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Acquisitions
 12 Months Ended
Jun. 30, 2011
Acquisitions  
Acquisitions

NOTE 17—ACQUISITIONS

Fiscal 2011

StreamServe Inc.

On October 27, 2010, we acquired StreamServe, a software company based in Burlington, Massachusetts. StreamServe offers enterprise business communication solutions that help organizations process and deliver highly personalized documents in paper or electronic format. The acquisition of StreamServe for $70.5 million in cash adds complementary document output and customer communication management software to our ECM Suite, while enhancing our SAP partnership and extending our reach in the Nordic market. In accordance with ASC Topic 805, this acquisition was accounted for as a business combination.

The results of operations of StreamServe have been consolidated with those of OpenText beginning October 27, 2010.

 

The following tables summarize the consideration paid for StreamServe and the amount of the assets acquired and liabilities assumed, as well as the goodwill recorded as of the acquisition date:

 

Cash consideration paid

    $ 70,514   
  

 

 

  

Acquisition related costs (included in Special charges in the Condensed Consolidated Statements of Income) for year ended June 30, 2011

    $ 1,146   
  

 

 

  

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of October 27, 2010, are set forth below:

 

Current assets (inclusive of cash acquired of $13,293)

    $ 29,431   

Long-term assets

      3,267   

Intangible customer assets

      15,400   

Intangible technology assets

      27,300   

Total liabilities assumed

      (43,912 ) 
  

 

 

  

Total identifiable net assets

      31,486   

Goodwill

      39,028   
  

 

 

  
   $ 70,514   
  

 

 

  

As set forth in the purchase agreement, $6.0 million of the total cash consideration paid is currently being held by an escrow agent for indemnification purposes pursuant to the purchase agreement. Subject to certain conditions being met, this consideration will be released to the former equity holders of StreamServe at the end of 15 months following the closing date of the acquisition.

No portion of the goodwill recorded upon the acquisition of StreamServe is expected to be deductible for tax purposes.

The fair value of current assets acquired includes accounts receivable with a fair value of $11.0 million. The gross amount receivable was $12.4 million. As of June 30, 2011, $0.7 million of this receivable was expected to be uncollectible.

The amount of StreamServe's revenues and net income included in OpenText's Consolidated Statements of Income for the year ended June 30, 2011, and the unaudited pro forma revenues and net income of the combined entity had the acquisition been consummated as of July 1, 2009, are set forth below:

 

     Revenues      Net Loss*  

Actual from October 27, 2010 to June 30, 2011

    $ 43,151       $ (1,978 ) 

 

     Year ended June 30,  
      2011      2010  
Supplemental Unaudited Pro forma Information      

Total revenues

    $ 1,053,884       $ 974,410   

Net income**

    $ 118,649       $ 88,174   

* Included within net loss for the period from October 27, 2010 to June 30, 2011 are $5.4 million of amortization charges relating to the allocated values of intangible assets and $3.7 million of restructuring charges included within Special charges (note 16).
** Included in pro forma net income for the year ended June 30, 2011 are non-recurring charges in the amount of $3.3 million recorded by StreamServe in connection to acquisition costs incurred by StreamServe and the acceleration of the vesting of StreamServe employee stock options. Estimated amortization charges relating to the allocated values of intangible assets are also included within pro forma net income for all the periods reported above.

 

The unaudited pro forma financial information in the table above is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.

Metastorm Inc.

On February 18, 2011, we acquired Metastorm, a software company based in Baltimore, Maryland. Metastorm provides Business Process Management (BPM), Business Process Analysis (BPA), and Enterprise Architecture (EA) software that helps enterprises align their strategies with execution. The acquisition of Metastorm adds complementary technology and expertise that can be used to enhance our ECM solutions portfolio. In accordance with ASC Topic 805, this acquisition was accounted for as a business combination.

The results of operations of Metastorm have been consolidated with those of OpenText beginning February 18, 2011.

The following tables summarize the consideration paid for Metastorm and the amount of the assets acquired and liabilities assumed, as well as the goodwill recorded as of the acquisition date:

 

Cash consideration paid

    $ 182,000   
  

 

 

  

Acquisition related costs (included in Special charges in the Condensed Consolidated Statements of Income) for the year ended June 30, 2011

    $ 1,038   
  

 

 

  

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of February 18, 2011 are set forth below:

 

Current assets (inclusive of cash acquired of $13,343)

    $ 37,494   

Long-term assets

      14,281   

Intangible customer assets

      34,300   

Intangible technology assets

      40,700   

Total liabilities assumed

      (55,277 ) 
  

 

 

  

Total identifiable net assets

      71,498   

Goodwill

      110,502   
  

 

 

  
   $ 182,000   
  

 

 

  

As set forth in the purchase agreement, $5.5 million of the total cash consideration paid is currently being held by an escrow agent for indemnification purposes pursuant to the purchase agreement. Subject to certain conditions being met, this consideration will be delivered to the former equity holders of Metastorm at the end of 275 days following the closing date of the acquisition.

The fair value of goodwill recorded above includes an amount of $10.6 million which is expected to be deductible for tax purposes.

The fair value of current assets acquired includes accounts receivable with a fair value of $11.0 million. The gross amount receivable was $12.2 million. As of June 30, 2011, $1.9 million of this receivable was expected to be uncollectible.

The amount of Metastorm's revenues and net loss included in OpenText's Condensed Consolidated Statements of Income for year ended June 30, 2011, and the unaudited pro forma revenues and net income of the combined entity had the acquisition been consummated as of July 1, 2009, are set forth below:

 

     Revenues      Net Loss*  

Actual from February 18, 2011 to June 30, 2011

    $ 28,731       $ (5,870 ) 

 

     The year ended June 30,  
      2011      2010  
Supplemental Unaudited Pro forma Information      

Total revenues

    $ 1,086,461       $ 980,228   

Net income**

    $ 114,054       $ 78,186   

* Included within net loss for the period reported above are $5.1 million of estimated amortization charges relating to the allocated values of intangible assets and $4.4 million of restructuring charges included within Special charges (note 16).
** Included in pro forma net income for the year ended June 30, 2011 are non-recurring charges in the amount of $0.7 million, recorded by Metastorm in connection with acquisition costs incurred by Metastorm and employee stock based compensations and bonuses. Estimated amortization charges relating to the allocated values of intangible assets are also included within pro forma net income for all the periods reported above.

The unaudited pro forma financial information in the table above is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.

weComm Limited

On March 15, 2011, we acquired weComm, a software company based in London, United Kingdom. weComm's software platform offers deployment of media rich applications for mobile devices, including smart phones and tablets. The acquisition of weComm facilitates our delivery of a platform to customers whereby we can help customers provide rich, immersive mobile applications more cost-effectively across a multitude of mobile operating systems and devices. In accordance with ASC Topic 805, this acquisition was accounted for as a business combination.

The results of operations of weComm have been consolidated with those of OpenText beginning March 15, 2011.

The following tables summarize the consideration paid for weComm and the amount of the assets acquired and liabilities assumed, as well as the goodwill recorded as of the completion date:

 

Cash consideration paid

    $ 20,461   
  

 

 

  

Acquisition related costs (included in Special charges in the Condensed Consolidated Statements of Income) for the year ended June 30, 2011

    $ 318   
  

 

 

  

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of March 15, 2011 are set forth below:

 

Current assets (inclusive of cash acquired of $263)

    $ 954   

Long-term assets

      328   

Intangible customer assets

      300   

Intangible technology assets

      5,000   

Total liabilities assumed

      (2,867 ) 
  

 

 

  

Total identifiable net assets

      3,715   

Goodwill

      16,746   
  

 

 

  
   $ 20,461   
  

 

 

  

As set forth in the purchase agreement, $2.1 million of the total cash consideration paid is currently being held by an escrow agent for indemnification purposes pursuant to the purchase agreement. Subject to certain conditions being met, this consideration will be delivered at the end of 12 months following the completion date of the acquisition.

 

No portion of the goodwill recorded upon the acquisition of weComm is expected to be deductible for tax purposes.

The fair value of current assets acquired includes accounts receivable with a fair value of $0.19 million. The gross accounts receivable was $0.25 million, of which $0.06 million was expected to be uncollectible.

The amount of weComm's revenues and net loss included in OpenText's Condensed Consolidated Statements of Income for the year ended June 30, 2011, and the unaudited pro forma revenues and net income of the combined entity had the acquisition been consummated as of July 1, 2009, are set forth below:

 

     Revenues      Net Loss*  

Actual from March 15, 2011 to June 30, 2011

    $ 311       $ (1,172 ) 

 

     The year ended June 30,  
      2011      2010  

Supplemental Unaudited Pro forma Information

      

Total revenues

    $ 1,035,175       $ 915,870   

Net income

    $ 120,913       $ 88,425   

* Included within net loss for the period reported above are $0.4 million of estimated amortization charges relating to the allocated values of intangible assets and $0.17 million of restructuring charges included within Special charges (note 16).

The unaudited pro forma financial information in the table above is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.

Fiscal 2010

Burntsand Inc.

On May 27, 2010, we acquired Burntsand Inc. (Burntsand), a provider of technology consulting services for customers with complex information processing and information management requirements, focusing in particular in areas such as ECM, Collaboration and Service Management. Burntsand was based in Toronto, Ontario, Canada. The acquisition of Burntsand complements and enhances our current service offerings to further strengthen our position in the ECM market. In accordance with ASC Topic 805, this acquisition was accounted for as a business combination.

The results of operations of Burntsand have been consolidated with those of OpenText beginning May 27, 2010.

The following tables summarize the consideration paid for Burntsand and the amount of the assets acquired and liabilities assumed, as well as the goodwill recorded as of the acquisition date:

 

Cash consideration paid

    $ 10,792   
  

 

 

  

Acquisition related costs (included in Special charges in the Consolidated Statements of Income) for the year ended June 30, 2010

    $ 303   
  

 

 

  

 

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of May 27, 2010 are set forth below:

 

Current assets (inclusive of cash acquired of $2,629)

    $ 11,085   

Long-term assets

      3,504   

Intangible customer assets

      753   

Total liabilities assumed

      (2,886 ) 
  

 

 

  

Total identifiable net assets

      12,456   

Goodwill

      (1,664 ) 
  

 

 

  
   $ 10,792   
  

 

 

  

The final valuation of the fair value assessment of acquired Burntsand's assets and liabilities, as at May 27, 2010, was concluded in the first quarter of Fiscal 2011. This valuation established an additional $7.2 million in deferred tax assets relating primarily to legacy net operating losses. Taking into account these deferred tax assets, total consideration paid was determined to be in excess of total identifiable net assets by $1.7 million, thereby generating a negative goodwill of $1.7 million at the time of acquisition. As required by ASC Topic 805, this negative goodwill is recorded under Special Charges in the consolidated statement of operations, for the year ended June 30, 2010, on a retroactive basis. In addition, in accordance with ASC Topic 805, the previously recorded amount as of June 30, 2010 for goodwill, short term deferred tax assets, long term deferred tax assets and long term income taxes recoverable have been adjusted in the amounts of $5.5 million, $4.5 million, $3.0 million and ($0.3) million, respectively, as a result of the final valuation.

The fair value of current assets acquired includes accounts receivable with a fair value of $3.3 million. The gross amount receivable was $3.3 million, all of which is expected to be collectible.

The amount of Burntsand's unaudited pro forma revenues and net income of the combined entity had the acquisition date been consummated as of July 1, 2008, are set forth below:

 

     Year ended June 30,  
     2010      2009  

Supplemental Unaudited Pro forma Information

      

Total revenues

    $ 929,033       $ 808,449   

Net income*

    $ 85,055       $ 56,742   

* Included within net income for the period reported above are the estimated amortization charges relating to the allocated values of intangible assets.

The unaudited pro forma financial information in the table above is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.

Nstein Technologies Inc.

On April 1, 2010, we acquired Nstein Technologies Inc. (Nstein), a software company based in Montreal, Quebec, Canada. Nstein provides content management solutions which help enterprises centralize, understand and manage large amounts of content. Nstein's solutions include its patented "Text Mining Engine" which allows users to more easily search through different content and data. We acquired Nstein to leverage and enhance our product offerings. In accordance with ASC Topic 805, this acquisition was accounted for as a business combination.

The results of operations of Nstein have been consolidated with those of OpenText beginning April 1, 2010.

 

The following tables summarize the consideration paid for Nstein and the amount of the assets acquired and liabilities assumed, as well as the goodwill recorded as of the acquisition date:

 

Equity consideration paid

    $ 8,548   

Cash consideration paid

      25,326   
  

 

 

  

Fair value of total consideration transferred

      33,874   
  

 

 

  

Acquisition related costs (included in Special charges in the Consolidated Statements of Income) for the year ended June 30, 2010

    $ 958   
  

 

 

  

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of April 1, 2010 are set forth below:

 

Current assets (inclusive of cash acquired of $4,956)

    $ 13,602   

Long-term assets

      10,545   

Intangible customer assets

      2,919   

Intangible technology assets

      17,310   

Total liabilities assumed

      (13,784 ) 
  

 

 

  

Total identifiable net assets

      30,592   

Goodwill

      3,282   
  

 

 

  
   $ 33,874   
  

 

 

  

The fair value of Common Shares issued as part of the consideration was CAD $48.39 per share, determined based upon the 10 day volume-weighted average price of OpenText's Common Shares, as traded on the Toronto Stock Exchange, prior to the acquisition date.

The fair value of current assets acquired includes accounts receivable with a fair value of $5.1 million. The gross amount receivable was $6.0 million, of which $0.9 million was expected to be uncollectible.

The amount of Nstein's unaudited pro forma revenues and net income of the combined entity had the acquisition date been consummated as of July 1, 2008, are set forth below:

 

     Year ended June 30,  
     2010      2009  

Supplemental Unaudited Pro forma Information

      

Total revenues

    $ 925,072       $ 807,636   

Net income*

    $ 83,122       $ 54,066   

The unaudited pro forma financial information in the table above is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.

New Generation Consulting Inc.

On April 16, 2010 we acquired certain miscellaneous assets and liabilities from New Generation Consulting Inc., in the amount of $4.0 million. Of this amount, $0.5 million was originally held back as of acquisition date, pending the resolution of certain post closing purchase price adjustments. This amount has been paid in full to the seller in the fourth quarter of Fiscal 2011. Of the total purchase price approximately $3.1 million has been allocated to goodwill, $0.4 million to customer intangible assets and the remainder to certain receivables and liabilities assumed.

 

Vignette Corporation

On July 21, 2009, we acquired, by way of merger, all of the issued and outstanding shares of Vignette, an Austin, Texas based company that provides and develops software used for managing and delivering business content. Pursuant to the terms of the merger agreement, each share of common stock of Vignette (not already owned by OpenText) issued and outstanding immediately prior to the effective date of the merger (July 21, 2009) was converted into the right to receive $8.00 in cash and 0.1447 of one OpenText common share (equivalent to a value of $5.33 as of July 21, 2009). We acquired Vignette to strengthen our ability to offer an expanded portfolio of Enterprise Content Management (ECM) solutions to further consolidate our position as an independent leader in the ECM marketplace. In accordance with ASC Topic 805, this acquisition was accounted for as a business combination.

The results of operations of Vignette have been consolidated with those of OpenText beginning July 22, 2009.

The following tables summarize the consideration paid for Vignette and the amount of the assets acquired and liabilities assumed, as well as the goodwill recorded as of the acquisition date:

 

Equity consideration paid

    $ 125,223   

Cash consideration paid

      182,909   
  

 

 

  

Fair value of total consideration transferred

      308,132   

Vignette shares already owned by OpenText through open market purchases (at fair value)

      13,283   
  

 

 

  
   $ 321,415   
  

 

 

  

Acquisition related costs (included in Special charges in the Consolidated Statements of Income) for the year ended June 30, 2010

    $ 1,931   
  

 

 

  

The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of July 21, 2009, are set forth below:

 

Current assets (inclusive of cash acquired of $92,309)

    $ 171,616   

Long-term assets

      17,484   

Intangible customer assets

      22,700   

Intangible technology assets

      68,200   

Total liabilities assumed

      (68,541 ) 
  

 

 

  

Total identifiable net assets

      211,459   

Goodwill

      109,956   
  

 

 

  
   $ 321,415   
  

 

 

  

The fair value of Common shares issued as part of the consideration was determined based upon the closing price of OpenText's common shares on NASDAQ on acquisition date.

The fair value of current assets acquired includes accounts receivable with a fair value of $27.1 million. The gross amount receivable was $28.3 million, of which $1.2 million was expected to be uncollectible.

We recognized a gain of $4.4 million as a result of re-measuring to fair value our investment in Vignette held before the date of acquisition. The gain was recognized in "Other income" in our consolidated financial statements during Fiscal 2010.

 

The amount of Vignette's unaudited pro forma revenues and net income of the combined entity had the acquisition been consummated as of July 1, 2008, are set forth below. Non-recurring charges of $11.9 million are included in the unaudited pro forma information. These charges relate primarily to one-time business combination and share-based compensation costs incurred by Vignette prior to our acquisition.

 

     Year ended June 30,  
     2010      2009  

Supplemental Unaudited Pro forma Information

      

Total revenues

    $ 918,230       $ 936,237   

Net income*

    $ 71,871       $ 41,509   

The unaudited pro forma financial information in the table above is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.

Fiscal 2009

Vizible Corporation

On April 8, 2009 we acquired Vizible Corporation (Vizible), a Toronto-based privately held maker of digital media interface solutions. We acquired Vizible to help expand our suite of digital asset management solutions. Vizible was acquired prior to the adoption of ASC Topic 805 becoming effective for the Company. In accordance with SFAS 141, this acquisition is accounted for as a business combination.

Total purchase consideration for this acquisition was approximately $0.9 million, of which approximately $0.4 million has been allocated to technology assets, $0.3 million has been allocated to deferred tax assets, and the remainder to goodwill.

Captaris Inc.

On October 31, 2008, we acquired all of the issued and outstanding shares of Captaris, a provider of software products that automate "document-centric" processes. We acquired Captaris to strengthen our ability to offer an expanded portfolio of solutions that integrate with SAP, Microsoft and Oracle solutions. In accordance with SFAS 141, this acquisition is accounted for as a business combination.

The results of operations of Captaris have been consolidated with those of OpenText beginning November 1, 2008.

Total consideration for this acquisition was $102.1 million, which consisted of $101.0 million in cash, net of cash acquired, and approximately $1.1 million of direct acquisition related costs.

Purchase Price Allocation

The purchase price allocation set forth below represents our final allocation of the purchase price and the fair value of net assets acquired.

 

Current assets (net of cash acquired of $30,043)

    $ 28,971   

Long-term assets

      26,252   

Intangible customer assets

      32,900   

Technology assets

      73,600   

In-process research and development*

      121   

Goodwill

      65,646   
  

 

 

  

Total assets acquired

      227,490   

Total liabilities assumed and acquisition-related accruals

      (125,300 ) 
  

 

 

  
   $ 102,190   
  

 

 

  

* Included as part of research and development expense in the quarter ended December 31, 2008.

The useful lives of intangible customer assets have been estimated to be between six and eight years. The useful lives of technology assets have been estimated to be between four and five years.

No amount of the goodwill is expected to be deductible for tax purposes. 

As part of the purchase price allocation, we recognized liabilities in connection with this acquisition of approximately $19.4 million relating to employee termination charges, costs relating to abandonment of excess Captaris facilities and accruals for unpaid direct acquisition related costs. This was the result of our management approved and initiated plans to restructure the operations of Captaris by way of workforce reduction and abandonment of excess legacy facilities.

Proforma financial information (unaudited)

The unaudited proforma financial information in the table below summarizes the combined result of OpenText and Captaris, on a pro forma basis, as though the companies had been combined as of July 1, 2008. This information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented or the result that may be realized in the future.

The unaudited pro forma information included hereunder does not include the financial impacts of the restructuring initiatives relating to former Captaris activities, as these have been capitalized as part of the preliminary purchase allocation but does include the estimated amortization charges relating to the allocation of values to acquired intangible assets.

 

     Year ended June 30,
2009		  

Total revenues

    $ 831,793   

Net income*

    $ 41,768   

* Included herein are non-recurring charges in the amount of $9.3 million, recorded by Captaris in relation to business combination costs incurred by Captaris and the acceleration of the vesting of Captaris employee stock options.

eMotion LLC

In July 2008, we acquired 100% ownership of eMotion LLC (eMotion), a division of Corbis Corporation. eMotion specializes in managing and distributing digital media assets and marketing content. We acquired eMotion to enhance our capabilities in the "digital asset management" market, giving us a broader portfolio of offerings for marketing and advertising agencies, adding capabilities that complement our existing enterprise asset-management solutions. eMotion is based in Seattle, Washington. In accordance with SFAS 141, this acquisition is accounted for as a business combination.

The results of operations of eMotion have been consolidated with those of OpenText beginning July 3, 2008.

Total consideration for this acquisition was $4.4 million which consisted of $4.2 million in cash, net of cash acquired, and approximately $0.2 million in costs directly related to this acquisition. An amount of $0.5 million which was originally accrued and held back, as provided for in the purchase agreement, was released in Fiscal 2010.

 

Purchase Price Allocation

Under business combination accounting the total purchase price, was allocated to eMotion's net assets based on their estimated fair values as of July 3, 2008, as set forth below. The excess of the purchase price over the net assets was recorded as goodwill.

The purchase price allocation set forth below represents our final allocation of the purchase price and the fair value of net assets acquired.

 

Current assets

    $ 648   

Long-term assets

      238   

Intangible customer assets

      1,411   

Technology assets

      2,823   
  

 

 

  

Total assets acquired

      5,120   

Liabilities assumed

      (751 ) 
  

 

 

  
   $ 4,369   
  

 

 

  

The useful lives of intangible customer and technology assets have been estimated to be five and seven years, respectively.

Division of Spicer Corporation

In July 2008, we acquired 100% ownership of a division of Spicer Corporation (Spicer), a privately-held company based in Kitchener, Ontario, Canada. Spicer specializes in "file format" viewer solutions for desktop applications, integrated business process management systems and reprographics. We acquired a division of Spicer to complement and extend our existing enterprise content management suite, providing flexible document viewing options and enhanced document security functionality. In accordance with SFAS 141, this acquisition is accounted for as a business combination.

The results of operations of Spicer have been consolidated with those of OpenText beginning July 1, 2008.

Total consideration for this acquisition was $11.7 million which consisted of $11.4 million in cash, and approximately $0.3 million in costs directly related to this acquisition. In addition, a further amount of $0.2 million has been held back from the purchase price and will be recorded as part of the purchase only upon the resolution of certain contingencies.

Purchase Price Allocation

Under business combination accounting the total purchase price, excluding the amount of $0.2 million which has been held back, was allocated to Spicer's net assets, based on their estimated fair values as of July 1, 2008, as set forth below. The excess of the purchase price over the net assets was recorded as goodwill.

The purchase price allocation set forth below represents our final allocation of the purchase price and the fair value of net assets acquired.

 

Current assets

    $ 953   

Long-term assets

      23   

Intangible customer assets

      1,777   

Technology assets

      5,529   

Goodwill

      4,791   
  

 

 

  

Total assets acquired

      13,073   

Liabilities assumed

      (1,330 ) 
  

 

 

  
   $ 11,743   
  

 

 

  

 

The useful life of the intangible customer and technology assets has been estimated to be five and seven years, respectively.

A portion of the goodwill is deductible for tax purposes.