(6) Acquisitions and divestments
Accounting and measurement policies
Business combinations
The balance sheet items goodwill, other intangible assets and deferred tax liabilities 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:
|
|
Measurement method for determining fair value |
|---|---|---|
Customer relationships |
|
Multi-period excess earnings method |
Technology |
|
Relief from royalty method |
Trademark |
|
Relief from royalty method |
With the exception of the tax effect, results from foreign currency hedging of expected business combinations that 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 in order to determine the accounting presentation of the transaction in the consolidated financial statements.
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:
- the 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,
- the useful life and the degree of technical obsolescence, which depend on assumptions about technological developments, among other things.
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 and at what time a corresponding disposal will occur.
Acquisitions in the fiscal year
Acquisition of Mirus Bio LLC, USA
On July 31, 2024, the Group successfully completed the acquisition of the life science company Mirus Bio LLC, United States (Mirus Bio), after obtaining the necessary regulatory clearances; the agreement had been announced on May 22, 2024. The purchase price in accordance with IFRS 3 for 100% of the voting rights amounted to US$ 617 million (€ 570 million) in cash. No contingent consideration was agreed. In the consolidated cash flow statement, € 554 million was recognized in net cash outflows from acquisitions less acquired cash and cash equivalents.
Mirus Bio specializes in the development and commercialization of transfection reagents. Transfection reagents, such as TransIT-VirusGEN® from Mirus Bio, are used to introduce genetic material into cells. They play a key role in the production of viral vectors for cell and gene therapies. With the acquisition of Mirus Bio, the Group is pursuing the goal of offering solutions for every step of viral vector manufacturing in its Life Science business sector.
Preliminary purchase price allocation for the intangible assets and deferred tax liabilities was applied at the time the consolidated financial statements were prepared, as information on the extent and value of the acquired assets and other allocation parameters could still change. Material contingent liabilities were not identified as part of purchase price allocation. The preliminary difference of € 365 million was recognized as goodwill. It includes expected synergies resulting from the integration of Mirus Bio into the Group, expected revenues from technical innovations and developments that go beyond the current product, development and customer portfolios, and unrecognized intangible assets such as the expertise of the workforce.
The goodwill is denominated in U.S. dollars and was allocated to the Life Science business sector in full. As a result of foreign exchange developments, it increased from € 365 million on first-time recognition to € 379 million as of December 31, 2024. As expected, it is not tax deductible.
For the period between the acquisition and December 31, 2024, the legacy Mirus Bio business contributed € 7 million to Group net sales as well as € -6 million to net income after taxes. This result also includes higher cost of sales due to the step-up of the acquired inventories to fair values as well as the amortization of assets identified and remeasured during purchase price allocation.
Assuming the first-time consolidation of Mirus Bio as of January 1, 2024, net sales of the Group for the period would have been € 21,164 million (compared with reported net sales of € 21,156 million) and net income after taxes would have been € 2,774 million (compared with reported net income after taxes of € 2,786 million). When calculating these figures, it was assumed that the adjustments to carrying amounts resulting from purchase price allocation had been identical and would have been taken into account in accordance with their useful life in terms of their effects on the consolidated income statement.
Acquisition of Unity-SC SAS, France
The Group acquired Unity-SC SAS, France (Unity-SC), effective October 31, 2024. Unity-SC is a provider of metrology and inspection instrumentation for the semiconductor industry. Its acquisition complements and rounds off the expertise and the portfolio of the Display Solutions business unit (named Optronics since January 1, 2025) in the Electronics business sector. The purchase price in accordance with IFRS 3 for 100% of the voting rights amounted to € 144 million in cash plus potential payments of contingent consideration amounting to a maximum of € 45 million depending on the achievement of certain sales milestones. In the consolidated cash flow statement, € 138 million was recognized in net cash outflows from acquisitions less acquired cash and cash equivalents.
No purchase price allocation and no valuation of the contingent purchase price payments had taken place by the reporting date on account of its proximity to the completion date. The preliminary difference between the purchase price paid and the net assets acquired, amounting to € 122 million, was allocated to the Electronics business sector in full.
For the period between the acquisition and December 31, 2024, the legacy Unity-SC business contributed € 15 million to Group net sales as well as € 3 million to net income after taxes. Assuming the first-time consolidation of Unity-SC as of January 1, 2024, net sales of the Group for the period would have been € 21,182 million (compared with reported net sales of € 21,156 million) and net income after taxes would have been € 2,775 million (compared with reported net income after taxes of € 2,786 million).
Acquisition of Hub Organoids Holding B.V., Netherlands
The Group acquired all of the shares in Hub Organoids Holding B.V., Netherlands (HUB), effective December 23, 2024. HUB possesses a foundational patent portfolio for organoids. Organoids are cell culture models that functionally resemble an organ. HUB’s technology and service range closes the gap between the laboratory and clinical trials by enabling potential clinical candidates to be identified and validated in an in vitro system.
The purchase price for 100% of the voting rights amounted to € 83 million in cash. Furthermore, potential payments of contingent consideration amounting to a maximum of € 40 million were agreed and were recognized with a value of € 18 million at the acquisition date. The contingent consideration depends on the achievement of the agreed product development and sales milestones.
In the consolidated cash flow statement, € 81 million was recognized in net cash outflows from acquisitions less acquired cash and cash equivalents.
No purchase price allocation had been performed by the reporting date due to its proximity to the completion date. The preliminary difference between the purchase price and the net assets acquired amounted to € 103 million and was allocated to the Life Science business sector in full.
For the period between the acquisition and December 31, 2024, the legacy HUB business did not contribute to Group net sales or net income after taxes. Assuming the first-time consolidation of HUB as of January 1, 2024, net sales of the Group for the period would have been € 21,168 million (compared with reported net sales of € 21,156 million) and net income after taxes would have been € 2,785 million (compared with reported net income after taxes of € 2,786 million).
Preliminary fair values and carrying amounts acquired in the acquisitions
€ million |
|
Mirus Bio |
|
Other acquisitions |
|---|---|---|---|---|
Non-current assets |
|
|
|
|
Intangible assets (excluding goodwill) |
|
249 |
|
1 |
Property, plant and equipment |
|
3 |
|
7 |
Other non-current assets |
|
1 |
|
2 |
|
|
253 |
|
9 |
Current assets |
|
|
|
|
Inventories |
|
5 |
|
28 |
Trade and other current receivables |
|
2 |
|
13 |
Cash and cash equivalents |
|
16 |
|
6 |
Other current assets |
|
2 |
|
8 |
|
|
25 |
|
56 |
Total assets |
|
277 |
|
65 |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Other non-current provisions and liabilities |
|
1 |
|
3 |
Deferred tax liabilities |
|
68 |
|
– |
|
|
69 |
|
3 |
Current liabilities |
|
|
|
|
Trade payables and other liabilities |
|
3 |
|
27 |
Other current liabilities and provisions |
|
– |
|
15 |
|
|
3 |
|
42 |
Total liabilities |
|
72 |
|
45 |
|
|
|
|
|
Net assets acquired |
|
205 |
|
20 |
|
|
|
|
|
Purchase price for the acquisition of shares in accordance with IFRS 3 |
|
570 |
|
245 |
Positive difference (goodwill) |
|
365 |
|
225 |
Divestments
Agreement on the divestment of the Surface Solutions business unit
On July 25, 2024, the Group announced that it had signed an agreement to divest the Surface Solutions business unit of the Electronics business sector to Global New Material International Holdings Ltd., Cayman Islands. The agreed purchase price before purchase price adjustments for cash and cash equivalents and financial liabilities was € 665 million. The agreement comprises the majority of the global production, sales and development activities of the Surface Solutions business. The transaction is subject to regulatory approvals in all key markets as well as the establishment of independent Surface Solutions companies in certain jurisdictions. The transaction is expected to close in the second half of 2025. The net sales of the Surface Solutions business and the assets of the Electronics business sector to be disposed of, including goodwill to be disposed of on a pro rata basis, comprised less than 2.5% of the corresponding value of the Group both in the year under review and at the reporting date.
The cumulative income in connection with the disposal group recognized directly in equity amounted to € 112 million.
At the reporting date, the following assets and liabilities of the disposal group were reclassified to assets held for sale and liabilities directly related to assets held for sale, respectively:
€ million |
|
|
Goodwill |
|
162 |
|---|---|---|
Property, plant and equipment |
|
106 |
Inventories |
|
237 |
Trade receivables |
|
13 |
Other current assets |
|
35 |
Assets held for sale |
|
553 |
|
|
|
Provisions for employee benefits |
|
118 |
Trade payables |
|
10 |
Other non-financial liabilities |
|
23 |
Other liabilities |
|
6 |
Liabilities directly related to assets held for sale |
|
157 |
Additional assets held for sale
Assets held for sale also included the fixed assets of a Life Science and Healthcare site in France. An agreement on the divestment of the site was concluded in the fourth quarter of 2024. The transaction is expected to close in the third quarter of 2025 subject to the satisfaction of contractually agreed conditions and regulatory clearances.
Sale of shares in Calypso Biotech B.V., Netherlands
Assets held for sale as of December 31, 2023, included an equity investment and a convertible bond in connection with the M Ventures portfolio company Calypso Biotech B.V., Netherlands (Calypso). Calypso is a biotech company that develops drug candidates for the treatment of autoimmune diseases. It was allocated to Corporate and Other. The company was acquired in full by Novartis AG, Switzerland, on January 8, 2024. The disposal group included non-current equity instruments in a mid-double-digit million-euro amount that were measured at fair value through other comprehensive income subsequent to initial recognition and a convertible bond issued by Calypso in a mid-single-digit million-euro amount that was measured at fair value through profit or loss subsequent to initial recognition. The cumulative income recognized in other comprehensive income amounted to € 48 million.