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Acquisitions
 3 Months Ended
Mar. 31, 2012
Acquisitions  
Acquisitions

4. Acquisitions

 

Unity Semiconductor Corporation

 

On February 3, 2012, the Company completed its acquisition of a privately-held company, Unity Semiconductor Corporation (“Unity”), by acquiring all issued and outstanding shares of capital stock of Unity. Pursuant to the merger agreement on February 3, 2012, a wholly-owned subsidiary of the Company merged with and into Unity, with Unity as the surviving corporation. Under the terms of the merger agreement, the purchase price is $35.0 million subject to certain adjustments, of which the Company has paid approximately $31.3 million in cash and will pay the balance in the second quarter of 2012. Of the purchase price, approximately $5.5 million in cash was deposited into an escrow account until August 3, 2013, subject to any claims, to fund any indemnification obligations to the Company following the consummation of the merger. The Company acquired Unity’s technology and a portfolio of non-volatile solid state memory patents. The solid state memory technology is intended to replace NAND in the growing non-volatile memory market. This memory technology has been designed to accelerate the commercialization of the Terabit generation of non-volatile memories. Devices using this technology are expected to achieve higher density, faster performance, lower manufacturing costs and greater data reliability than NAND Flash.  Unity is part of the Semiconductor Business Group (“SBG”) reportable segment. The Company incurred approximately $0.6 million in direct acquisition costs in connection with the acquisition which were expensed as incurred.

 

In addition to the purchase consideration, the Company agreed to pay an aggregate of $5.0 million in retention bonuses to certain Unity employees over the next three years. The retention bonus payouts are subject to the condition of employment, and therefore, will be treated as compensation and expensed as incurred on a graded attribution basis.

 

The purchase price allocation for the business acquired is based on management’s estimate of the fair value for purchase accounting purposes at the date of acquisition. The fair value of the assets acquired has been determined primarily by using valuation methods that discount the expected future cash flows to present value using estimates and assumptions determined by management, which is a level three fair value measurement. The Company performed a valuation of the net assets acquired as of the February 3, 2012 closing date. The purchase price from the business combination was allocated as follows:

 

 

 

Total

 

 

 

(in thousands)

 

Cash

 

$

182

 

Property and equipment

 

51

 

Other tangible assets

 

36

 

Identified intangible assets

 

19,280

 

Goodwill

 

15,451

 

Total

 

$

35,000

 

 

The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of Unity. This goodwill is not expected to be deductible for tax purposes.

 

The identified intangible assets assumed in the acquisition of Unity were recognized as existing technology based upon their fair values as of the acquisition date. The purchased intangible assets have an estimated average useful life of 10 years from the date of acquisition.

 

Other Acquisition Activities

 

In the first quarter of 2012, the Company entered into one additional business combination and a patent acquisition for $12.8 million, which resulted in approximately $8.1 million of goodwill, $3.7 million of intangible assets (weighted average useful life of 6 years) and $1.0 million of other assets and has an additional payment of $1.0 million due in the second quarter of 2012. These acquisitions are part of the “All Other” reportable segment.

 

The condensed consolidated financial statements include the operating results of these businesses from the date of acquisition. The acquired assets did not generate any revenue during the reported periods. Pro forma results of operations for these business combinations have not been presented because their effects were not significant to the Company’s financial results.