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BUSINESS ACQUISITIONS

12 Months Ended

Dec. 31, 2020

NOTE 2. BUSINESS ACQUISITIONS

Versatile Power, Inc

On December 31, 2020, we acquired 100% of the issued and outstanding shares of Versatile Power, Inc., which is based in Campbell, California. This acquisition added radio frequency ("RF") and programmable power supplies for medical and industrial applications to our product portfolio and further expands our presence in the medical market by adding proven technologies, deep customer relationships, expertise in medical design, and a medical-certified manufacturing center.

The components of the fair value of the total consideration transferred are as follows:


Cash paid for acquisition	$	4,594
Holdback		950
Contingent consideration		1,500
Total fair value of consideration transferred		7,044
Less cash acquired		(245)
Total purchase price	$	6,799

The following table summarizes the estimated preliminary values of the assets acquired and liabilities assumed:


	Preliminary Fair Value December 31, 2020
Current asset and liabilities, net	$	1,015
Property and equipment		35
Operating lease right-of-use assets		453
Intangible assets		4,000
Goodwill		1,749
Total assets acquired		7,252
Operating lease liability		453
Total liabilities assumed		453
Total fair value of net assets acquired	$	6,799

Artesyn’s Embedded Power Business

In September 2019, we completed the acquisition of Artesyn Embedded Technologies, Inc.’s embedded power business pursuant to the Stock Purchase Agreement dated May 14, 2019 as amended (the "Acquisition Agreement").

Pursuant to the Acquisition Agreement, we acquired 100% of Artesyn’s issued and outstanding shares for a purchase price of $370.2 million, including the assumption of certain liabilities and the finalization of the net working capital adjustment. In connection with the Acquisition Agreement, we entered into a credit agreement that provided us with aggregate financing of $500.0 million which was used to partially fund the Artesyn acquisition. See Note 21. Credit Facility for additional details related to the credit agreement.

Artesyn’s embedded power business is one of the world’s largest providers of highly engineered, application-specific power supplies for demanding applications. This acquisition diversified our product portfolio and gave us access to additional growth markets, such as data centers (including hyperscale), telecom infrastructure in next generation 5G networks, embedded industrial power applications and medical power for diagnostic and treatment applications.

The components of the fair value of the total consideration transferred are as follows:



Cash paid for acquisition	$	390,453
Contingent consideration		3,008
Total fair value of consideration transferred		393,461
Less cash acquired		(23,225)
Total purchase price	$	370,236

The following table summarizes the final fair values of the assets acquired and liabilities assumed:


	Final Fair Value December 31, 2020
Accounts and other receivable, net	$	132,466
Inventories		156,407
Property and equipment		63,321
Operating lease right-of-use assets		54,439
Goodwill		114,998
Intangible assets		124,000
Other assets		63,214
Total assets acquired		708,845
Accounts payable		152,635
Operating lease liability		54,515
Pension liability		48,315
Deferred income tax liabilities		1,695
Other liabilities		81,449
Total liabilities assumed		338,609
Total fair value of net assets acquired	$	370,236

A summary of the intangible assets acquired, amortization method and estimated useful lives are as follows:


			Amortization
			Method	Useful Life
Technology	$	28,000	Straight-line	5
Customer relationships		75,000	Straight-line	15
Tradename		21,000	Straight-line	10
Total	$	124,000

Goodwill and intangible assets are recorded in the functional currency of the entity and are subject to changes due to translation on each balance sheet date. The goodwill represents expected operating synergies from combining operations with the acquired company and the estimated value associated with the enhancements to our comprehensive product lines and access to new markets. Advanced Energy settled the adjustment for the net working capital and finalized the fair value for the assets acquired and liabilities assumed related to the Artesyn acquisition. Accordingly, the purchase price allocation presented above is final.

Pro forma results for Advanced Energy Inc. giving effect to the Artesyn Transaction

The following unaudited pro forma financial information presents the combined results of operations of Advanced Energy and Artesyn as if the acquisition had been completed on January 1, 2019. The unaudited pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of the year prior to the acquisition dates, nor are they indicative of future results.

The unaudited pro forma financial information for the year ended December 31, 2019 combines Advanced Energy’s results with the pre-acquisition results of Artesyn for that period.


	Year Ended December 31,
	2019
	As Reported		Pro Forma
Total sales	$	788,948	$	1,202,790
Net income attributable to Advanced Energy Industries, Inc.	$	64,941	$	83,104
Earnings per share:
Basic earnings per share	$	1.70	$	2.17
Diluted earnings per share	$	1.69	$	2.16

The unaudited pro forma results for all periods presented include adjustments made to account for certain costs and transactions that would have been incurred had the acquisitions been completed at the beginning of the year prior to the year of acquisition. These include adjustments to amortization charges for acquired intangible assets, interest and financing expenses, transaction costs, amortization of purchased gross profit and the alignment of various accounting policies. These adjustments are net of any applicable tax impact and were included to arrive at the pro forma results above.

Artesyn’s operating results have been included in the Advanced Energy’s operating results for the periods subsequent to the completion of the acquisition on September 10, 2019. During the year ended December 31, 2019, Artesyn contributed total sales of $220.3 million and net income of $7.1 million, including interest and other expense associated with the financing of the transaction.