Acquisitions and divestments Acquisitions
Acquisitions 2013–2015
2015 2014 2013
Total consideration, including cash 2,119 4,767 3,176
Acquisition-related costs 1) 19 50 101
Net assets acquired
Cash and cash equivalents 271 407 223
Property, plant and equipment 45 427 597
Intangible assets 445 2,540 1,551
Other assets 572 817 850
Provisions, including post-employment benefits – –288 –463
Other liabilities –379 –1,150 –1,705
Total identifiable net assets 954 2,753 1,053
Operating expenses – – 410
Non-controlling interest – – 67
Goodwill 1,165 2,014 1,646
Total 2,119 4,767 3,176
1) Acquisition-related costs are included in Selling and administrative expenses in the consolid-ated income statement.
In 2015, Ericsson made acquisitions with a negative cash flow effect amounting to SEK 1,867 (4,410) million. The acquisitions presented below are not material but the Company gives the information to provide the reader a summarized view of the content of the acquisitions made.
The acquisitions consist primarily of:
Envivio: On October 27, 2015, the Company acquired 100% of the shares in Envivio, a US-based company with competence in software-defined and cloud-enabled architectures for video processing. The acquisition will strengthen Ericsson’s video compression position, combining its leading position in broadcast and contribution with Envivio’s leadership in multi-screen cable and telecom. Envivio’s cloud-centric and software-based video capabilities will be a key addition to Ericsson’s extensive portfolio of media enrichment, processing, publishing, delivery, and TV platforms, enabling TV experiences on any device. Envivio has an installed base of over 400 TV service provider and content owner customers in all markets globally. Balances to facilitate the purchase price allocation are preliminary.
Icon: On August 5, 2015, the Company acquired assets of Guatemala- based Icon Americas, a consulting and systems integration company with approximately 250 employees and consultants. The acquisition boosts Ericsson’s services portfolio in Latin America – particularly in application development and maintenance. Balances to facilitate the purchase price allocation are preliminary.
Sunrise technology: On July 31, 2015, the Company acquired assets of Guangzhou-based IT services provider Sunrise Technology. The acquisi-tion of Sunrise Technology strengthens Ericsson’s posiacquisi-tion in OSS and BSS, which is one of the targeted growth areas where Ericsson aims to establish leadership. Sunrise technology has a strong track record of delivering complex IT solutions to leading operators in China. The employ-ees have expertise in IT consulting; systems integration for charging and billing systems, customer relationship management and business intelli-gence/analytics solutions; and application development and maintenance.
Balances to facilitate the purchase price allocation are preliminary.
Acquisitions 2013–2015
Company Description Transaction date
Envivio A US-based company with competence in software-defined and cloud-enabled architectures for video processing. Oct 2015 ICON A consulting and systems integration business with approximately 250 employees and consultants. Aug 2015 Sunrise technology A business which has a strong track record of delivering complex IT solutions to leading operators in China Jul 2015 Timelessmind A Canada-based consulting and systems integration business specializing in operations and business support
(OSS and/BSS). Apr 2015
Apcera The acquisition of a majority stake in Apcera strengthens Ericsson’s position in enterprise cloud. Oct 2014 Fabrix The acquisition of Fabrix Systems extends Ericsson’s overall leadership position in TV & Media. Oct 2014 MetraTech The acquisition of MetraTech accelerates Ericsson’s cloud and enterprise billing capabilities within BSS. Sep 2014 Red Bee Media A leading media services company headquartered in the UK with an extensive list of high-profile
broadcast services customers. May 2014
Azuki A provider of TV Anywhere delivery platforms for service providers, content owners and broadcasters. Feb 2014
Airvana A Massachusetts-based company and supplier of EVDO software to Ericsson. Sep 2013
Mediaroom The leading platform for video distribution deployed with the world’s largest IPTV operators. Sep 2013 Telcocell A consulting and systems integration company specializing in Business Support Systems (BSS). Sep 2013 Modems Ericsson has taken on the design, development and sales of the LTE multimode thin modem solutions,
including 2G, 3G and 4G interoperability. Aug 2013
Devoteam A leader in Information and Communications Technology consulting with 5,000 employees in Europe, the
Mid-dle East and Africa. Apr 2013
Divestments 2013–2015
Company Description Transaction date
Telecom cable business Divestment of the telecom cable business in Hudiksvall, Sweden, to Hexatronic. It resulted in a loss of SEK –0.5 billion. Dec 2013 Power cables operation Divestment of the power cables operation to NKT Cables. The transaction resulted in a loss of SEK –0.1 billion. Jul 2013 Applied Communication
Sciences Sale of Applied Communication Sciences (ACS), the former research and engineering arm of Telcordia Technologies.
This resulted in a loss of SEK –0.3 billion. May 2013
Timelessmind: On April 8, 2015, the Company acquired assets of Time-lessmind, a Canada-based consulting and systems integration company specializing in operations and business support (OSS and BSS). The acquisition includes approximately 30 employees and consultants and Ericsson further expands its systems integration capabilities for OSS and BSS in North America. Balances to facilitate the purchase price allocation are final.
In order to finalize a purchase price allocation all relevant information needs to be in place. Examples of such information are final consideration and final opening balances, which may remain preliminary for a period of time due to for example adjustments of working capital, tax items or decisions from local authorities.
Divestments
Divestments 2013–2015
2015 2014 2013
Proceeds 0 42 655
Net assets disposed of
Property, plant and equipment – – 297
Investments in joint ventures and associated
companies – 32 –
Other assets 52 46 1,326
Other liabilities –3 – –127
49 78 1,496
Net gains/losses from divestments –49 –36 –841
Less Cash and cash equivalents – – –207
Cash flow effect 0 42 448
In 2015, the Company made some minor divestments with a cash flow effect amounting to SEK 0 (42) million.
C27 Leasing
Leasing with the Company as lessee
Assets under finance leases, recorded as property, plant and equipment, consist of:
Finance leases
2015 2014
Cost
Real estate 701 650
701 650
Accumulated depreciation
Real estate –249 –212
–249 –212
Net carrying value 452 438
As of December 31, 2015, future minimum lease payment obligations were distributed as follows:
Future minimum lease payment obligations
Finance
leases Operating leases
2016 73 3,025
2017 72 2,529
2018 72 2,125
2019 72 1,800
2020 551 1,113
2021 and later 6 4,778
Total 846 15,370
Future finance charges 1) –225 n/a
Present value of finance lease liabilities 621 n/a
1) Average effective interest rate on lease payables is 8.14%.
Expenses in 2015 for leasing of assets were SEK 3,449 (2,662) million, of which variable expenses comprised SEK 35 (19) million. The leasing contracts vary in length from 1 to 16 years.
The Company’s lease agreements normally do not include any contin-gent rents. In the few cases they occur, they relate to charges for heating linked to the oil price index. Most of the leases of real estate contain terms of renewal, giving the Company the right to prolong the agreement in question for a predefined period of time. All of the finance leases of facil-ities contain purchase options. Only a very limited number of the Com-pany’s lease agreements contain restrictions on stockholders’ equity or other means of finance. The major agreement contains a restriction stating that the Parent Company must maintain a stockholders’ equity of at least SEK 25 billion.
Leases with the Company as lessor
Leasing income relates to subleasing of real estate as well as equipment provided to customers under leasing arrangements. These leasing con-tracts vary in length from 1 to 17 years.
At December 31, 2015, future minimum payment receivables were distributed as follows:
Future minimum payment receivables
Finance
leases Operating leases
2016 317 28
2017 12 20
2018 – 16
2019 – 6
2020 – 5
2021 and later – 10
Total 329 85
Unearned financial income n/a n/a
Uncollectible lease payments n/a n/a
Net investments in financial leases n/a n/a
Leasing income in 2015 was SEK 73 (74) million.