2. ACQUISITIONS

Acquisition of FiBest Limited—On December 9, 2015, we completed the acquisition of FiBest Limited (“FiBest Acquisition”) a Japan-based merchant market component supplier of optical sub-assemblies. We acquired FiBest to expand our position in optical networking components. In connection with the FiBest Acquisition, all of the outstanding equity interests (including outstanding options) of FiBest were exchanged for aggregate consideration of $59.1 million including net cash of $47.5 million and assumed debt of $11.6 million. We funded the FiBest Acquisition with cash on hand. For the three and six months ended April 1, 2016, we recorded transaction costs of $0.1 million and $2.7 million as selling, general and administrative expense related to this acquisition. The FiBest Acquisition was accounted for as a stock purchase and the operations of FiBest have been included in our consolidated financial statements since the date of acquisition.

We recognized the FiBest assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for FiBest is being allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, none of which will be tax deductible.

We expect to finalize our allocation of purchase price during calendar year 2016. The preliminary allocation of purchase price as of April 1, 2016, is as follows (in thousands):


	Six Months Ended April 1, 2016
	Preliminary Allocation
Current assets	$	10,850
Intangible assets		45,650
Other assets		3,334

Total assets acquired		59,834

Liabilities assumed:
Debt		11,627
Deferred income taxes		12,932
Other liabilities		3,968

Total liabilities assumed		28,527

Net assets acquired		31,307

Consideration:
Cash paid upon closing, net of cash acquired		47,517

Goodwill	$	16,210

The components of the acquired intangible assets on a preliminary basis were as follows (in thousands):


	Amount		Useful Lives (Years)
Developed technology	$	9,400	7
Customer relationships		36,250	10

	$	45,650

The overall weighted-average life of the identified intangible assets acquired in the FiBest Acquisition is estimated to be 9.4 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets.

The purchase accounting is preliminary and subject to completion including the areas of taxation and certain fair value measurements, particularly the finalization of the valuation assessment of the acquired tangible and intangible assets. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting.

The following is a summary of FiBest revenue and earnings included in MACOM’s accompanying condensed consolidated statements of operations for the three and six months ended months ended April 1, 2016 (in thousands):


	Three Months Ended			Six Months Ended
Revenue	$	8,435		$	11,105
Loss before income taxes		(1,747	)		(2,558	)

Unaudited Supplemental Pro Forma Data—The pro forma statements of operations data for the three and six months ended April 1, 2016 and April 3, 2015, below, give effect to the FiBest Acquisition, described above, as if it had occurred at October 4, 2014. These amounts have been calculated after applying our accounting policies and adjusting the results of FiBest to reflect; transaction costs, retention compensation expense, the impact of the step-up to the value of acquired inventory, as well as the additional intangible amortization that would have been charged assuming the fair value adjustments had been applied and incurred since October 4, 2014. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations.


	Three Months Ended						Six Months Ended
	April 1, 2016			April 3, 2015			April 1, 2016			April 3, 2015
Revenue	$	133,579		$	109,763		$	256,979		$	213,651
Net loss		(11,531	)		(8,798	)		(26,785	)		(19,115	)

Acquisition of Aeroflex/Metelics Inc.—On December 14, 2015, we acquired Aeroflex/Metelics, Inc. (“Metelics Acquisition”), a diode supplier for aggregate cash consideration of $38.0 million, subject to customary working capital and other adjustments. We acquired Metelics to expand our diode business. We funded the acquisition with cash on hand. The Metelics Acquisition was accounted for as a stock purchase and the operations of Metelics have been included in our consolidated financial statements since the date of acquisition. For the six months ended April 1, 2016, we recorded transaction costs of $0.5 million as selling, general and administrative expenses related to this acquisition. For the three months ended April 1, 2016 the transaction costs were not material.

We recognized the Metelics assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for Metelics is being allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, which will be tax deductible due to a 338(h)(10) election.

We expect to finalize our allocation of purchase price during calendar year 2016. The adjusted allocation of purchase price as of April 1, 2016, is as follows (in thousands):


	Preliminary Allocation		Allocation Adjustments			Adjusted Allocation
Current assets	$	15,250	$	(1,835	)		13,415
Intangible assets		19,700		—			19,700
Other assets		6,249		—			6,249

Total assets acquired		41,199		(1,835	)		39,364

Liabilities assumed:
Other liabilities		7,401		—			7,401

Total liabilities assumed		7,401		—			7,401

Net assets acquired		33,798		(1,835	)		31,963

Consideration:
Cash paid upon closing, net of cash acquired		38,000		—			38,000

Goodwill	$	4,202	$	1,835		$	6,037

The components of the acquired intangible assets on a preliminary basis were as follows (in thousands):


	Amount		Useful Lives (Years)
Developed technology	$	1,000	7
Customer relationships		18,700	10

	$	19,700

The overall weighted-average life of the identified intangible assets acquired in the Metelics Acquisition is estimated to be 9.8 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets.

During the quarter ended April 1, 2016, we recorded an adjustment of $1.8 million primarily associated with inventory which reduced current assets acquired.

The purchase accounting is preliminary and subject to completion including certain fair value measurements, particularly the finalization of the valuation assessment of the acquired tangible and intangible assets. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting.

The following is a summary of Metelics revenue and earnings included in our accompanying condensed consolidated statements of operations for the three and six months ended April 1, 2016 (in thousands):


	Three Months Ended			Six Months Ended
Revenue	$	10,345		$	12,252
Loss before income taxes		(220	)		(174	)

Unaudited Supplemental Pro Forma Data—The pro forma statements of operations data for the three and six months ended April 1, 2016 and April 3, 2015, below, give effect to the Metelics Acquisition, described above, as if it had occurred at October 4, 2014. These amounts have been calculated after applying our accounting policies and adjusting the results of Metelics to reflect the transaction costs, the impact of the step-up to the value of acquired inventory, as well as the additional intangible amortization that would have been charged assuming the fair value adjustments had been applied and incurred since October 4, 2014. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations.


	Three Months Ended						Six Months Ended
	April 1, 2016			April 3, 2015			April 1, 2016			April 3, 2015
Revenue	$	133,579		$	112,009		$	258,189		$	219,392
Net loss		(10,119	)		(7,995	)		(25,703	)		(15,748	)

Acquisition of BinOptics Corporation—On December 15, 2014, we completed the acquisition of BinOptics Corporation (“BinOptics Acquisition”) a supplier of high-performance photonic semiconductor products. In accordance with the related agreement and plan of merger, all of the outstanding equity interests (including outstanding warrants) of BinOptics were exchanged for aggregate consideration of approximately $208.4 million in cash. In addition we paid $14.6 million as part of a related retention escrow agreement designed to retain certain BinOptics employees. This $14.6 million was included in the terms of the purchase agreement and has been accounted for as a post-closing prepaid expense. We funded the BinOptics Acquisition with a combination of cash on hand and the incurrence of $100.0 million of additional borrowings under our existing Revolving Facility. For the six months ended April 3, 2015, we recorded transaction costs of $4.1 million related to the BinOptics Acquisition.

The BinOptics Acquisition was accounted for as a stock purchase and the operations of BinOptics have been included in our consolidated financial statements since the date of acquisition.

We have recognized BinOptics’ assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for BinOptics has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, none of which is tax deductible.

We finalized our allocation of purchase price during the first quarter of fiscal year 2016. The final allocation of purchase price as of January 1, 2016, is as follows (in thousands):


	October 2, 2015 Allocation		Allocation Adjustments			January 1, 2016 Adjusted Allocation

Current assets	$	23,674	$	(1,100	)	$	22,574
Intangible assets		136,900		400			137,300
Other assets		9,194		—			9,194

Total assets acquired		169,768		(700	)		169,068

Liabilities assumed:
Debt		2,535		—			2,535
Deferred income taxes		33,345		99			33,444
Other liabilities		13,106		—			13,106

Total liabilities assumed		48,986		99			49,085

Net assets acquired		120,782		(799	)		119,983

Consideration:
Cash paid upon closing, net of cash acquired		208,352		—			208,352

Goodwill	$	87,570	$	799		$	88,369

The components of the acquired intangible assets were as follows (in thousands):


	Amount		Useful Lives (Years)
Developed technology	$	17,500	7
Customer relationships		119,800	10

	$	137,300

The overall weighted-average life of the identified intangible assets acquired in the BinOptics Acquisition is estimated to be 9.6 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets.

Unaudited Supplemental Pro Forma Data—The pro forma statements of operations data for the three and six months ended April 3, 2015, below, give effect to the BinOptics Acquisition, described above, as if it had occurred at September 28, 2013. These amounts have been calculated after applying our accounting policies and adjusting the results of BinOptics to reflect the transaction costs, retention compensation expense, the impact of the step-up to the value of the acquired inventory, as well as additional intangible amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied and incurred since September 28, 2013. This pro forma data is presented as of April 3, 2015 for informational purposes only and does not purport to be indicative of our future results of operations.


	Three Months Ended			Six Months Ended
	April 3, 2015			April 3, 2015
Revenue	$	104,387		$	237,966
Net loss		(11,387	)		(14,750	)