Acquisition and Restructuring Costs
The following table presents net acquisition and restructuring costs recorded in the years ended December 31: |
| | | | | | | | | | | |
Years Ended December 31, | 2013 | | 2012 | | 2011 |
(In millions) | | | | | |
Acquisition costs | $ | 76 |
| | $ | 26 |
| | $ | 16 |
|
Restructuring charges, net | 28 |
| | 199 |
| | 253 |
|
Total acquisition and restructuring costs | $ | 104 |
| | $ | 225 |
| | $ | 269 |
|
Acquisition Costs:
Acquisition costs incurred in 2013 were related to previously disclosed acquisitions, mainly the 2012 GSAS and 2010 Intesa acquisitions. Acquisition costs incurred in 2012 of $66 million were mainly related to integration costs incurred in connection with the 2012 GSAS and 2010 Intesa acquisitions, and were partly offset by an indemnification benefit of $40 million for the assumption of an income tax liability related to the 2010 Intesa acquisition. Acquisition costs incurred in 2011 totaled $71 million, and were mainly composed of integration costs associated with the 2011 Bank of Ireland Asset Management and 2010 Intesa and Mourant International Finance Administration acquisitions. These acquisition costs were partially offset by an indemnification benefit of $55 million for the assumption of an income tax liability related to the 2010 Intesa acquisition. The indemnification benefits of $40 million in 2012 and $55 million in 2011 were offset by corresponding income tax expense of $40 million in 2012 and $55 million in 2011 in our consolidated statement of income.
Restructuring Charges:
Information with respect to our Business Operations and Information Technology Transformation program and our 2011 and 2012 expense control measures, including charges, employee reductions and aggregate activity in the related accruals, is provided in the two sections that follow.
Business Operations and Information Technology Transformation Program
In November 2010, we announced a global multi-year Business Operations and Information Technology Transformation program. The program includes operational, information technology and targeted cost initiatives, including plans related to reductions in both staff and occupancy costs. To date, we have recorded aggregate restructuring charges of $381 million in our consolidated statement of income, composed of $156 million in 2010, $133 million in 2011, $67 million in 2012 and $25 million in 2013.
The charges related to the program included costs related to severance, benefits and outplacement services, as well as costs which resulted from actions taken to reduce our occupancy costs through the consolidation of leases and properties. The charges also included costs related to information technology, including transition fees associated with the expansion of our use of third-party service providers associated with components of our information technology infrastructure and application maintenance and support.
In 2010, in connection with the program, we initiated the involuntary termination of 1,400 employees, or approximately 5% of our global workforce, which we completed by the end of 2011. In addition, in connection with our announcement in 2011 of the expansion of our use of third-party service providers associated with our information technology infrastructure and application maintenance and support, as well as the continued execution of the business operations transformation component of the program, we identified 1,340 additional involuntary terminations and role eliminations, including 376 in 2013. As of December 31, 2013, we eliminated 1,278 of these positions.
Expense Control Measures
In December 2011, in connection with expense control measures designed to calibrate our expenses to our outlook for our capital markets-facing businesses in 2012, we took two actions. First, we withdrew from our fixed-income trading initiative, in which we traded in fixed-income securities and derivatives as principal with our custody clients and other third-parties that trade in these securities and derivatives. Second, we undertook other targeted staff reductions. As a result of these actions, we recorded aggregate pre-tax restructuring charges of $120 million in 2011 and net pre-tax credit adjustments of $(1) million in 2012 in our consolidated statement of income.
The charges recorded in 2011 included costs related to severance, benefits and outplacement services with respect to both our withdrawal from our fixed-income initiative and the other targeted staff reductions; costs associated with fair-value adjustments to the initiative's trading portfolio resulting from our decision to withdraw from the initiative; and costs for asset and other write-offs related to asset write-downs and contract terminations. In 2011, in connection with the above-described employee-related actions, we identified 442 employees to be involuntarily terminated as their roles were eliminated. As of December 31, 2013, we completed these reductions.
In December 2012, in connection with expense control measures designed to better align our expenses to our business strategy and related outlook for 2013, we identified additional targeted staff reductions. As a result of these actions, we have recorded aggregate pre-tax restructuring charges of $133 million in 2012 and $3 million in 2013 in our consolidated statement of income. Employee-related costs included severance, benefits and outplacement services. Costs for asset and other write-offs were primarily related to contract terminations. We originally identified involuntary terminations and role eliminations of 960 employees (630 positions after replacements). As of December 31, 2013, 782 positions were eliminated through voluntary and involuntary terminations.
Aggregate Restructuring-Related Accrual Activity
The following table presents aggregate activity associated with accruals that resulted from the charges associated with the Business Operations and Information Technology Transformation program and the 2011 and 2012 expense control measures:
|
| | | | | | | | | | | | | | | | | | | |
(In millions) | Employee- Related Costs | | Real Estate Consolidation | | Information Technology Costs | | Asset and Other Write-Offs | | Total |
Balance as of December 31, 2012 | $ | 195 |
| | $ | 49 |
| | $ | 5 |
| | $ | 13 |
| | $ | 262 |
|
Additional accruals for Business Operations and Information Technology Transformation program | 13 |
| | 13 |
| | (1 | ) | | — |
| | 25 |
|
Additional accruals for 2012 expense control measures | (4 | ) | | — |
| | — |
| | 7 |
| | 3 |
|
Payments and adjustments | (154 | ) | | (13 | ) | | (4 | ) | | (13 | ) | | (184 | ) |
Balance as of December 31, 2013 | $ | 50 |
| | $ | 49 |
| | $ | — |
| | $ | 7 |
| | $ | 106 |
|
