Annual report pursuant to Section 13 and 15(d)

ACQUISITIONS

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ACQUISITIONS
 12 Months Ended
Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
Business Combination Disclosure [Text Block] ACQUISITIONS
During 2022, we completed various acquisitions for total consideration, net of cash acquired, of $315.0 million. For certain acquisitions totaling $249.9 million, the fair value of the assets acquired represented substantially all the consideration transferred, and as such we accounted for the acquisitions as an asset acquisition. All acquisitions were not material on an individual basis or in aggregate for the year ended December 31, 2022.
During 2021, we completed the acquisition of an aggregate 51% interest in OCESA. This acquisition was accounted for as a business combination under the acquisition method of accounting. With the exception of OCESA, all other acquisitions were not material on an individual basis or in the aggregate for the years ended December 31, 2021.
OCESA Acquisition
Description of Transaction
On December 6, 2021, we completed our acquisition of an aggregate 51% of the capital stock of OCESA (the “Acquisition”) for $431.9 million, subject to certain adjustments. OCESA is one of the most prominent live event businesses globally with a robust business portfolio in ticketing, sponsorship, concession, merchandise, and venue operation across Mexico and Latin America. We completed our purchase price accounting during the three-month period ending December 31, 2022.
Recording of Assets Acquired and Liabilities Assumed
The following table summarizes the final acquisition-date fair value of the identifiable assets acquired, liabilities assumed and noncontrolling interests including goodwill:
Initial Allocation (1)
Adjustments (2)
Final Allocation
(in thousands)
Fair value of consideration transferred $ 431,943  $ —  $ 431,943 
Adjustments for working capital —  2,269  2,269 
Fair value of redeemable noncontrolling interests 280,000  —  280,000 
Fair value of noncontrolling interests 7,000  (3,000) 4,000 
Fair value of pre-existing investment in nonconsolidated affiliates 50,000  16,660  66,660 
Less: recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents 113,014  (7,896) 105,118 
Accounts receivable 89,844  (18,497) 71,347 
Prepaid expenses 33,070  (7,178) 25,892 
Other current assets 658  7,168  7,826 
Property, plant and equipment 25,318  (97) 25,221 
Operating lease assets 67,142  51  67,193 
Intangible assets 340,000  134,000  474,000 
Investments in nonconsolidated affiliates 30,000  —  30,000 
Other long-term assets 36,525  —  36,525 
Accounts payable, client accounts (13,344) 13,019  (325)
Accounts payable (12,584) 18  (12,566)
Accrued expenses (69,583) 8,514  (61,069)
Deferred revenue (144,557) 8,401  (136,156)
Current portion of operating lease liabilities (9,209) (1) (9,210)
Long-term operating lease liabilities (57,984) —  (57,984)
Long-term deferred income taxes (102,279) (40,200) (142,479)
Other long-term liabilities —  (10,334) (10,334)
Goodwill $ 442,912  $ (71,039) $ 371,873 
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(1) As reported in our 2021 Annual Report on Form 10-K.
(2) The adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired and liabilities assumed. The fair value adjustments made to the initial allocation did not result in significant changes to the amortization expense recorded for the years ended December 31, 2022 and 2021.
Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Acquisition consists largely of new opportunities expected from combining the operations of Live Nation and OCESA. The anticipated synergies primarily relate to increased effectiveness of promotion, venue and festivals as well as ticketing and sponsorship opportunities. Of the total amount of goodwill recognized in connection with the Acquisition, none will be deductible for tax purposes. Goodwill of $195.5 million and $176.4 million has been allocated to the Ticketing and Sponsorship & Advertising segments, respectively, as a result of the Acquisition.
Below is a summary of the methodologies and significant assumptions used in estimating the fair value of intangible assets and noncontrolling interests.
Intangible assets — the fair value of the acquired intangible assets was evaluated using commonly used valuation techniques. In estimating the fair value of the acquired intangible assets, we utilized the valuation methodology determined to be most appropriate for the individual intangible asset being valued. The acquired definite-lived intangible assets include the following:
Fair Value
Useful Lives (1)
(in thousands) (years)
Client/vendor relationships $ 90,000 
10
Revenue-generating contracts 325,000 
10
Venue management and leaseholds 14,000  10
Trademarks and naming rights 45,000 
10
Total acquired intangible assets $ 474,000 
_____________________
(1) Determination of the estimated useful lives of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the shorter of the respective lives of the agreement or the period of time the assets are expected to contribute to future cash flows.
Some of the more significant estimates and assumptions inherent in determining the fair value of the identifiable intangible assets are associated with forecasting cash flows and profitability. The primary assumptions used were generally based upon the present value of anticipated cash flows discounted at rates ranging from 12% to 13%. Estimated years of projected earnings generally follow the range of estimated remaining useful lives for each intangible asset class.
Noncontrolling interests — The fair value of the redeemable noncontrolling interests and noncontrolling interests of $280.0 million and $4.0 million, respectively, were estimated by applying the market approach. The fair value estimates are based on fair value of consideration transferred, adjustment of 20% to account for acquisition premium and adjustments of 10% to 20% to account for lack of marketability that market participants would consider when estimating the fair value of the individual noncontrolling interests.
We incurred a cumulative total of $13.3 million of acquisition transaction expenses relating to the Acquisition, of which $1.0 million, $9.0 million and $1.1 million are included in selling, general and administrative expenses within our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020, respectively.