $45.0 million, fair valued at $14.6 million as of October 1, 2021 is payable in cash and/or shares of the Company’s Class A Common Stock, at the Company’s option. See Note 18 for additional information regarding the fair value determination of the earn-out consideration. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of October 1, 2021, as follows (in thousands):
Purchase consideration:
Cash | $ | 46,500 |
Fair value of Class A common stock issued | 56,626 |
Fair value of contingent consideration | 14,600 |
Total consideration | $ | 117,726 |
Tangible assets acquired: |
Cash and cash equivalents | $ | 1,430 |
Accounts receivable | 3,301 |
Prepaid expenses and other current assets | 78 |
Other non-current assets | 2,564 |
Total tangible assets acquired | 7,373 |
Identifiable intangible assets acquired: |
Customer relationships | 32,500 |
Technology | 5,000 |
Corporate trade name | 2,500 |
Total identifiable intangible assets acquired | 40,000 |
Liabilities assumed: |
Accounts payable | 93 |
Accrued liabilities | 661 |
Accrued compensation and employee benefits | 970 |
Deferred tax liabilities, net | 499 |
Deferred revenue | 2,000 |
Operating lease liabilities | 2,712 |
Total liabilities assumed | 6,935 |
Goodwill | 77,288 |
Net assets acquired | $ | 117,726 |
Pro forma financial information has not been presented for the Vital Decisions acquisition as the impact to the Company’s consolidated financial statements was not material. The fair value of the receivables acquired, as shown in the table above, approximates the gross contractual amounts and is expected to be collectible in full. Identifiable intangible assets associated with customer relationships, technology and corporate trade names will be amortized on a straight-line basis over their preliminary estimated useful lives of 13 years, 5 years, and 15 years, respectively. The customer relationships are primarily attributable to existing contracts with current customers. The technology consists primarily of a proprietary advance care planning documentation portal where patients can input information, and doctor/patient conversations are populated for later reference. The corporate trade name reflects the value that we believe the Vital Decisions brand name carries in the market. The fair value of the intangible assets was determined using the income approach and the relief from royalty approach. The income approach estimates fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The relief from royalty approach estimates the fair value of an asset by calculating how much an entity would have to spend to lease a similar asset. Goodwill is calculated as the difference between the acquisition date fair value of the total consideration and the fair value of the net assets acquired and represents the future economic benefits that we expect to achieve as a result of the acquisition. The goodwill is attributable primarily to cross-selling opportunities and the acquired assembled workforce and was all allocated to the Clinical Solutions segment. Goodwill is considered to be an indefinite lived asset. $69.6 million of the goodwill recorded on the transaction is deductible for tax purposes.

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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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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