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Business Combinations | 6 Months Ended
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May 31, 2018
Business Combinations [Abstract] |
Business Combinations | Business Combinations Kinvey Acquisition On June 1, 2017, we acquired by merger 100% of the outstanding securities of Kinvey for an aggregate sum of $49.2 million, which includes approximately $0.3 million held-back from the founder of Kinvey as an incentive to remain with the Company for at least two years following the acquisition. The $0.3 million held-back is being recorded to expense over the service period. Kinvey allows developers to set up, use, and operate a cloud backend for any native, hybrid, web, or IoT app built using any development tools. The acquisition was accounted for as a business combination, and accordingly, the results of operations of Kinvey are included in our operating results as part of the OpenEdge business segment from the date of acquisition. We paid the purchase price in cash from available funds. The total consideration, less the $0.3 million held-back discussed above, which is considered to be a compensation arrangement, was allocated to Kinvey's tangible assets, identifiable intangible assets and assumed liabilities based on their estimated fair values. The excess of the total consideration, less the amount held-back from the founder, over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The allocation of the purchase price was completed in the fourth quarter of fiscal year 2017 upon the finalization of our valuation of identifiable intangible assets and deferred taxes. The allocation of the purchase price is as follows (in thousands):
| Total |  | Life
Net working capital | $ | (963 | ) |  |
Property, plant and equipment | 26 |  |  |
Purchased technology | 22,100 |  |  | 5 Years
Trade name | 1,800 |  |  | 5 Years
Customer relationships | 100 |  |  | 5 Years
Net deferred tax assets | 1,465 |  |  |
Goodwill | 24,351 |  |  |
Net assets acquired | $ | 48,879 |  |  |
The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to price the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital. Deferred taxes include deferred tax liabilities resulting from the tax effects of fair value adjustments related to identifiable intangible assets, which are more than offset by the value of deferred tax assets acquired from Kinvey. Tangible assets acquired and assumed liabilities were recorded at fair value. We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill. We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $24.4 million of goodwill, which is not deductible for tax purposes. Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) are not included as a component of consideration paid, but are required to be expensed as incurred. We incurred minimal acquisition-related costs during the three and six months ended May 31, 2018, which are included in acquisition-related expenses on our condensed consolidated statements of operations. We have not disclosed the amount of revenues and earnings of Kinvey since acquisition, nor pro forma financial information, as those amounts are not significant to our consolidated financial statements. DataRPM Acquisition On March 1, 2017, we acquired by merger 100% of the outstanding securities of DataRPM for an aggregate sum of $30.0 million. Approximately $1.7 million of the purchase price was paid to DataRPM’s founders in the form of restricted stock units, subject to a two-year vesting schedule and continued employment. DataRPM is a leader in cognitive predictive maintenance for the industrial IoT ("IIoT") market. The acquisition was accounted for as a business combination, and accordingly, the results of operations of DataRPM are included in our operating results as part of the OpenEdge business segment from the date of acquisition. We paid the purchase price in cash from available funds. The total consideration, less the fair value of the granted restricted stock units discussed above, which are considered compensation arrangements, was allocated to DataRPM’s tangible assets, identifiable intangible assets and assumed liabilities based on their estimated fair values. The excess of the total consideration, less the fair value of the restricted stock units, over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The allocation of the purchase price was completed in the fourth quarter of fiscal year 2017 upon the finalization of our valuation of identifiable intangible assets and deferred taxes. The allocation of the purchase price is as follows (in thousands):
| Total |  | Life
Net working capital | $ | (174 | ) |  |
Property, plant and equipment | 68 |  |  |
Purchased technology | 19,900 |  |  | 5 Years
Trade name | 800 |  |  | 5 Years
Customer relationships | 100 |  |  | 5 Years
Deferred taxes | (5,006 | ) |  |
Goodwill | 12,583 |  |  |
Net assets acquired | $ | 28,271 |  |  |
The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to price the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital. Deferred taxes include deferred tax liabilities resulting from the tax effects of fair value adjustments related to identifiable intangible assets, partially offset by the fair value of deferred tax assets acquired from DataRPM. Tangible assets acquired and assumed liabilities were recorded at fair value. We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill. We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $12.6 million of goodwill, which is not deductible for tax purposes. As discussed above, approximately $1.7 million of the total consideration was paid to DataRPM’s founders in restricted stock units, subject to a vesting schedule and continued employment. We concluded that the restricted stock units are compensation arrangements and we are recognizing stock-based compensation expense in accordance with the vesting schedule over the service period of the awards, which is two-years. During the three months ended May 31, 2018, we incurred minimal stock-based compensation expense related to these restricted stock units. During the six months ended May 31, 2018, as a result of the termination of employment of one of the founders, we recorded a minimal credit to stock-based compensation expense related to forfeitures. These amounts are included in operating expenses on our condensed consolidated statements of operations. Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) are not included as a component of consideration transferred, but are required to be expensed as incurred. We did not incur any acquisition-related costs during the three and six months ended May 31, 2018 and do not expect to incur additional material costs with respect to this acquisition. We have not disclosed the amount of revenues and earnings of DataRPM since acquisition, nor pro forma financial information, as those amounts are not significant to our consolidated financial statements.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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