v3.26.1
Business Combinations
 6 Months Ended
Jun. 30, 2026
Business Combination [Abstract]  
Business Combinations

NOTE 5 Business Combinations

During the six months ended June 30, 2026, the Company acquired all of the stock of three insurance intermediaries, purchased the assets and assumed certain liabilities of eight insurance intermediaries, and purchased three books of business (customer accounts) for a total of 14 acquisitions. Additionally, adjustments were recorded to the purchase price allocation of certain prior acquisitions completed within the last twelve months as permitted by ASC 805 — Business Combinations.

Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company’s Condensed Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period, as defined in ASC 805. The recorded purchase price for all acquisitions includes an estimation of the fair value of liabilities associated with any potential earn-out provisions. Subsequent changes in the fair value of earn-out obligations are recorded in the Condensed Consolidated Statements of Income when incurred. The fair value of earn-out obligations is based on the present value of the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements.

On August 1, 2025, the Company completed the acquisition of Accession pursuant to the Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provided for escrowed consideration in the form of cash and shares of the Company’s common stock. Both the cash and shares are held in an escrow account. Escrowed shares, which were issued at the closing of the acquisition, total approximately 4.4 million shares. Once all claims related to certain indemnification matters described in the Merger Agreement are resolved, any amounts remaining in the escrow account will be released to the equityholders. The amount of the cash balance will change over time based upon payment of any indemnification obligations of the equityholders associated with the discontinued businesses, as well as dividends paid on the shares and interest income earned on the cash. The Company believes this escrow, plus other available funds, is sufficient to cover any potential costs associated with those specified matters subject to indemnification under the Merger Agreement.

The value of the shares and cash held in the escrow account is presented within long-term liabilities (other liabilities), and the restricted cash is presented within other assets in the Company's Condensed Consolidated Balance Sheets. The value of the shares placed in escrow changes as the share price of the Company increases or decreases as compared to the value at the start of the applicable reporting period. In accordance with ASC 480 - Distinguishing Liabilities from Equity and ASC 815 - Derivatives and Hedging, periodic share value changes will be recorded as a mark-to-market of the escrow liability in the Company's Consolidated Statements of Income. This mark-to-market adjustment is non-cash.

As of June 30, 2026, the total balance of the escrow liability was $552 million, with $284 million in escrowed shares and $271 million in cash, net of reimbursements receivable of $3 million. The shares held in escrow are measured at fair value on a recurring basis as defined in ASC 820 - Fair Value Measurement. The change in the fair value of the shares during the three and six months ended June 30, 2026, resulted in decreases to expense of $5 million and $69 million, respectively.

The following table summarizes the estimated fair values of the aggregate assets and liabilities acquired through the six months ended June 30, 2026 as of the date of each acquisition and adjustments made during the measurement period of the prior year acquisitions.

 

(in millions)

Other (1)

 

 

Measurement Period Adjustments

 

 

Total

 

Business Segment

Retail & Specialty Distribution

 

 

Retail & Specialty Distribution

 

 

 

 

Effective date of acquisition

Various

 

 

Various

 

 

 

 

Cash paid

$

44

 

 

$

(13

)

 

$

31

 

Other payable

 

1

 

 

 

(19

)

 

 

(18

)

Recorded earn-out payable

 

8

 

 

 

—

 

 

 

8

 

Total consideration

 

53

 

 

 

(32

)

 

 

21

 

Maximum potential earn-out payable

 

18

 

 

 

—

 

 

 

18

 

Allocation of purchase price:

 

 

 

 

 

 

Cash and cash equivalents, inclusive of fiduciary cash

 

1

 

 

 

—

 

 

 

1

 

Commission, fees, and other receivables

 

—

 

 

 

(29

)

 

 

(29

)

Fiduciary receivables

 

—

 

 

 

19

 

 

 

19

 

Other current assets

 

4

 

 

 

(25

)

 

 

(21

)

Goodwill

 

31

 

 

 

106

 

 

 

137

 

Purchased customer accounts and other intangibles (2)

 

21

 

 

 

(89

)

 

 

(68

)

Other assets

 

(1

)

 

 

27

 

 

 

26

 

Total assets acquired

 

56

 

 

 

9

 

 

 

65

 

Fiduciary liabilities

 

(1

)

 

 

(20

)

 

 

(21

)

Other current liabilities

 

—

 

 

 

(24

)

 

 

(24

)

Deferred income tax, net

 

(2

)

 

 

12

 

 

 

10

 

Other liabilities

 

—

 

 

 

(9

)

 

 

(9

)

Total liabilities assumed

 

(3

)

 

 

(41

)

 

 

(44

)

Net assets acquired

$

53

 

 

$

(32

)

 

$

21

 
(1)
The other column represents a summarization of current year acquisitions with total consideration of less than $50 million per acquisition.
(2)
The weighted average useful life of purchased customer accounts is 15 years.

For the six months ended June 30, 2026, adjustments were made within the permitted measurement period that resulted in a net increase to goodwill of $106 million. These measurement-period adjustments have been reflected as current-period adjustments in the six months ended June 30, 2026 in accordance with the guidance in ASC 805. The measurement-period adjustments included a decrease to cash consideration paid of $13 million from a working capital true up payment and a $27 million favorable impact on current-period earnings, recorded to change in estimated acquisition earn-out payables in the Condensed Consolidated Statements of Income.

Acquisition Earn-Out Payables

As of June 30, 2026 and 2025, the fair values of the estimated acquisition earn-out payables were re-evaluated and measured at fair value on a recurring basis using unobservable inputs (Level 3) as defined in ASC 820 - Fair Value Measurement. The resulting additions, payments, and net changes, as well as the interest expense accretion on the estimated acquisition earn-out payables were as follows:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

(in millions)

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Balance as of the beginning of the period

 

$

393

 

 

$

143

 

 

$

541

 

 

$

167

 

Additions from new acquisitions

 

 

2

 

 

 

12

 

 

 

8

 

 

 

17

 

Assumed estimated acquisition earn-out payables

 

 

19

 

 

 

—

 

 

 

27

 

 

 

—

 

Disposals

 

 

(6

)

 

 

—

 

 

 

(6

)

 

 

—

 

Payments

 

 

(59

)

 

 

(20

)

 

 

(224

)

 

 

(46

)

Subtotal

 

 

349

 

 

 

135

 

 

 

346

 

 

 

138

 

Net change in earnings from estimated acquisition earn-out payables:

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value

 

 

(44

)

 

 

9

 

 

 

(45

)

 

 

4

 

Interest expense accretion

 

 

4

 

 

 

2

 

 

 

11

 

 

 

3

 

Net change in earnings from estimated acquisition earn-out payables

 

 

(40

)

 

 

11

 

 

 

(34

)

 

 

7

 

Foreign currency translation adjustments

 

 

1

 

 

 

5

 

 

 

(2

)

 

 

6

 

Balance as of June 30,

 

$

310

 

 

$

151

 

 

$

310

 

 

$

151

 

 

Of the $310 million of estimated acquisition earn-out payables as of June 30, 2026, $136 million was recorded as accounts payable and $174 million was recorded as other non-current liabilities. Included within the additions to estimated acquisition earn-out payables are any adjustments to opening balance sheet items within the allowable measurement period, which may therefore differ from previously reported amounts.

Certain acquisition agreements include provisions with no maximum potential earn-out amount. The amount recorded for these acquisitions as of June 30, 2026 was $190 million. The maximum future acquisition contingency payments totaled $371 million, excluding the uncapped earn-out payables, as of June 30, 2026.