Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2025

Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]

Acquisitions and Divestitures

Acquisitions

The following table summarizes the purchase price allocations for our acquisitions as of the acquisition dates. There were no acquisitions for the year ended 2023.


	Year Ended December 31, 2025			Year Ended December 31, 2024
	Weighted-Average Life	Acquisitions(1)		Weighted-Average Life	Acquisitions(1)
Accounts/finance receivables		$	346		$	58

Inventories		422			4
Equipment on operating leases, net		65			—
Land, Buildings and Equipments, net		243			5
Intangible assets:
Customer relationships	10 years	530		10 years	134
Trademarks	7 years	110		1 year	2
Technology	7 years	123			—

Goodwill(2)		248			286
Other assets		441			6
Total Assets acquired		2,528			495

Liabilities assumed		(1,531)			(124)
Acquisition-related debt		(323)			(210)
Total Acquisition, net of cash acquired		$	674		$	161

_____________

(1)For additional details related to our 2025 and 2024 acquisition activity, see below.

(2)Our 2025 and 2024 acquisitions included approximately $2 and $42, respectively, of goodwill that is expected to be deductible for tax purposes. Goodwill resulting from our 2025 acquisition is allocated to the Print and Other Segment.

2025 Acquisition

Lexmark Acquisition

On July 1, 2025, Xerox Corporation completed the acquisition of all of the issued and outstanding equity of Lexmark International II, LLC (Lexmark), a leading developer, manufacturer and supplier of printing, imaging, device management, managed print services (MPS), cloud services, document workflow, and technology solutions (the Lexmark Acquisition).

Total Purchase Consideration

Total consideration paid to the Seller for the net assets acquired from Lexmark was $768, which included Cash and cash equivalents acquired of $93. As part of the Lexmark Acquisition we effectively settled a pre-existing net payable of $43 with Lexmark. The settlement is presented as an operating cash outflow to reflect the nature of the underlying net liability.

Assets Acquired and Liabilities Assumed

The transaction has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805 — Business Combinations (ASC 805), which requires among other things, that assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. No contingent consideration was recorded by Xerox. The preliminary application of acquisition accounting to the assets acquired, and liabilities assumed, as well as the pro forma results of operations are presented below.

The following table summarizes the preliminary allocation of total purchase consideration to the assets acquired and the liabilities assumed as of the date of the acquisition. Certain amounts have been updated to reflect working capital and measurement period adjustments, the impacts of which were not material to the Consolidated Statements of (Loss) Income:


	July 1, 2025
Assets acquired
Cash and cash equivalents	$	93
Accounts receivable, net	280
Finance receivables, net(1)	22
Inventories	422

Other current assets	131
Finance receivables due after one year, net(1)	44
Equipment on operating lease, net	65
Land, buildings and equipment, net	243
Intangible assets, net	763
Goodwill	246
Deferred tax assets	25
Other long-term assets	266
Total Assets acquired	$	2,600

Liabilities assumed

Accounts payable	$	476
Accrued compensation and benefits costs	56
Accrued expenses and other current liabilities(2)	518
Long-term debt	323
Pension and other benefit liabilities	118
Post-retirement medical benefits	6

Other long-term liabilities(2)	335
Total Liabilities assumed	$	1,832

Net Assets acquired	$	768

_____________

(1)Comprised of sales-type lease receivables.

(2)Includes Deferred revenue accounted for in accordance with ASC 606, Revenue from Contracts with Customers.

Our estimates and assumptions are subject to change, and have already changed, within the measurement period, which is up to 12 months after the acquisition date.

During the fourth quarter 2025, adjustments were recorded to correct certain errors in the Lexmark Acquisition preliminary purchase price allocation that existed as of the acquisition date. The errors resulted from misstated balances of accounts receivable, contract assets, and contract liabilities in Lexmark's opening balance sheet as of July 1, 2025, and were subsequently reflected in the Company's Consolidated Balance Sheet as of September 30, 2025. Accordingly, Accounts receivable, net decreased by $73, Other current assets increased by $20, Deferred tax assets increased by $7, Accrued expenses and other current liabilities decreased by $11, and Other long-term liabilities decreased $7. The identified errors had an immaterial impact on the Lexmark preliminary purchase accounting through September 30, 2025. As a result of the correction, an increase of $28 was recorded to Goodwill. In addition, immaterial measurement period adjustments were also recorded which resulted in a further increase of $11 to Goodwill associated with the Lexmark Acquisition.

The allocation of the purchase price for this acquisition has been prepared on a preliminary basis, and adjustments may continue to be required as additional information becomes available. Additionally, as required by the Lexmark Agreement, Xerox provided its determination of the Closing Statement (as defined in the Lexmark Agreement) to the Lexmark Seller. The final purchase price is subject to a final working capital adjustment, which we are still finalizing.

Transaction-related expense for the Lexmark Acquisition was approximately $33 for the year ended December 31, 2025 and were recorded within Selling, administrative and general expenses.

Our Consolidated Statements of (Loss) Income includes revenue of $962, and net loss of $119 for the year ended December 31, 2025, attributable to the Lexmark Acquisition since the date of acquisition.

Intangible Assets

The following table is a summary of the fair value estimates of the identifiable intangible assets and their estimated average useful lives:


	July 1, 2025		Estimated Useful Life
Customer relationships	$	530	10 years
Developed technology	123		7 years
Trademarks	110		7 years
Total Identifiable intangible assets	$	763

The customer-related intangible assets relates to customer contracts and related relationships. The customer contracts and related relationships intangible asset represents the fair value of future projected cash flows that will be derived from sales of products and services to existing customers of Lexmark. The asset was valued using a multi-period excess earnings method which estimates the present value of the after-tax cash flows attributable to the customer relationships. The present value of projected future cash flows included significant judgment and assumptions regarding projected annual revenues based on estimated customer attrition rates, projected operating margins, and the discount rate.

Developed technology represents the estimated fair value of Lexmark’s proprietary technology and is valued using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted cash flows that are expected to be generated by the developed technology, which included judgment and assumptions regarding projected future revenues, projected expenses, and the discount rate.

Trade name and trademarks represents the estimated fair value of Lexmark’s trade name and trademarks. The fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted cash flows that are expected to be generated by the trade name and trademarks, which included judgment and assumptions regarding projected future revenues, projected expenses, and the discount rate.

Intangible assets of approximately $4 are deductible for tax purposes as a result of previous taxable acquisitions made by Lexmark.

Goodwill

Goodwill in the amount of $246 was recognized for this acquisition and is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized, primarily expected synergies. Goodwill of approximately $2 is deductible for tax purposes as a result of previous taxable acquisitions made by Lexmark. All of the goodwill associated with the Lexmark Acquisition is allocated to our Print and Other Segment.

Debt

In conjunction with the acquisition, Xerox assumed approximately $323 of Lexmark debt that, concurrent with the closing date, was included in the renegotiated terms of Xerox's Term Loan B. The assumed debt is included in Long-term debt in the Consolidated Balance Sheet. It was determined that the fair value of the assumed debt approximated its book value and that the conversion of this debt within the Term Loan B represented a modification. Refer to Note 15 - Debt for additional information regarding debt related to the Lexmark Acquisition.

Deferred Taxes

We provided deferred taxes and recorded other tax adjustments as part of the accounting for the acquisition primarily related to the estimated fair value adjustments for acquired intangible assets, as well as the elimination of a previously recorded deferred tax liability associated with Lexmark's historical tax deductible goodwill.

2024 Acquisition

ITsavvy

On November 20, 2024, we completed the acquisition of ITsavvy Acquisition Company, Inc. (ITsavvy), a technology infrastructure solutions provider for total consideration of $404, which resulted in 100% ownership of ITsavvy.

Total Purchase Consideration

The table below details the total fair value of consideration paid for the ITsavvy Acquisition:


	November 20, 2024

Cash	$	194
Secured promissory notes due in 2025, net of $3 discount	107
Secured promissory notes due in 2026, net of $7 discount	103

Total Fair value of consideration transferred	$	404

The secured promissory notes due in 2025 (the 2025 Note), as well as the secured promissory notes due in 2026 (the 2026 Note and, together with the 2025 Note, the Notes), were issued by Xerox to the Seller at closing, net of total unamortized debt discounts of $10. For additional information related to the Notes issued in connection with the acquisition of ITsavvy, refer to Note 15 - Debt.

Assets Acquired and Liabilities Assumed

The transaction has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805 — Business Combinations (ASC 805), which requires among other things, that most assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. No change-in-control or contingent consideration liabilities were recorded by Xerox.

The following table summarizes the final allocation of total purchase consideration to the assets acquired and the liabilities assumed as of the date of the acquisition. Certain amounts have been updated to reflect working capital and measurement period adjustments, the impacts of which were not material to the Consolidated Statements of (Loss) Income and resulted in a final allocation to Goodwill of $288, as compared to the original allocation of Goodwill of $286 at the time of acquisition:


	November 20, 2024
Assets acquired
Cash and cash equivalents	$	34
Accounts receivable, net	58
Inventories	4
Other current assets	15
Land, buildings and equipment, net	5
Intangible assets, net	136
Goodwill	288
Other long-term assets	10
Total Assets acquired	$	550

Liabilities assumed

Accounts payable	$	57
Accrued compensation and benefits costs	7
Accrued expenses and other current liabilities(1)	30
Deferred tax liability	18
Other long-term liabilities(1)	34
Total Liabilities assumed	$	146

Net Assets acquired	$	404

____________

(1)Includes Deferred revenue accounted for in accordance with ASC 606 Revenue.

Transaction-related expense for the ITsavvy Acquisition were not material for the year ended December 31, 2024.

For the years ended December 31, 2025 and 2024, our Consolidated Statements of (Loss) Income include revenue of $451 and $48, respectively, and net income of $16 and $2, respectively, attributable to the ITsavvy Acquisition. Amounts for 2024 are from the date of acquisition on November 20, 2024.

Intangible Assets

The following table is a summary of the fair value estimates of the identifiable intangible assets and their estimated average useful lives:


	November 20, 2024		Estimated Useful Life
Customer relationships	$	134	10 years
Trademarks	2		1 year
Total consideration transferred	$	136

The majority of customer-related intangible assets relates to customer contracts and related relationships. The customer contracts and related relationships intangible asset represents the fair value of future projected cash flows that will be derived from sales of products to existing customers of ITsavvy. The asset was valued using a multi-period excess earnings method which estimates the present value of the after-tax cash flows attributable to the customer relationships. The present value of projected future cash flows included significant judgment and assumptions regarding projected annual revenues based on estimated customer attrition rates, projected operating margins, and the discount rate.

Trademark represents the preliminary estimated fair value of the ITsavvy trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trade name. Intangible assets of approximately $59 is deductible for tax purposes as a result of previous taxable acquisitions made by ITsavvy.

Goodwill

Goodwill in the amount of $288 was recognized for this acquisition and is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized, primarily expected synergies. Goodwill of approximately $42 is deductible for tax purposes as a result of previous taxable acquisitions made by ITsavvy. As a result of the ITsavvy Acquisition, we reassessed our operating and reportable segments on January 1, 2025. Accordingly, all of the goodwill associated with the ITsavvy Acquisition is allocated to our IT Solutions Segment.

Deferred Taxes

Unaudited Pro Forma Information

The unaudited pro forma results presented below are calculated in accordance with ASC 805 - Business Combinations, and include the effects of the Lexmark Acquisition and related financing transactions, as if it had been consummated as of January 1, 2024, as well as the acquisition of ITsavvy, as if it had been consummated as of January 1, 2023. ITsavvy is included in our 2025 reported results as the effective date of the acquisition was November 20, 2024. Lexmark is included in our 2025 results beginning July 1, 2025, the effective date of acquisition. Pro forma results for all periods presented below includes adjustments to align historical accounting policies and purchase accounting adjustments for amortization of intangible assets and real and personal property, the expensing of the step up of inventory to fair value, the elimination of historical goodwill impairment charges recorded by Lexmark of approximately $681 pre-tax, transaction expenses, the expense related to compensation to various employees resulting from the acquisition as well as interest expense related to debt financing. The following table summarizes the pro forma financial information:


	Year Ended December 31,
	2025		2024
Total revenue	$	7,962	$	8,620
Net loss	(968)		(1,680)

The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions and the cost of financing the acquisitions had taken place on January 1, 2024.

2023 Acquisitions

There were no material business acquisitions during 2023.

Divestitures

Sales of Argentina and Chile

In March 2024, Xerox completed the sales of its direct business operations in Argentina and Chile to Grupo Datco, a technologies and fiber optic network service provider in Latin America for a total consideration of $19. Following the transfer of ownership, the new companies operate as independent entities and Grupo Datco will continue to service Xerox devices previously sold in Argentina and Chile and is the exclusive partner for Xerox in these markets. This transaction aligns with the Company's ongoing Reinvention.

The sales resulted in a net disposal loss of $51, which included, a net currency translation loss of $40, allocated Goodwill of $10, the carrying value of the net assets of $18, and related fees of $2. During the second quarter of 2024 we recorded a purchase price adjustment credit of $3. The allocation of Goodwill was based on the relative fair value of the operations in Argentina and Chile to the total fair value for the Print and Other Segment Reporting Unit, which it was part of prior to the sales. The estimated fair values of the operations in Argentina and Chile as well as the Print and Other reporting unit are based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy. Xerox also recorded a net income tax benefit of $19 related to the sales, for a net after-tax loss on the sales of $32.

Donation of Palo Alto Research Center (PARC)

In April 2023, Xerox completed the donation of its Palo Alto Research Center (PARC) subsidiary to Stanford Research Institute International (SRI), a nonprofit research institute. The donation enables Xerox to focus on its core businesses and prioritize growth through its business technology solutions for customers in Print, as well as Digital Services and IT Services. The donation also allows PARC to reach its full potential through SRI’s resources and deep-tech expertise that will enable PARC to focus exclusively on the development of pioneering innovative technologies. The majority of patents held by PARC were retained by Xerox with a perpetual license to use those patents being provided to SRI. Xerox, at its option, will also continue to receive certain research services from SRI. The donation resulted in a net charge of $132 in the second quarter 2023, which includes allocated Goodwill of $115, the carrying value of the net assets associated with PARC being donated of $13, and approximately $4 of other costs and expenses related to the donation. The allocation of Goodwill was based on the relative fair value of the PARC business to the total fair value for the Print and Other Segment/Reporting Unit, which it was part of prior to the donation. The estimated fair values of the PARC business as well as the Print and Other reporting unit are based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy. At the time of divestiture, Xerox also recorded a net income tax benefit of $40 related to the donation for a net after-tax loss on the donation of $92. In 2025, we concluded that certain deferred tax assets in the U.S. were not more-likely-than-not to be realized, including the benefits associated with the charitable contribution of PARC in 2023. Accordingly, a valuation allowance for the remaining deferred tax assets of $20 was recorded.

Other Divestitures

During 2025 and 2024 we sold the rights to sell paper in certain European countries. The sales resulted in a net disposal gain of $4 and $4 for the years ended December 31, 2025 and 2024, respectively.