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Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions Petal & Pup On August 9, 2019, the Company acquired 66.7% of the share capital of Petal & Pup Limited (“Petal & Pup”) for an aggregate cash consideration of AUD $29.4 million, net of cash acquired of AUD $3.1 million (US $19.9 million, net of cash acquired of $2.1 million) and consideration payable of AUD $0.9 million ($0.6 million). In connection with the IPO, the Company acquired the remaining 33.3% (refer to Note 1 for additional information). The acquisition expanded the Company’s customer following and products into online apparel for female customers in their twenties or thirties and provides the Company with an Australian brand that can be expanded into the North American market. The fair values of assets acquired, liabilities assumed and noncontrolling interest as of the date of the acquisition, are as follows:
Trade receivables | $ | 6 |
Inventory | 630 |
Prepaid expenses and other current assets | 78 |
Property and equipment, net | 93 |
Operating lease right-of-use assets | 430 |
Intangible assets | 7,695 |
Trade and other payables | (1,218) |
Deferred tax liability | (2,272) |
Current tax liabilities | (407) |
Operating lease liabilities | (430) |
Total net assets acquired | 4,605 |
Fair value of noncontrolling interest | (8,314) |
Goodwill | 24,214 |
Total purchase price, net of cash acquired of $2,109 | $ | 20,505 |
The acquisition was accounted for as a business combination. The following table summarizes the identifiable intangible assets acquired as of the date of the acquisition:
| Fair Value at Acquisition Date |  | Amortization Period
Brand | $ | 5,112 |  |  | 10 years
Customer relationships | 2,583 |  |  | 4 years
Total intangible assets | $ | 7,695 |  |  |
The fair value of the noncontrolling interest is determined by measuring the fair value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition, adjusted for a discount to factor the non-marketable, noncontrolling holding. The results of operations of Petal & Pup are included in the Company’s consolidated results beginning August 9, 2019. Total net sales of $9.4 million and net income attributable to the Company of less than $0.1 million of Petal & Pup are included in the accompanying consolidated statement of income for the year ended December 31, 2019. Goodwill of $24.2 million, none of which is deductible for tax purposes, represents the excess purchase price over the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill arising from the acquisition consists largely of anticipated synergies related to combining with the Company’s existing operations. Total acquisition costs incurred by the Company in connection with the purchase primarily related to third-party legal, accounting and tax diligence fees, were $0.7 million. These costs are recorded in general and administrative expenses in the consolidated statement of income during the year ended December 31, 2019. Rebdolls On December 6, 2019, the Company acquired 100% of the share capital of Rebdolls, Inc. (“Rebdolls”), a New Jersey corporation, for $0.6 million, which consisted of upfront cash consideration of $0.5 million and the fair value of contingent consideration of $0.1 million. The conditions were ultimately not met in relation to the contingent consideration. The acquisition provides the Company with a brand that offers apparel with a full range of sizes from 0 to 32 with an emphasis on size inclusivity, focused on female customers age 18 to 34. As part of the purchase price allocation, the Company recorded $0.1 million in inventory, $0.1 million in identifiable intangible assets and $0.5 million in goodwill. The results of operations of Rebdolls, Inc. are included in the Company’s consolidated results beginning December 6, 2019. Total net sales of $0.1 million in 2019 and net loss attributable to the Company of $0.2 million are included in the accompanying consolidated statement of income for the year ended December 31, 2019. The acquisition costs incurred for this purchase agreement were immaterial. Culture Kings On March 31, 2021, pursuant to a share sale agreement, the Company, through its subsidiary CK Holdings, acquired a 55% ownership stake in Culture Kings. The previous shareholders of Culture Kings retained a 45% noncontrolling interest in Culture Kings by receipt of an equity interest in CK Holdings. The Company recognized goodwill as the excess of the fair value of the total purchase consideration and noncontrolling interests over the net fair value of the identifiable assets acquired and the liabilities assumed. The purchase price consisted of AUD $307.4 million ($235.9 million) in cash consideration and noncontrolling interest with a fair value of AUD $186.0 million ($142.7 million). In connection with the IPO, the Company completed a series of transactions in which the minority investors exchanged their interests in CK Holdings for newly issued shares of a.k.a. Brands Holding Corp. common stock (refer to Note 1 for additional information). Culture Kings is focused on street apparel aimed at the young adult age group and has a combination of online sales as well as stores based in Australia and expands the Company’s consumer market to include male consumers and further expansion in the United States. The following table sets forth the allocation of the total consideration to the identifiable tangible and intangible assets acquired and liabilities assumed, as of the date of the acquisition, with the excess recorded to goodwill:
Purchase consideration: |
Total purchase price, net of cash acquired of $8,831 | $ | 227,053 |
Fair value of noncontrolling interest | 142,717 |
Total consideration | $ | 369,770 |
Identifiable net assets acquired: |
Account receivable, net | $ | 625 |
Inventory (1) | 62,937 |
Prepaid expenses and other current assets | 4,800 |
Property and equipment, net | 8,048 |
Intangible assets, net (2) | 73,209 |
Operating lease right-of-use assets | 24,299 |
Accounts payable | (13,449) |
Deferred revenue | (141) |
Income taxes payable | (1,778) |
Other current liabilities | (2,533) |
Operating lease liabilities | (24,299) |
Deferred income taxes, net | (25,439) |
Accrued liabilities, non-current | (1,058) |
Net assets acquired | 105,221 |
Goodwill | $ | 264,549 |
The purchase price allocation includes significant judgments, assumptions and estimates to determine the fair value of assets acquired and liabilities assumed. The valuations involving the most significant assumptions, estimates and judgment are: (1)Inventory was adjusted by $15.1 million to step-up inventory cost to estimated fair value. The fair value of the inventory was determined utilizing the net realizable value method, which was based on the expected selling price of the inventory to customers adjusted for related disposal costs and a profit allowance for the post-acquisition selling effort. (2)The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:
| Estimated Fair Value |  | Annual Amortization Expense |  | Estimated Useful Life in Years
Brand names | $ | 68,354 |  |  | $ | 6,835 |  |  | 10 years
Customer relationships | 4,855 |  |  | 1,214 |  |  | 4 years
Total | $ | 73,209 |  |  |  |  |
Brand names are valued using a relief from royalty approach, which estimates the license fee that would need to be paid by Culture Kings if it was deprived of the brand names and domain names, and instead had to pay a license fee for their use. The fair value is the present value of the expected future license fee cash flows. Customer relationship intangible assets are valued using the multi-period excess earnings method, which is the present value of the projected cash flows that are expected to be generated by the existing intangible asset after reduction by an estimated fair rate of return on contributory assets required to generate the customer relationship revenues. Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates. Total acquisition costs incurred by the Company in connection with its purchase of Culture Kings primarily related to third-party legal, accounting and tax diligence fees, were $3.3 million. These costs are recorded in general and administrative expenses in the condensed consolidated statement of income for the year ended December 31, 2021. Goodwill of $264.5 million, none of which is deductible for tax purposes, represents the excess purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill arising from the acquisition consists largely of anticipated synergies related to combining with the Company’s existing operations. The fair value of the noncontrolling interest was determined by measuring the fair value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition, adjusted for a discount to factor the non-marketable, noncontrolling holding. The noncontrolling interest in Culture Kings contained a put right whereby the minority investors could have caused CK Holdings to purchase all of their units at a per unit price equal to six times the EBITDA of CK Holdings, calculated as of the twelve-month period ending on the end of the most recent fiscal quarter. The put right was only exercisable after December 31, 2023. In accordance with ASC 810, Consolidation, as this put right was redeemable outside of the Company’s control, the noncontrolling interest was classified outside the permanent equity section of the Company’s consolidated balance sheets prior to the IPO. In connection with the IPO, the Company completed a series of transactions in which the CK Holdings minority investors exchanged their interests in CK Holdings for newly issued shares of a.k.a. Brands Holding Corp. common stock, thereby eliminating the noncontrolling interest classified outside of permanent equity. Since the date of acquisition, March 31, 2021, the results of Culture Kings have been included in the Company’s consolidated results. The following amounts are included in the accompanying consolidated statement of income for the year ended December 31, 2021:
| Year Ended December 31, 2021
Net sales | $ | 196,471 |
Net loss | $ | (5,899) |
The unaudited pro forma financial information below is presented to illustrate the estimated effects of the acquisition of Culture Kings and the associated financing as if they had occurred on January 1, 2020:
| Year Ended December 31,
| 2021 |  | 2020
Net sales | $ | 613,390 |  |  | $ | 385,048 |
Net income attributable to a.k.a. Brands Holding Corp. | $ | 16,781 |  |  | $ | 9,238 |
Net income per share, basic and diluted: | $ | 0.17 |  |  | $ | 0.11 |
The pro forma information was prepared using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Since this pro forma financial information has been prepared based on preliminary estimates of consideration and fair values, including the identifiable intangibles, the actual amounts eventually recorded for the Culture Kings Acquisition may differ materially from the information herein. The unaudited pro forma financial information has been prepared for informational purposes only and is not indicative of what the Company’s results of operations would have been had the transactions occurred on January 1, 2020, nor does it project the results of operations of the combined company following the transaction. mnml On October 14, 2021, the Company acquired all of the equity interests of Third Estate LLC (“mnml”) for total consideration of $46.1 million, including cash consideration of $28.2 million, net of cash acquired of $0.6 million, and subject to working capital adjustments. The remaining consideration of $17.3 million was paid in the form of 2,057,695 shares of a.k.a. common stock. mnml is an LA-based streetwear brand that offers competitively priced on-trend wardrobe staples. This acquisition will help the Company continue its growth into the US market and provide opportunities for customer cross-sell. The estimated fair values of assets acquired and liabilities assumed as of the date of the acquisition, are as follows:
Accounts receivable, net | $ | 68 |
Inventory (1) | 7,321 |
Prepaid expenses and other current assets | 2,178 |
Other assets | 15 |
Intangible assets (2) | 14,300 |
Accounts payable | (504) |
Deferred income | (164) |
Accrued liabilities | (1,794) |
Assumed loan | (1,312) |
Sales and use tax liability | (1,100) |
Deferred income taxes, net | (3,159) |
Total net assets acquired | 15,849 |
Goodwill | 29,650 |
Total purchase price, net of cash acquired of $605 | $ | 45,499 |
The cash purchase consideration is subject to working capital adjustments that will be concluded before the one-year anniversary of the close of the transaction. The preliminary purchase price allocation includes significant judgments, assumptions and estimates to determine the fair value of assets acquired and liabilities assumed. The valuations involving the most significant assumptions, estimates and judgment are: (1)Inventory was adjusted by $1.9 million to step-up inventory cost to estimated fair value. The fair value of the inventory was determined utilizing the net realizable value method, which was based on the expected selling price of the inventory to customers adjusted for related disposal costs and a profit allowance for the post-acquisition selling effort. (2)The fair value of the acquired intangible assets was determined with the assistance of a valuation specialist and include:
| Fair Value at Acquisition Date |  | Amortization Period
Brand | $ | 11,800 |  |  | 10 years
Customer relationships | 2,500 |  |  | 3 years
Total intangible assets | $ | 14,300 |  |  |
The results of operations of mnml are included in the Company’s consolidated results beginning October 14, 2021. Total net sales of $11.6 million and net income attributable to the Company of $1.0 million of mnml are included in the accompanying consolidated statement of income for the year ended December 31, 2021. Goodwill of $29.7 million, none of which is deductible for tax purposes, represents the excess purchase price over the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed. The goodwill arising from the acquisition consists largely of anticipated synergies related to combining with the Company’s existing operations. Total acquisition costs incurred by the Company in connection with the purchase primarily related to third-party legal, accounting and tax diligence fees, were $1.3 million. These costs are recorded in general and administrative expenses in the consolidated statement of income during the year ended December 31, 2021. Purchase of Noncontrolling Interests Immediately following the New Excelerate Reorganization (as described in Note 1), the Company completed a series of transactions in which the minority investors exchanged their interests in CK Holdings for 21,809,804 newly issued shares of a.k.a. Brands Holding Corp. common stock. The number of shares issued in exchange for the minority interests was determined based on the relative valuations of CK Holdings and the consolidated a.k.a. group at the time of the IPO. This exchange resulted in the elimination of the noncontrolling interest in Culture Kings, with a value of $132.3 million, and an increase in additional paid-in capital with a nominal amount recorded as common stock at a value of $0.001 per issued share in the exchange. Following the completion of this transaction, CK Holdings became a wholly-owned subsidiary of a.k.a. Brands Holding Corp. The Company had historically owned 66.7% of the equity interests in P&P Holdings, which operated the Company’s Petal & Pup business prior to the IPO. The remaining 33.3% of the equity interests in P&P Holdings were held by certain minority investors. On August 19, 2021, the Company repurchased approximately 6.0% of the equity held by the P&P minority investors for AUD $5.0 million. In connection with the completion of the IPO, the Company used a portion of the net proceeds from the IPO to fund the acquisition of the remaining 27.3% of the equity interests in P&P Holdings then owned by the P&P minority investors for cash of approximately AUD $22.8 million. As a result of the transaction, noncontrolling interest of $9.6 million was eliminated and the $10.6 million paid in excess of the noncontrolling interest was recorded as a reduction to additional paid-in capital. Following the completion of this purchase, P&P Holdings became a wholly-owned subsidiary of a.k.a. Brands Holding Corp.

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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 http://asc.fasb.org/topic&trid=2303972 + Details
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