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15.  BUSINESS COMBINATIONS

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Acquiring businesses is a key part of our ongoing strategy to grow our company and expand our business. Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations.” Acquisition related costs for the years ended December 31, 2023 and 2022, were $16.2 million and $1.3 million, respectively.  Acquisition related costs are included in selling, general, and administrative expense in our Consolidated Statements of Operations.

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On January 26, 2023, we acquired the assets of the residential insulation business of SRI. This installation acquisition enhanced our presence in Georgia, Michigan, Ohio, Florida, Alabama and South Carolina. The purchase price of $45.3 million was funded by cash on hand.

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On July 10, 2023, we acquired the assets of the residential insulation installer business Rocky Mountain. This installation acquisition enhanced our presence in the Colorado market. The purchase price of $7.2 million was funded by cash on hand.

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On July 17, 2023, we acquired the assets of the residential insulation business Best. This installation acquisition enhanced our presence in Texas, Arizona, Tennessee, and Florida markets. The purchase price of $94.6 million was funded by cash on hand.

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On July 26, 2023, we entered into a definitive agreement to acquire SPI. SPI has 85 branches across the United States and 4 branches in Canada. We expect to fund this $960.0 million transaction with Term Facility Two and cash on hand. The agreement contains terms and conditions which are customary in transactions of this kind, including reasonable best efforts and cooperation by the parties to satisfy the conditions to closing and a reverse termination fee of up to $30 million if the transaction is not closed by October 18, 2024. The transaction is subject to customary closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.  

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On October 6, 2023, we acquired the assets of the residential insulation business of Panhandle.  This installation acquisition enhanced our presence in the Florida market. The purchase price of $2.0 million was funded by cash on hand.

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The table below provides a summary of businesses acquired in 2023 including the net sales and net income incurred for the year ended December 31, 2023:

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The estimated fair values of the assets acquired and liabilities assumed for our 2023 acquisitions are as follows as of December 31, 2023, in thousands:

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Estimates of acquired intangible assets related to our 2023 acquisitions are as follows as of December 31, 2023, dollars in thousands:

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Purchase Price Allocations

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As third-party or internal valuations are finalized, certain tax aspects of the foregoing transactions are completed, and customer post-closing reviews are concluded, adjustments may be made to the fair value of assets acquired, and in some cases total purchase price, through the end of each measurement period, generally one year following the applicable acquisition date.  Primarily all of the goodwill recorded during the years ended December 31, 2023 and 2022, respectively, is deductible for income tax purposes.

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The table below provides a summary as of December 31, 2023 for businesses acquired during the year ended December 31, 2022:

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Contingent Consideration

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Payments of contingent consideration are classified as either financing or operating activities in our Consolidated Statements of Cash Flows in accordance with ASC 230-10-45. We made a contingent payment of $0.3 million for Assured during the year ended December 31, 2023, with a remaining obligation of $0.3 million to be paid based on achievement of annual gross revenue targets. We made contingent payments of $0.5 million and $1.2 million for Viking and Valley, respectively, during the year ended December 31, 2022, which completed the arrangements for those acquisitions.