On August 17, 2022 (the "Effective Date"), the Company completed the Atotech Acquisition, through the acquisition of the entire issued share capital of Atotech by Atotech Manufacturing, Inc. ("Bidco"), a Delaware corporation and indirect wholly owned subsidiary of the Company. The Atotech Acquisition was implemented by means of a scheme of arrangement under the laws of Jersey (the "Scheme") pursuant to the definitive agreement entered into by the Company and Atotech on July 1, 2021, as amended by the Letter Agreement dated October 29, 2021 by and among the Company, Atotech and Bidco and as further amended by the Amendment to the Implementation Agreement dated April 1, 2022 by and among the Company, Atotech and Bidco (together, the "Implementation Agreement").

Atotech develops leading process and manufacturing technologies for advanced surface modification, electroless and electrolytic plating, and surface finishing. Applying a comprehensive systems-and-solutions approach, Atotech's portfolio includes chemistry, equipment, software, and services for innovative and high-technology applications in a wide variety of end markets. Atotech further broadens the Company's capabilities by bringing leadership in critical chemistry solutions for advanced electronics and specialty industrial applications.

On the Effective Date, pursuant to the Scheme and in accordance with terms and conditions of the Implementation Agreement, Bidco acquired each issued and outstanding ordinary share of Atotech in exchange for per share consideration of $16.20 in cash and 0.0552 of a share of Company common stock. The Company funded the payment of the aggregate cash consideration with a combination of cash on hand and the proceeds from the New Term Loan Facility as defined in Note 10.

As a result of the Atotech Acquisition, the Company issued an aggregate of 10.7 shares of Company common stock to the former Atotech shareholders.

The preliminary purchase price of Atotech consisted of the following:


Cash consideration to Atotech stockholders, net	$	2,886
Value of MKS shares issued		1,186
Repayment of Atotech debt(1)		1,545
Settlement of Atotech share-based awards(2)		47
Total purchase price, net of cash and cash equivalents acquired	$	5,664

(1)

Represents the cash paid for the outstanding principal of Atotech's senior secured term loans.

(2)

Represents the amount paid to the holders of Atotech options that became fully vested on the Effective Date and the fair value of vested but unissued Atotech share-based awards.

Under the acquisition method of accounting, the total estimated purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of Atotech based on their fair values as of the Effective Date, except for contract assets and liabilities, which remain at book value in accordance with Accounting Standards Codification 606. Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill and none of this goodwill or intangible assets will be deductible for tax purposes. The Company believes the amount of goodwill relative to identifiable intangible assets relates to several factors, including (1) broadening its position in key industrial end markets to offer complementary solutions, and (2) leveraging component and systems expertise to provide robust solutions to meet customer evolving technology needs.

The following table summarizes the allocation of the preliminary purchase price to the fair values assigned to assets acquired and liabilities assumed at the Effective Date:


Cash and cash equivalents	$	238
Trade accounts receivable		273
Inventories		280
Other current assets		114
Property, plant and equipment		285
Intangible assets		3,251
Goodwill		2,720
Other assets		146
Total assets acquired		7,307
Accounts payable		197
Other current liabilities		203
Non-current deferred taxes		859
Non-current accrued compensation		94
Other non-current liabilities		52
Total liabilities assumed		1,405
Fair value of assets acquired and liabilities assumed		5,902
Less: Cash and cash equivalents acquired		(238	)
Total purchase price, net of cash and cash equivalents acquired	$	5,664

The allocation of estimated purchase consideration to the acquired tangible and intangible assets and assumed liabilities of Atotech is preliminary and subject to change during the measurement period. The Company is in the process of finalizing information related to the allocation of assets acquired and liabilities assumed.

The following table reflects the preliminary allocation of the acquired intangible assets and related estimate of useful lives at the Effective Date:


Developed technology	$	813	9 years
Customer relationships		2,080	16 years
Trade names		195	8 years
Other intangible assets		98	4 years
In process research and development		65	12 years
	$	3,251

The acquired intangible assets are being amortized on a straight-line basis, which approximates the economic use of the assets over their estimated useful lives.

The net fair value of the acquired intangibles was based upon publicly available benchmarked information as well as a variety of other assumptions, including market participant assumptions, as the preliminary valuation report has not been completed. The valuations were based on the information that was available through the filing date of this 10-Q that existed as of the Effective Date and the expectations and assumptions that have been deemed reasonable by the Company's management. There are inherent uncertainties and management judgment required in these determinations.

While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the Effective Date, its estimates and assumptions are subject to refinement. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations. The finalization of the purchase accounting assessment will result in a change in the valuation of assets acquired and liabilities assumed and may have a material impact on the Company's results of operations and financial position. As a result, during the measurement period, which may be up to one year from the Effective Date, the Company records adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill to reflect additional information received about facts and circumstances which existed at the Effective Date. The Company records adjustments to the assets acquired and liabilities assumed subsequent to the purchase price allocation period in the Company's operating results in the period in which the adjustments are determined. The size and breadth of the Atotech Acquisition will necessitate the use of this one-year measurement period to adequately analyze and assess a number of the factors used in establishing the fair value of certain tangible and intangible assets acquired and liabilities assumed as of the Effective Date and the related tax impacts of any changes made. Any potential adjustments made could be material in relation to the preliminary values presented above.

The results of this acquisition were included in the Company's consolidated statement of operations beginning on August 17, 2022. The Atotech business constitutes the Company's MSD reportable segment (see Note 16).

The Company's condensed consolidated statement of operations for the three and nine months ended September 30, 2022, includes the following amounts of revenue and net income of Atotech since the Effective Date:


	Three and Nine Months Ended September 30,
	2022
Total net revenues	$	177
Net loss	$	(44	)

During the three and nine months ended September 30, 2022, the Company recognized acquisition and integration costs, substantially all of which related to the Atotech Acquisition.

The following unaudited pro forma financial information presents the combined results of operations of the Company as if the Atotech Acquisition had occurred on January 1, 2021. The unaudited pro forma financial information is not necessarily indicative of what the Company's condensed consolidated results of operations actually would have been had the acquisition occurred at the beginning of the year. In addition, the unaudited pro forma financial information does not attempt to project the future results of operations of the combined Company.


	Three Months Ended September 30,					Nine Months Ended September 30,
	2022			2021		2022		2021
Total net revenues	$	1,141		$	1,125	$	3,364	$	3,298
Net (loss) income	$	(34	)	$	95	$	166	$	193

The unaudited pro forma information for the three and nine months ended September 30, 2022 and 2021 give effect primarily to the following:

•

Applying the Company's accounting policies;

•

Incremental interest expense related to the New Term Loan Facility;

•

Incremental amortization of acquired intangible assets related to the estimated fair value from the purchase price allocation;

•

The exclusion of inventory step-up amortization from the three and nine months ended September 30, 2022 and the addition of this amortization to the nine months ended September 30, 2021;

•

Incremental compensation expense for share-based compensation arrangements; and

•

The estimated tax impact of the above adjustments.

On July 15, 2021, the Company completed its acquisition of Photon Control Inc. ("Photon Control") and such acquisition, the "Photon Control Acquisition"), pursuant to a definitive agreement (the "Arrangement Agreement"). Photon Control designs, manufactures and distributes a wide range of optical sensors and systems to measure temperature and position used in semiconductor wafer fabrication. At the effective time of the Photon Control Acquisition and pursuant to the terms and conditions of the Arrangement Agreement, each share of Photon Control's common stock issued and outstanding as of immediately prior to the effective time of the Photon Control Acquisition, was converted into the right to receive CAD 3.60 per share in cash, without interest and subject to deduction for any required withholding tax. The Company funded the payment of the aggregate consideration with available cash on hand. Photon Control is included in the Company's PSD segment.

Under the acquisition method of accounting, the total estimated purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of Photon Control based on their fair values as of the acquisition date. Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill and none of this goodwill or intangible assets will be deductible for tax purposes. The Company believes the amount of goodwill relative to identifiable intangible assets relates to enhancing the Company's Surround the Chamber® offering by adding optical sensors for temperature control for critical etch and deposition applications in semiconductor wafer fabrication.

The following table summarizes the allocation of the purchase price to the fair values assigned to assets acquired and liabilities assumed at the date of the Photon Control Acquisition:


Current assets	$	51
Intangible assets		121
Goodwill		168
Other non-current assets		9
Total assets acquired		349
Current liabilities		14
Non-current deferred taxes		32
Other non-current liabilities		1
Total liabilities assumed		47
Fair value of assets acquired and liabilities assumed		302
Less: Cash and cash equivalents acquired		(34	)
Total purchase price, net of cash and cash equivalents acquired	$	268

The acquired intangible assets are being amortized on a straight-line basis, which approximates the economic use of the assets over their estimated useful lives. The following table reflects the allocation of the acquired intangible assets and related estimate of useful lives at the date of the Photon Control Acquisition:

The fair value of the acquired intangible assets was determined using the income approach. In performing these valuations, the key underlying assumptions used included the appropriate discount rates as well as forecasted revenue growth rates, gross profit and operating margins. Fair value estimates are based on complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The valuations were based on the information that was available as of the acquisition date and the expectations and assumptions that have been deemed reasonable by the Company's management. There are inherent uncertainties and management judgment required in these determinations. This acquisition resulted in a purchase price that exceeded the estimated fair value of tangible and intangible assets, the excess amount of which was allocated to goodwill.

The results of operations of the Photon Control business from the Photon Control Acquisition closing date of July 15, 2021 through December 31, 2021, were not material to the Company's results of operations. The acquisition was also not material to the Company's results of operations for the periods presented on a pro forma basis.

Completed technology

Customer relationships