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Business Acquisitions
 3 Months Ended
Mar. 28, 2015
Business Combinations [Abstract]  
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS
ChanTest
In October 2014, the Company acquired ChanTest Corporation (ChanTest), a leading provider of ion channel testing services to the pharmaceutical and biotech industry. The acquisition augments the Company’s early discovery capabilities and enhances the Company’s ability to support clients’ target discovery and lead optimization efforts. The preliminary purchase price of the acquisition was $59.3 million, including $0.3 million in contingent consideration. The aggregate, undiscounted amount of contingent consideration that could become payable is a maximum of $2.0 million. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The purchase price is subject to an adjustment based on the final determined net working capital as of the closing date. The business is reported in the Company’s Discovery and Safety Assessment (DSA) reportable segment.
The preliminary purchase price allocation of $52.1 million, net of $7.2 million in cash acquired, is as follows:
 
October 29, 2014
 
(in thousands)
Current assets (excluding cash)
4,648

Property, plant and equipment
1,579

Definite-lived intangible assets
23,920

Goodwill
34,927

Current liabilities
(3,515
)
Long-term liabilities
(9,486
)
Total purchase price allocation
$
52,073



The purchase price allocations were prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. During the three months ended March 28, 2015, the Company recorded measurement period adjustments related to the ChanTest acquisition that resulted in an immaterial change to the purchase price allocation. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.
The breakout of definite-lived intangible assets acquired is as follows:
 
October 29, 2014
 
Weighted average amortization life
 
(in thousands)
 
(in years)
Client relationships
$
19,000

 
13
Other intangible assets
4,920

 
9
Total definite-lived intangible assets
$
23,920

 
 


The definite-lived intangibles are largely attributed to the expected cash flows related to client relationships existing at the acquisition closing date. The goodwill resulting from the transaction is primarily attributed to the potential growth of the business and is not deductible for tax purposes.
VivoPath
In June 2014, the Company acquired substantially all of the assets of VivoPath LLC (VivoPath), a discovery services company specializing in the rapid, in vivo compound evaluation of molecules in the therapeutic areas of metabolism, inflammation and oncology. The preliminary purchase price was $2.3 million, including $1.6 million in contingent consideration, and was allocated primarily to the intangible assets acquired. The aggregate, undiscounted amount of contingent consideration that could become payable is a maximum of $2.4 million, payable over three years based on the achievement of revenue growth targets. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The business is reported in the Company’s DSA reportable segment.
Argenta and BioFocus
On April 1, 2014, the Company acquired (1) 100% of the shares of the United Kingdom (U.K.) based entities Argenta and BioFocus, and (2) certain Dutch assets. These businesses have formed the core of the Company’s Early Discovery business. With this acquisition, the Company has enhanced its position as a full service, early-stage CRO, with integrated in vitro and in vivo capabilities from target discovery through preclinical development. The purchase price of the acquisition was $191.8 million, including $0.9 million in contingent consideration. The acquisition was funded by cash on hand and borrowings on the Company’s revolving credit facility. The purchase price included payment for estimated working capital, which was subject to final adjustment based on the actual working capital of the acquired business. The businesses are reported in the Company’s DSA reportable segment.
The contingent consideration earn-out period ended on April 1, 2015. As a result, the related contingent consideration liability was reversed and a gain of $0.8 million was recorded in selling, general, and administrative expenses during the three months ended March 28, 2015 as no payments are expected to be made. The contingent consideration was a one-time payment that could have become payable in the second quarter of 2015 based on the achievement of a certain revenue target for the twelve-month period following the acquisition. The aggregate, undiscounted amount of contingent consideration that the Company could have paid was €5.0 million ($5.4 million as of March 28, 2015). The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes.
The purchase price allocation of $183.6 million, net of $8.2 million of cash acquired, was as follows (in thousands):
Current assets (excluding cash)
$
31,682

Property, plant and equipment
21,008

Other long term assets
11,140

Definite-lived intangible assets
104,470

Goodwill
65,235

Current liabilities
(13,139
)
Long term liabilities
(36,802
)
Total purchase price allocation
$
183,594


The breakout of definite-lived intangible assets acquired was as follows:
 
Definite-Lived Intangible Assets
 
Weighted Average Amortization Life
 
(in thousands)
 
(in years)
Client relationships
$
94,000

 
18
Backlog
5,900

 
1
Trademark and trade names
1,170

 
3
Leasehold interests
1,000

 
13
Other intangible assets
2,400

 
19
Total definite-lived intangible assets
$
104,470

 
 

The goodwill resulting from the transaction is primarily attributed to the potential growth of the Company’s DSA businesses from clients introduced through Argenta and BioFocus, the assembled workforce of the acquired businesses and expected cost synergies. The goodwill attributable to Argenta and BioFocus is not deductible for tax purposes. The Company incurred transaction and integration costs in connection with the acquisition of less than $0.1 million and $3.3 million during the three months ended March 28, 2015 and March 29, 2014, respectively, which were included in selling, general and administrative expenses.