ACQUISITION AND DIVESTITURES

12 Months Ended

Dec. 31, 2022

Acquisition – On June 1, 2021, we acquired all of the equity of First American Payment Systems, L.P. (First American) in a cash transaction for $958,514, net of cash, cash equivalents, restricted cash and restricted cash equivalents acquired. First American is a large-scale payments technology company that provides partners and merchants with comprehensive in-store, online and mobile payment solutions. The transaction was funded by our revolving credit facility and additional debt we issued in June 2021 (Note 13). The acquisition resulted in non-deductible goodwill as First American provides an end-to-end payments technology platform, which provides significant leverage to accelerate organic growth. Transaction costs related to the acquisition totaled $18,913 in 2021. The goodwill and results of operations of First American from the date of acquisition are included in the Payments segment.

Information regarding goodwill by reportable business segment and the useful lives of acquired intangibles can be found in Note 3. Information regarding the calculation of the estimated fair values of the acquired intangibles can be found in Note 8.

The acquisition was accounted for as a business combination and the allocation of the purchase price to the assets acquired and liabilities assumed was finalized during the quarter ended June 30, 2022. We recorded measurement period adjustments during 2022 that increased deferred income tax liabilities by $1,343, with the offset to goodwill. These measurement period adjustments did not have a significant impact on the 2022 consolidated statement of income.

The following illustrates the final allocation of the purchase price, to the assets acquired and liabilities assumed:


(in thousands)	Purchase price allocation
Trade accounts receivable	$	27,296
Other current assets	8,533
Property, plant and equipment	9,873
Operating lease assets	24,396
Intangible assets:
Customer relationships	127,000
Partner relationships	72,000
Technology-based intangibles	65,000
Trade names	21,000
Internal-use software	6,111
Total intangible assets	291,111
Goodwill	728,516
Other non-current assets	350
Accounts payable	(18,475)
Funds held for customers	(9,428)
Accrued liabilities	(23,460)
Operating lease liabilities, non-current	(21,316)
Deferred income taxes	(54,506)
Other non-current liabilities	(4,376)
Payment for acquisition, net of cash, cash equivalents, restricted cash and restricted cash equivalents acquired of $15,841	$	958,514

Operating results for First American for the years ended December 31 were as follows:


(in thousands)	2022		2021
Revenue	$	347,709	$	194,976
Net income attributable to Deluxe	5,794		1,806

The above results for the year ended December 31, 2022 include restructuring and integration costs of $5,452 in 2022.

Pro forma financial information (unaudited) – During the first quarter of 2022, we corrected errors in the previously reported unaudited pro forma results of operations related to the First American acquisition. These errors related to the amount of historical First American revenue and net income included for the pre-acquisition periods, as well as errors in the adjustments related to the amortization of intangibles, interest expense on the acquisition financing, and transaction costs. For the year ended December 31, 2021, these corrections decreased pro forma revenue by $26,335 and increased pro forma net income attributable to Deluxe by $10,138. For the year ended December 31, 2020, the corrections decreased pro forma revenue by $3,027 and increased net loss attributable to Deluxe by $9,082.

The following unaudited pro forma financial information summarizes our consolidated results of operations for the years ended December 31 as though the acquisition occurred on January 1, 2020:


(in thousands)	2021		2020
Revenue	$	2,156,313	$	2,079,103
Net income (loss) attributable to Deluxe	74,843		(54,489)

The unaudited pro forma financial information was prepared in accordance with the accounting policies described in Note 1. The pro forma information includes adjustments to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from January 1, 2020. The pro forma information also includes adjustments to reflect the additional interest expense on the debt we issued to fund the acquisition (Note 13), and.the acquisition transaction costs we incurred during 2021 are reflected in the 2020 pro forma results.

This pro forma financial information is for informational purposes only. It does not reflect the integration of the businesses or any synergies that may result from the acquisition. As such, it is not indicative of the results of operations that would have been achieved had the acquisition been consummated on January 1, 2020. In addition, the pro forma amounts are not indicative of future operating results.

2022 divestitures – In May 2022, we completed the sale of our Australian web hosting business for cash proceeds of $17,620, net of costs of the sale. This business generated annual revenue in our Data Solutions segment of $23,766 during 2021. During 2022, we recognized a pretax gain of $15,166 on this sale. The assets and liabilities sold were not significant to our consolidated balance sheet.

In April 2022, we sold the assets of our Promotional Solutions strategic sourcing business, and in August 2022, we sold the assets of our Promotional Solutions retail packaging business. These businesses generated annual revenue of approximately $29,000 during 2021. Neither the gain on these sales nor the assets and liabilities sold were significant to our consolidated financial statements.

2023 divestiture – In January 2023, we entered into an agreement for the sale of our North American web hosting and logo businesses for an aggregate sales price of $42,000, plus up to $10,000 of additional proceeds contingent upon performance against certain conditions following the closing. We anticipate that the sale will close by March 31, 2023 and that we will recognize a gain on the sale. These businesses generated annual revenue of approximately $66,000 during 2022, primarily in our Data Solutions segment.

We believe that these divestitures allow us to focus our resources on the key growth areas of payments and data, while allowing us to optimize our operations.

Facility sale – In May 2022, we sold our former facility located in Lancaster, California for cash proceeds of $6,929, net of costs of the sale, and we recognized a pretax gain on the sale of $2,361 during 2022. The sale was a result of our continued real estate rationalization process.