XML 28 R12.htm IDEA: XBRL DOCUMENT
v3.24.0.1

Acquisition of Businesses | 12 Months Ended
--- | ---
Dec. 31, 2023
Business Combinations [Abstract] |
Acquisition of Businesses | Acquisition of Businesses The acquisitions of our businesses are accounted for under the acquisition method of accounting. For each new platform acquisition, the Company typically structures the transaction so that a newly created holding company acquires 100% of the equity interests in the acquired business. The entirety of the purchase consideration is paid by the newly created holding company to the selling shareholders. The total purchase consideration is the amount paid to the selling shareholders and we will, from time to time, allow the selling shareholder to reinvest a portion of their proceeds alongside the Company at the same price per share, into the holding company that acquires the target business. Once the acquisition is complete, the selling shareholders no longer hold equity interests in the acquired company, but rather hold noncontrolling interest in the holding company that acquired the target business. Because the selling shareholders are investing in the transaction alongside the Company at the same price per share as the Company and are not retaining their existing equity in the acquired business, the Company includes the amount provided by noncontrolling shareholders in the total purchase consideration. A component of our acquisition financing strategy that we utilize in acquiring the businesses we own and manage is to provide both equity capital and debt capital, raised at the parent level, typically through our existing credit facility. The debt capital is in the form of “intercompany loans” made by the LLC to the newly created holding company and the acquired business and are due from the newly created holding company and the acquired business, and payable to the LLC by the newly created holding company and the acquired business. The selling shareholders of the acquired businesses are not a party to the intercompany loan agreements nor do they have any obligation to repay the intercompany loans. These intercompany loans eliminate in consolidation and are not reflected on the Company's consolidated balance sheets. Acquisition of PrimaLoft On July 12, 2022, the LLC, through its newly formed indirect acquisition subsidiary, Relentless Intermediate, Inc. ("PrimaLoft Buyer"), acquired PrimaLoft Technologies Holdings, Inc. (“PrimaLoft”) pursuant to a Stock Purchase Agreement (the “PrimaLoft Purchase Agreement”), dated June 4, 2022, by and between PrimaLoft Buyer and VP PrimaLoft Holdings, LLC ("PrimaLoft Seller"). The Company acquired PrimaLoft for a total purchase price, including proceeds from noncontrolling shareholders, of approximately $541.1 million, before working capital and other customary adjustments. The Company funded the acquisition through a draw on its 2022 Revolving Credit Facility and the proceeds from its new $400 million 2022 Term Loan Facility. PrimaLoft management invested in the transaction along with the Company, representing 9.2% of the initial equity interest in PrimaLoft. Concurrent with the closing, the Company provided a credit facility to PrimaLoft pursuant to which a secured revolving loan commitment and secured term loan were made available to PrimaLoft (the "PrimaLoft Credit Agreement"). The initial revolving loan and term loan commitments under these facilities on the closing date were $178 million. CGM received integration service fees of $4.8 million which were payable quarterly over the twelve-month period beginning September 30, 2022. The Company incurred $5.7 million of transaction costs in conjunction with the PrimaLoft acquisition, which was included in selling, general and administrative expense in the consolidated statements of operations during the third quarter of 2022. PrimaLoft, Inc. is a branded, advanced material technology company based in Latham, New York and is focused on the research and innovative development of high-performance material solutions, specializing in insulations and fabrics. The results of operations of PrimaLoft have been included in the consolidated results of operations since the date of acquisition. PrimaLoft's results of operations are reported as a separate operating segment as a branded consumer business. The table below provides the recording of the fair value of assets acquired and liabilities assumed as of the date of acquisition.
(in thousands) |  | Preliminary Purchase Price Allocation |  | Measurement Period Adjustments |  | Final Purchase Price Allocation
Purchase Consideration |  | $ | 539,576 |  |  | $ | 1,536 |  |  | $ | 541,112 |
Fair value of identifiable assets acquired: |  |  |  |  |  |
Cash |  | $ | 6,951 |  |  | $ | — |  |  | $ | 6,951 |
Accounts receivable (1) |  | 2,992 |  |  | — |  |  | 2,992 |
Inventory |  | 1,991 |  |  | — |  |  | 1,991 |
Property, plant and equipment |  | 1,058 |  |  | — |  |  | 1,058 |
Intangible assets |  | 248,200 |  |  | 58,700 |  |  | 306,900 |
Other current and noncurrent assets |  | 3,581 |  |  | (1,187) |  |  | 2,394 |
Total identifiable assets |  | 264,773 |  |  | 57,513 |  |  | 322,286 |
Fair value of liabilities assumed: |  |  |  |  |  |
Current liabilities |  | 8,865 |  |  | (1,080) |  |  | 7,785 |
Other liabilities |  | 360 |  |  | — |  |  | 360 |
Deferred tax liabilities |  | 51,268 |  |  | 12,108 |  |  | 63,376 |
Total liabilities |  | 60,493 |  |  | 11,028 |  |  | 71,521 |
Net identifiable assets acquired |  | 204,280 |  |  | 46,485 |  |  | 250,765 |
Goodwill |  | $ | 335,296 |  |  | $ | (44,949) |  |  | $ | 290,347 |
Acquisition consideration |  |  |  |  |  |
Purchase price |  | $ | 530,000 |  |  | $ | — |  |  | $ | 530,000 |
Cash acquired |  | 7,319 |  |  | (368) |  |  | 6,951 |
Net working capital adjustment |  | 2,257 |  |  | 1,904 |  |  | 4,161 |
Total purchase consideration |  | $ | 539,576 |  |  | $ | 1,536 |  |  | $ | 541,112 |
(1) The fair value of accounts receivable approximates book value acquired. The allocation of the purchase price presented above is based on management's estimate of the fair values using valuation techniques including the income, cost and market approach. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates and estimated discount rates. Current and noncurrent assets and current and other liabilities are valued at historical carrying values, which approximate fair value. Inventory is recognized at fair value, with finished goods stated at selling price less an estimated cost to sell. Property, plant and equipment is valued at fair value which approximates book value and will be depreciated on a straight-line basis over the remaining useful lives of the assets. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future synergies. The goodwill of $290.3 million reflects the strategic fit of PrimaLoft in the Company's branded consumer business and is not expected to be deductible for income tax purposes. The PrimaLoft purchase price allocation was finalized in 2023. The intangible assets recorded related to the PrimaLoft acquisition are as follows (in thousands):
Intangible Assets |  | Fair Value |  | Estimated Useful Lives
Customer relationships |  | $ | 209,100 |  |  | 15 years
Tradename |  | 48,200 |  |  | 20 years
Technology |  | 49,100 |  |  | 11 years
In-process research and development (1) |  | 500 |  |  | N/a
|  | $ | 306,900 |  |  |
(1) In-process research and development is considered indefinite lived until the underlying technology becomes viable, at which point the intangible asset will be amortized over the expected useful life. The customer relationships were considered the primary intangible asset and was valued at $209.1 million using a multi-period excess earnings method. The technology was valued at $49.1 million using a mul ti-period excess earnings methodology with an assumed obsolescence factor. The tradename was valued at $48.2 million using a multi period excess earnings method. The multi period excess earnings method assumes an asset has value to the extent that it enables its owners to earn a return in excess of the other assets utilized in the business. Acquisition of Lugano Diamonds On September 3, 2021, the LLC, through its newly formed acquisition subsidiaries, Lugano Holding, Inc., a Delaware corporation (“Lugano Holdings”), and Lugano Buyer, Inc., a Delaware corporation (“Lugano Buyer”) and a wholly-owned subsidiary of Lugano Holdings, acquired the issued and outstanding shares of stock of Lugano Diamonds & Jewelry Inc. ("Lugano") other than certain rollover shares (the “Lugano Transaction”). The Lugano Transaction was effectuated pursuant to a Stock Purchase Agreement (the “Lugano Purchase Agreement”), also dated September 3, 2021, by and among Lugano Buyer, the sellers named therein (“Lugano Sellers”) and Mordechai Haim Ferder in his individual capacity and as initial representative of the Lugano Sellers. Lugano is a leading designer, manufacturer and marketer of high-end, one-of-a-kind jewelry sought after by some of the world’s most discerning clientele. Lugano conducts sales via its own retail salons as well as pop-up showrooms at Lugano-hosted or sponsored events in partnership with influential organizations in the equestrian, art and philanthropic community. Lugano is headquartered in Newport Beach, California. The LLC made loans to, and purchased a 60% equity interest in, Lugano. The purchase price, including proceeds from noncontrolling shareholders, was $265.1 million. The selling shareholders invested in the transaction along with the LLC, representing 40% initial noncontrolling interest on both a primary and fully diluted basis. The fair value of the noncontrolling interest was determined based on the enterprise value of the acquired entity multiplied by the ratio of the number of shares acquired by the minority holders to total shares. The transaction was accounted for as a business combination. CGM acted as an advisor to the LLC in the acquisition and continued to provide integration services during the first year of the LLC's ownership of Lugano. CGM received integration service fees of $2.3 million which were payable quarterly over a twelve month period as services were rendered beginning December 31, 2021. The LLC incurred $1.8 million of transaction costs in conjunction with the Lugano acquisition, which was included in selling, general and administrative expense in the consolidated statements of operations during the third quarter of 2021. The LLC funded the acquisition with cash on hand and a $120 million draw on its 2021 Revolving Credit Facility. The results of operations of Lugano have been included in the consolidated results of operations since the date of acquisition. Lugano's results of operations are reported as a separate operating segment as a branded consumer business. The table below provides the recording of assets acquired and liabilities assumed as of the date of acquisition.
(in thousands) |  | Preliminary Purchase Price Allocation |  | Measurement Period Adjustments |  | Final Purchase Price Allocation |
Purchase Consideration |  | $ | 267,554 |  |  | $ | (2,420) |  |  | $ | 265,134 |  |
Fair value of identifiable assets acquired: |  |  |  |  |  |  |
Cash |  | $ | 1,433 |  |  | $ | — |  |  | $ | 1,433 |  |
Accounts receivable (1) |  | 20,954 |  |  | — |  |  | 20,954 |  |
Inventory |  | 85,794 |  |  | 9,419 |  |  | 95,213 |  |
Property, plant and equipment |  | 2,743 |  |  | 392 |  |  | 3,135 |  |
Intangible assets |  | — |  |  | 82,454 |  |  | 82,454 |  |
Other current and noncurrent assets |  | 4,979 |  |  | 4,114 |  |  | 9,093 |  |
Total identifiable assets |  | $ | 115,903 |  |  | $ | 96,379 |  |  | $ | 212,282 |  |
Fair value of liabilities assumed: |  |  |  |  |  |  |
Current liabilities |  | $ | 7,129 |  |  | $ | 58 |  |  | $ | 7,187 |  |
Other liabilities |  | — |  |  | 3,175 |  |  | 3,175 |  |
Deferred tax liabilities |  | — |  |  | 23,123 |  |  | 23,123 |  |
Total liabilities |  | $ | 7,129 |  |  | $ | 26,356 |  |  | $ | 33,485 |  |
Net identifiable assets acquired |  | $ | 108,774 |  |  | $ | 70,023 |  |  | $ | 178,797 |  |
Goodwill |  | $ | 158,780 |  |  | $ | (72,443) |  |  | $ | 86,337 |  |
Acquisition consideration |  |  |  |  |  |
Purchase price |  | $ | 256,000 |  |  | $ | — |  |  | $ | 256,000 |
Cash acquired |  | 1,554 |  |  | (120) |  |  | 1,434 |
Net working capital adjustment |  | 10,000 |  |  | (2,300) |  |  | 7,700 |
Total purchase consideration |  | $ | 267,554 |  |  | $ | (2,420) |  |  | $ | 265,134 |
(1) The fair value of accounts receivable approximates book value acquired. The allocation of the purchase price presented above is based on management's estimate of the fair values using valuation techniques including the income, cost and market approach. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates and estimated discount rates. Current and noncurrent assets and current and other liabilities are valued at historical carrying values which approximate fair value. Inventory is recognized at fair value, with finished goods stated at selling price less an estimated cost to sell. Property, plant and equipment is valued through a purchase price appraisal and will be depreciated on a straight-line basis over the respective remaining useful lives of the assets. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future synergies. The goodwill of $86.3 million reflects the strategic fit of Lugano in the Company's branded consumer business and is not expected to be deductible for income tax purposes. The intangible assets recorded related to the Lugano acquisition are as follows (in thousands):
Intangible Assets |  | Fair Value |  | Estimated Useful Lives
Tradename |  | $ | 48,433 |  |  | 18 years
Customer relationships |  | 34,021 |  |  | 15 years
|  | $ | 82,454 |  |  |
The tradename was considered the primary intangible asset and was valued at $48.4 million using a multi period excess earnings method. The customer relationships were valued at $34.0 million using a multi period excess earnings method. The multi period excess earnings method assumes an asset has value to the extent that it enables its owners to earn a return in excess of the other assets utilized in the business. Unaudited pro forma information The following unaudited pro forma data for the years ended December 31, 2022 and 2021 gives effect to the acquisitions of PrimaLoft and Lugano as described above, as if these transactions had been completed as of January 1, 2021. The pro forma data gives effect to historical operating results with adjustments to interest expense, amortization and depreciation expense, management fees and related tax effects. The information is provided for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the transaction had been consummated on the date indicated, nor is it necessarily indicative of future operating results of the consolidated companies, and should not be construed as representing results for any future period.
|  | Years ended
(in thousands, except per share data) |  | December 31, 2022 |  | December 31, 2021
Net sales |  | $ | 2,064,315 |  |  | $ | 1,860,442 |
Gross profit |  | $ | 816,840 |  |  | $ | 736,712 |
Operating income |  | $ | 140,643 |  |  | $ | 136,011 |
Net income from continuing operations |  | $ | 51 |  |  | $ | 40,173 |
Net income (loss) from continuing operations attributable to Holdings |  | $ | (10,755) |  |  | $ | 28,147 |
Basic and fully diluted net loss per share from continuing operations attributable to Holdings |  | $ | (0.76) |  |  | $ | (0.59) |
Other acquisitions Velocity King's Camo - On July 8, 2022, Velocity acquired the assets of King's Camo LC, a manufacturer of outdoor performance apparel and gear, for a purchase price of approximately $25.2 million and included a potential earnout of $3.0 million. The final earnout amount was $1.3 million and was paid in the second quarter of 2023.The acquisition and related transaction costs were funded through an additional term loan of $25.7 million under the Velocity intercompany credit agreement. Velocity paid approximately $0.2 million in transaction fees. Velocity recorded a purchase price allocation, including goodwill of approximately $9.7 million, which is expected to be deductible for income tax purposes, and intangible assets of $7.1 million. The remainder of the purchase consideration was allocated to net assets acquired. The purchase price allocation was finalized in the fourth quarter of 2022. Altor Solutions Plymouth Foam - On October 5, 2021, Altor acquired Plymouth Foam, LLC (“Plymouth”), a manufacturer of protective packaging and componentry, for an enterprise value of approximately $56.0 million, excluding customary closing adjustments. The acquisition and related transaction costs were funded through an additional term loan of $52.0 million under the Altor intercompany credit agreement and a draw on the existing Altor intercompany revolving credit facility with the LLC. Altor paid approximately $0.4 million in transaction fees in connection with the acquisition of Plymouth. Plymouth was founded in 1978 and is based in Plymouth, Wisconsin. Plymouth supplies a wide array of high value products, including custom protective packaging, cold chain packaging and internal components made from expanded polystyrene and expanded polypropylene. Plymouth’s complementary product portfolio will allow Altor to be able to further expand its business and capabilities. Altor recorded a purchase price allocation, including goodwill of approximately $15.5 million, which is not expected to be deductible for income tax purposes, and intangible asset of $20.1 million. The purchase price allocation was finalized in the first quarter of 2022. Arnold Ramco - On March 1, 2021, Arnold acquired Ramco Electric Motors, Inc. ("Ramco"), a manufacturer of stators, rotors and full electric motors, for a purchase price of approximately $34.3 million. The acquisition and related transaction costs were funded through an additional equity investment in Arnold by the LLC of $35.5 million. Ramco was founded in 1987 and is based in Greenville, Ohio. Ramco supplies their custom electric motor solutions for general industrial, aerospace and defense, and oil and gas end-markets. Ramco’s complementary product portfolio will allow Arnold to be able to offer more comprehensive, turnkey solutions to their customers. In connection with the acquisition, Arnold recorded a purchase price allocation of $12.4 million of goodwill, which is not expected to be deductible for income tax purposes and $12.7 million in intangible assets. The remainder of the purchase consideration was allocated to net assets acquired. The purchase price allocation was finalized in the fourth quarter of 2021.

X
- 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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration