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ACQUISITION OF RIVIERAWAVES
 12 Months Ended
Dec. 31, 2015
Business Combinations [Abstract]  
ACQUISITION OF RIVIERAWAVES

NOTE 2: ACQUISITION OF RIVIERAWAVES

On July 4, 2014 (the “Closing Date”), the Company acquired 100% of RivieraWaves SAS (“RivieraWaves”), a privately-held, French-based company and a provider of wireless connectivity intellectual property for Wi-Fi and Bluetooth technologies. The Company agreed to pay an aggregate of $18,378 to acquire RivieraWaves with $14,678 paid on the Closing Date and the remaining amount of $3,700 payable upon the satisfaction of certain milestones (the “Contingent Consideration”). The Contingent Consideration was recognized as a liability at fair value. As of December 31, 2014, the fair value of the Contingent Consideration was estimated to be $3,603. Accretion of the Contingent Consideration liability was included in financial income, net. During 2015, the Company fully paid the Contingent Consideration.

 

In addition, the Company incurred acquisition-related costs in an amount of $310, which were included in general and administrative expenses for the year ended December 31, 2014.

The acquisition was accounted in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 805, “Business Combinations.” Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets of RivieraWaves acquired in the acquisition, based on their fair values on the Closing Date.

The results of operations of RivieraWaves are included in the Company’s consolidated financial statements as of the Closing Date. The primary rationale for this acquisition was to further expand CEVA’s non-cellular baseband business into advanced technology offerings in connectivity, including Wi-Fi and Bluetooth IP. The goodwill is primarily attributable to expected synergies resulting from the acquisition.

In addition, as part of the acquisition, the Company established an employee retention plan for the RivieraWaves employees at a cost of approximately $3,400, to be payable on a semiannual basis for a period of two years after the Closing Date. During 2015, the Company paid $971 of the employee retention plan.

Details of the fair value of consideration transferred and the purchase price allocation are as follows:

 

  (a) Consideration transferred:

 

Cash

    $  14,678   

Fair value of Contingent Consideration

      3,434   
  

 

 

  

Total

    $ 18,112   
  

 

 

  

 

  (b) Under business combination accounting, the total purchase price was allocated to RivieraWaves’ net tangible and intangible assets based on their estimated fair values as set forth below. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.

 

Cash and cash equivalents

    $ 1,189   

Bank deposits

      1,384   

Other assets

      2,898   

Intangible assets

      6,161   

Goodwill

      10,114   
  

 

 

  

Total assets

      21,746   

Current liabilities

      (2,201 ) 

Deferred tax liabilities, net

      (1,433 ) 
  

 

 

  

Total liabilities

      (3,634 ) 

Total

    $ 18,112   
  

 

 

  

 

In performing the purchase price allocation, the Company considered, among other factors, analysis of historical financial performance, highest and best use of the acquired assets and estimates of future performance of RivieraWaves’ products. In its allocation, the Company also considered the fair value of intangible assets based on a market participant approach to valuation performed by a third party valuation firm using an income approach and estimates and assumptions provided by management. The following table sets forth the components of intangible assets associated with the RivieraWaves acquisition:

 

     Fair value  

Core technologies (1)

    $ 5,796   

Customer relationships (2)

      272   

Customer backlog (3)

      93   
  

 

 

  

Total intangible assets

    $ 6,161   
  

 

 

  

 

(1) Core technologies represent a combination of RivieraWaves’ processes and trade secrets related to the design and development of its products. This proprietary know-how can be leveraged to develop new technology and improve the Company’s products and is amortized using the straight line method.
(2) Customer relationships represent the underlying relationships and agreements with RivieraWaves’ installed customer base and are amortized using the straight line method.
(3) Customer backlog represents an order or production backlog arises from contracts or sales orders and are amortized using the straight line method.