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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 market share. Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations.” Acquisition related costs for the years ended December 31, 2022 and 2021, were $1.3 million and $15.3 million, respectively.  Acquisition related costs are included in selling, general, and administrative expense in our consolidated statements of operations. The table below provides a summary of businesses acquired in 2022 including, for significant acquisitions, the net sales and net income incurred for the year ended December 31, 2022:

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The estimate of acquired customer relationships related to the 2022 acquisitions was $4.1 million and the weighted average useful live is 12 years.

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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, 2022 and 2021, respectively, is deductible for income tax purposes with the exception of DI.  We recorded goodwill on the DI acquisition of $450.7 million, of which $64.7 million is deductible for income tax purposes.

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During the year ended December 31, 2022, DI’s goodwill increased by $10.7 million primarily as a result of payment of additional consideration of $4.5 million during 2022 and the finalization of purchase price adjustments to acquisition date sales and use tax liabilities, net working capital adjustments, property, plant and equipment, and true-ups to supplier rebate receivables.  

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The table below represents the final fair value of DI’s assets and liabilities assumed:

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The table below provides a summary as of December 31, 2022 for businesses acquired during the year ended December 31, 2021:

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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 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.  The acquisition of Assured included a consideration arrangement of $0.5 million to be paid based on achievement of annual gross revenue targets over a two-year period.