Quarterly report pursuant to Section 13 or 15(d)

BUSINESS ACQUISITIONS

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BUSINESS ACQUISITIONS
 9 Months Ended
Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
Business Combination Disclosure [Text Block] BUSINESS ACQUISITIONS
During December 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.
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. Upon closing of the Acquisition, we and Corporación Interamericana de Entretenimiento, S.A.B. de C.V. terminated the then pending International Chamber of Commerce arbitration in connection with the earlier termination of the purchase agreements, and any related litigation was also dismissed.
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 expect the Acquisition to add value and growth to all of our reporting segments.
Recording of Assets Acquired and Liabilities Assumed
The following table summarizes the preliminary acquisition-date fair value of the identifiable assets acquired, liabilities assumed and noncontrolling interests including goodwill:
Initial Allocation
(in thousands)
Fair value of consideration transferred $ 431,943 
Adjustments for working capital 2,269 
Fair value of redeemable noncontrolling interests 280,000 
Fair value of noncontrolling interests 7,000 
Fair value of pre-existing investment in nonconsolidated affiliates 50,000 
Less: Preliminary recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents 105,118 
Accounts receivable 90,575 
Prepaid expenses 33,060 
Other current assets 658 
Property, plant and equipment 25,221 
Operating lease assets 67,193 
Intangible assets 337,000 
Investments in nonconsolidated affiliates 30,000 
Other long-term assets 36,525 
Accounts payable, client accounts (12,566)
Accounts payable (13,344)
Accrued expenses (71,209)
Deferred revenue (144,557)
Current portion of operating lease liabilities (9,209)
Long-term operating lease liabilities (57,984)
Long-term deferred income taxes (101,379)
Goodwill $ 456,110 
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 cost savings and new opportunities expected from combining the operations of Live Nation and OCESA. The anticipated synergies primarily relate to growth in concert promotion, ticketing, and sponsorship opportunities. Of the total amount of preliminary goodwill recognized in connection with the Acquisition, none will be deductible for tax purposes. Preliminary goodwill of $46.7 million, $165.0 million and $244.4 million has been allocated to the Concerts, 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 preliminary fair value of the acquired intangible assets is currently being 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:
Preliminary Estimated Fair Value
Preliminary Estimated Useful Lives (1)
(in thousands) (years)
Client/vendor relationships $ 100,000 
10
Revenue-generating contracts 90,000 
4 to 10
Venue management and leaseholds 107,000  10
Trademarks and naming rights 40,000 
10
Total acquired intangible assets $ 337,000 
_____________________
(1) Determination of the preliminary 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 preliminary fair value of the redeemable noncontrolling interests and noncontrolling interests of $280.0 million and $7.0 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.
Actual and Pro Forma Impact of Acquisition
The revenue, loss from continuing operations and net loss of OCESA that are included in our consolidated statements of operations were not material for the year ended December 31, 2021 since the Acquisition closed on December 6, 2021. Pro forma results of operations, assuming that OCESA had been acquired on January 1, 2020, for the years ended December 31, 2021 and 2020 were not material to our consolidated statements of operations.
We incurred a cumulative total of $13.2 million of acquisition transaction expenses relating to the Acquisition, of which $0.9 million and $0.8 million are included in selling, general and administrative expenses within our consolidated statements of operations for the nine months ended September 30, 2022 and 2021, respectively.
We are in the process of completing our purchase accounting in accordance with GAAP, whereby the purchase price is allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. As we completed the Acquisition in the last month of the year ended December 31, 2021 and given the size of the Acquisition, the purchase accounting should be considered preliminary and is subject to revision based on final determinations of fair value and allocations of purchase price to the identifiable assets and liabilities acquired.