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Acquisitions | 6 Months Ended
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Jul. 04, 2015
Acquisitions |
Acquisitions | 7. Acquisitions Bluegiga On January 30, 2015, the Company acquired Bluegiga Technologies Oy, a private company based in Finland. Bluegiga is a provider of Bluetooth® Smart, Bluetooth Classic and Wi-Fi® modules and software stacks for a multitude of applications in the Internet of Things (IoT), industrial automation, consumer electronics, automotive, retail, residential, and health and fitness markets. The Company acquired Bluegiga for cash consideration of approximately $58.0 million. Approximately $9.4 million of the initial consideration was held in escrow as security for breaches of representations and warranties and certain other expressly enumerated matters. The Company recorded the purchase of Bluegiga using the acquisition method of accounting and accordingly, recognized the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The results of Bluegiga’s operations are included in the Company’s consolidated results of operations beginning on the date of the acquisition. The Company believes that this strategic acquisition will accelerate its entry into the wireless module market. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, the Company recorded goodwill. The goodwill is not deductible for tax purposes. The purchase price was allocated as follows (in thousands):
|  | Amount |  | Weighted-Average Amortization Period (Years) |
Intangible assets: |  |  |  |  |
In-process research and development |  | $ | 5,710 |  | Not amortized |
Developed technology |  | 12,190 |  | 8 |
Customer relationships |  | 6,670 |  | 4 |
Trademarks |  | 880 |  | 3 |
|  | 25,450 |  |  |
Cash and cash equivalents |  | 1,132 |  |  |
Other current assets |  | 6,156 |  |  |
Goodwill |  | 35,145 |  |  |
Other non-current assets |  | 208 |  |  |
Current liabilities |  | (3,289 | ) |  |
Non-current deferred tax liabilities, net |  | (4,328 | ) |  |
Long-term debt |  | (2,232 | ) |  |
Other non-current liabilities |  | (220 | ) |  |
Total purchase price |  | $ | 58,022 |  |  |
The allocation of the purchase price is preliminary and subject to change, based on the finalization of income tax matters. Accordingly, adjustments may be made to the values of the assets acquired and liabilities assumed as additional information is obtained about the facts and circumstances that existed at the valuation date. In-process research and development (IPR&D) represents acquired technology that had not achieved technological feasibility as of the acquisition date and had no alternative future use. The IPR&D recorded in connection with the acquisition of Bluegiga consisted primarily of Bluetooth Smart Ready and Bluetooth Smart modules and software stacks. The fair value of these technologies was determined using the income approach. The discount rate applicable to the cash flows was 16.1%. The significant risks associated with the projects include the Company’s potential inability to produce working models and the final products gaining customer acceptance. Pro forma information related to this acquisition has not been presented because it would not be materially different from amounts reported. The Company recorded approximately $1.2 million of acquisition-related costs in selling, general and administrative expenses during the six months ended July 4, 2015. Energy Micro On July 1, 2013, the Company acquired Energy Micro AS for approximately $140.6 million, including: 1) Initial consideration of $107.4 million; 2) Deferred consideration with an estimated fair value of $19.2 million at the date of acquisition; and 3) Contingent consideration (the “Earn-Out”) with an estimated fair value of $14.0 million at the date of acquisition. The Earn-Out is payable on an annual basis over a five-year period from fiscal 2014 through 2018 (the “Earn-Out Period”) and in no event shall exceed $6,666,666 per year, unless revenue from the Earn-Out Products exceeds $400 million in a single fiscal year during the Earn-Out Period (in which case, the entire Earn-Out amount less any amounts previously paid will become payable). Approximately $20.3 million of the initial consideration was withheld by the Company as security for breaches of representations and warranties and certain other expressly enumerated matters (the “Holdback”). A portion of the Earn-Out (28.76%) is contingent on the continued employment of certain key employees for the three years following the acquisition date (the “Departure Percentage”). The Departure Percentage was accounted for as a transaction separate from the business combination based on its economic substance and will be recorded as post-combination compensation expense in the Company’s financial statements during the Earn-Out period. In the first quarter of 2015, the Company made the following payments in connection with the acquisition: (a) approximately $20.0 million was paid for the release of the Holdback; and (b) approximately $6.3 million was paid for the first annual period of the Earn-out. Approximately $1.8 million of the Earn-out payment represented the Departure Percentage portion and was recorded as compensation expense during fiscal 2014. The remaining approximately $4.5 million of the Earn-out payment represented additional consideration.

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