Note 5. Mergers and Acquisitions

AvComm and Wireless Test and Measurement business (“AW business”)

On March 15, 2018 ("AW business Closing Date"), the Company completed the acquisition of the AW business of Cobham plc. The Company acquired the AW business for $469.8 million cash consideration, subject to final cash and working capital adjustment.

The acquisition further strengthens the Company’s competitive position in 5G deployment and diversifies the Company into military, public safety and avionics test markets. The acquired business is being integrated into the Company's Network Enablement ("NE") segment.

The Company accounted for the transaction in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed are recorded at fair value on the acquisition date. The acquisition-related costs totaling $9.8 million were included in selling, general, and administrative expenses in the Company’s Consolidated Statements of Operations for the nine months ended March 31, 2018.

The purchase price was allocated as follows (in millions) :



Net tangible assets acquired	$	65.9
Intangible assets acquired:
Developed technology	113.5
Customer relationships	75.0
Trade names	28.0
In-process research and development	9.0
Backlog	6.5
Goodwill	171.9
Total purchase price	$	469.8

The amounts above are considered preliminary and are subject to change once the Company receives additional information it believes is necessary to finalize its determination of the fair value of certain assets acquired under the acquisition.

The following table summarizes the components of the tangible assets acquired at fair value (in millions):



Cash	$	16.1
Accounts receivable	42.6
Inventory	33.5
Property and equipment	33.5
Other assets	7.6
Accounts payable	(10.9		)
Other liabilities	(23.3		)
Deferred revenue	(9.0		)
Deferred tax liabilities	(24.2		)
Net tangible assets acquired	$	65.9

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of acquired developed technology, customer relationships, trade names, acquired in-process research and development (“IPR&D”) and backlog was determined based on an income approach using the discounted cash flow method. The intangible assets, except IPR&D, are being amortized over their estimated useful lives that range from three to six years. Order backlog will be fully amortized within one year.

In accordance with authoritative guidance, the Company recognizes IPR&D at fair value as of March 15, 2018. The IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts. IPR&D is tested for impairment during the period it is considered an indefinite lived asset.

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of AW business. Goodwill has been assigned to the NE segment and is partially deductible for tax purpose. Goodwill is not being amortized but is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with authoritative guidance.

The amount of AW business’ net revenue and net loss, included in the Company's Consolidated Statements of Operations for the three and nine months ended March 31, 2018 were $12.3 million and $2.4 million, respectively. AW business’s net revenue and net loss disclosed above reflect Management’s best estimate, based on information available at the reporting date.

The following table presents certain unaudited pro forma information, for illustrative purposes only, for three and nine months ended March 31, 2018 and April 1, 2017 as if the AW business had been acquired on July 3, 2016. The unaudited estimated pro forma information combines the historical results of the AW business with the Company's consolidated historical results and includes certain adjustments reflecting the estimated impact of fair value adjustments for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisition taken place on July 3, 2016. Actual results will differ from the unaudited pro forma information presented below (unaudited, in millions):



	Three Months Ended					Nine Months Ended
	March 31, 2018			April 1, 2017		March 31, 2018			April 1, 2017
Pro forma net revenue	$	256.4		$	241.1	$	767.9		$	770.9
Pro forma net (loss) income	(21.0		)	12.6		(37.8		)	111.8

Trilithic, Inc. (“Trilithic”)

On August 9, 2017, the Company completed the acquisition of Trilithic, a privately-held provider of electronic test and measurement equipment for telecommunications service providers. The Company acquired all outstanding shares of Trilithic for $56.4 million in cash. The Trilithic acquisition has been integrated into the Company’s NE segment.

The Company accounted for the transaction in accordance with the authoritative guidance on business combinations. Therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date, and acquisition-related costs totaling $0.9 million were included in selling, general, and administrative expenses in the Company’s Consolidated Statement of Operations during the nine months ended March 31, 2018.

The purchase price was allocated as follows (in millions) :



Net tangible assets acquired	$	11.8
Intangible assets acquired:
Developed technology	15.5
Customer relationships	11.0
Other	0.3
Goodwill	17.8
Total purchase price	$	56.4

The following table summarizes the components of the tangible assets acquired at fair value (in millions):



Cash	$	0.2
Accounts receivable	3.2
Inventory	10.1
Property and equipment	1.2
Accounts payable	(1.7		)
Other liabilities, net of other assets	(1.2		)
Net tangible assets acquired	$	11.8

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of acquired developed technology, customer relationships, and other intangible assets was determined based on an income approach using the discounted cash flow method. The intangible assets are being amortized over their estimated useful lives that range from three to five years for the acquired developed technology and customer relationships.

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of Trilithic. Goodwill has been assigned to the NE segment and is not deductible for tax purposes. Goodwill is not being amortized but is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with authoritative guidance.

Trilithic’s results of operations have been included in the Company’s consolidated financial statements subsequent to the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.