(6) Acquisitions and divestments
Accounting and measurement policies
Business combinations
The balance sheet items goodwill, other intangible assets, and deferred taxes are significantly influenced by purchase price allocations conducted within the scope of business combinations. As observable market prices are mostly not available for the acquired other intangible assets, the Group regularly relies on the expertise of external professionals when it comes to business combinations. The following overview shows the methods typically used to measure intangible assets within the scope of purchase price allocations:
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Measurement method for determining fair value |
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Customer relationships |
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Multi period excess earnings method |
Technology |
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Relief from royalty method |
Trademark |
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Relief from royalty method |
Results from foreign currency hedging of expected business combinations, if they meet the requirements for hedge accounting, are offset against the carrying value of the net assets acquired.
Where management considers it to be appropriate, the optional concentration test set out in IFRS 3.B7B is applied in individual transactions. This makes it easier to determine whether a transaction constitutes a business combination or the acquisition of an individual asset or a group of similar assets.
Significant discretionary decisions and sources of estimation uncertainty
Business combinations
In particular, estimation uncertainty and discretionary decisions in conjunction with purchase price allocation relate to:
- planning of future cash flows,
- the customer churn rate, which indicates how existing customer relationships will change in the future,
- the license rate for technologies, which estimates royalty savings on the basis of comparable transactions of similar technologies,
- the discount factor, which is applied for maturity- and risk-based discounting of expected cash inflows, and
- the useful life and the degree of technical obsolescence which depend, among other things, on assumptions about technological developments.
Divestments
The assessment as to when a non-current asset, disposal group, or discontinued operation meets the prerequisites of IFRS 5 for classification as “held for sale” is subject to discretionary judgment. Even in the case of an existing management decision to review a disposal, an uncertain assessment has to be made as to the probability of whether a corresponding disposal will occur during the year.
Planned acquisitions in the fiscal year
Planned acquisition of Chord Therapeutics SA, Switzerland
On December 20, 2021, the Group announced the conclusion of an agreement to acquire Chord Therapeutics SA, Switzerland, a biotech company specializing in rare neuroinflammatory diseases. It is currently being examined as to whether the acquisition constitutes a business operation when applying the optional concentration test in accordance with IFRS 3. The purchase price was agreed as an upfront cash payment in a double-digit million euro amount plus standard payments for the achievement of future development and sales milestones. The transaction closed on January 31, 2022.
Planned acquisition of Exelead Inc., United States
On December 30, 2021, the Group signed a definitive agreement for the purchase of all of the shares in Exelead Inc., United States, (Exelead), a biopharmaceutical contract development and manufacturing organization (CDMO), for around USD 780 million (approximately € 690 million) in cash. The transaction is expected to close in the first quarter of 2022 subject to regulatory clearances as well as the satisfaction of other customary closing conditions. Exelead specializes in complex injectable formulations, including the lipid nanoparticles that are key components of mRNA (messenger ribonucleic acid) therapeutics for treating Covid-19 and other indications. The aim of the planned acquisition is for Exelead’s capacities and expertise to expand the Group’s service range for mRNA contract development and manufacturing, allowing it to provide a fully integrated offering across the entire mRNA manufacturing process. The business will be integrated into the Process Solutions business unit in the Life Science business sector.
Acquisitions in the previous year
Acquisition of Resolution Spectra Systems S.A.S., France
On June 30, 2020, the Group completed the acquisition of all of the shares in Resolution Spectra Systems S.A.S., a leading provider of systems for real-time analysis and monitoring of bioprocesses. The acquisition strengthened the Group’s bioprocessing product portfolio within the Life Science business sector. The purchase price comprised a fixed compensation of € 4 million and future sales-based milestone payments of up to € 4 million. The purchase price allocation was completed as of December 31, 2020.
Acquisition of AmpTec GmbH, Hamburg, Germany
On December 22, 2020, the Group acquired all shares in AmpTec GmbH, one of the leading contract development and manufacturing organizations for mRNA (messenger ribonucleic acid).
The deal strengthened the Group’s capabilities to develop and manufacture mRNA. The acquisition added to the Group’s lipid manufacturing expertise and created an integrated offering across the entire mRNA value chain. The company was integrated into the Process Solutions business unit, which is part of the Life Science business sector. The purchase price comprised a payment of € 7 million and milestone payments of up to € 18 million for the achievement of technological development targets and sales- and profit-based targets. Valuation of the contingent purchase price payments resulted in a purchase price of € 13 million in accordance with IFRS 3. Purchase price allocation was carried out and completed in the course of fiscal 2021. The prior-year figures were not restated for reasons of materiality.
Divestments in the previous year
Divestment of the Allergopharma allergy business
On February 19, 2020, the Group signed an agreement to sell its Allergopharma allergy business to Dermapharm Beteiligungs GmbH, Grünwald, Germany. Following regulatory approval and the satisfaction of other customary closing conditions, the transaction closed on March 31, 2020. Allergopharma is a leading provider of specific immunotherapies for type 1 allergies. The transaction encompassed the Allergopharma business in Europe and Asia, including a wide range of therapeutic and diagnostic products, as well as the production site in Reinbek, Germany. The final purchase price was € 70 million. After deducting the cash transferred, the Group received € 56 million. This was reported in the cash flow statement in cash flows from investment activities in fiscal 2020. The gain on disposal in the amount of € 35 million was reported in other operating income in the consolidated income statement.
In the management’s estimation, the conditions for classification as a disposal group within the meaning of IFRS 5 were met only when the agreement on the divestment of the Allergopharma business was signed.
Divestment of Litec-LLL GmbH, Greifswald, Germany
The Group sold Litec-LLL GmbH on August 31, 2020, as part of a management buyout. The company specializes in lighting materials. The selling price was € 3 million.