Acquisitions

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Acquisitions

Acquisitions

On April 1, 2020, we acquired 100% of the shares of Lumerical, a leading developer of photonic design and simulation tools, for a purchase price of approximately $107.5 million, paid in cash. The acquisition adds best-in-class photonic products to our multiphysics portfolio, providing customers with a full set of solutions to solve their next-generation product challenges.

The assets and liabilities of Lumerical have been recorded based upon management's estimates of their fair market values as of the acquisition date. The following tables summarize the fair value of consideration transferred and the fair values of identified assets acquired and liabilities assumed at the acquisition date:

Fair Value of Consideration Transferred:

(in thousands)
Cash	$	107,545

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

(in thousands)
Cash	$	11,844
Accounts receivable and other tangible assets	3,385
Developed software and core technologies	31,614
Customer lists	1,616
Trade names	1,756
Accounts payable and other liabilities	(1,108)
Deferred revenue	(1,405)
Net deferred tax liabilities	(6,305)
Total identifiable net assets	$	41,397
Goodwill	$	66,148

The goodwill, which is not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the assembled workforce of the acquired business and the synergies expected to arise as a result of the acquisition of Lumerical.

The fair values of the assets acquired and liabilities assumed are based on preliminary calculations. The estimates and assumptions for these items are subject to change as additional information about what was known and knowable at the acquisition date is obtained during the measurement period (up to one year from the acquisition date).

We determined the fair value of our intangible assets using various valuation techniques, including the relief-from-royalty method and the multi-period excess earnings method. These models utilize certain unobservable inputs classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include, but are not limited to: royalty rate, discount rate and attrition rate.

The valuation method and assumptions used to determine the fair value of the intangible assets acquired with the Lumerical acquisition are as follows:

Intangible Asset	Useful Life	Valuation Method	Assumptions
Developed software and core technologies	10 years	Multi-period excess earnings	Discount rate: 16.5%
Trade names	6 years	Relief-from-royalty	Royalty rate: 2.0% Discount rate: 16.5%
Customer lists	10 years	Multi-period excess earnings	Attrition rate: 10.0% Discount rate: 12.5%

The operating results of Lumerical have been included in our condensed consolidated financial statements since the date of acquisition. The effects of the business combination were not material to our consolidated results of operations.

On November 1, 2019, we completed the acquisition of 100% of the shares of Livermore Software Technology (LST), the premier provider of explicit dynamics and other advanced finite element analysis technology, for a purchase price of $781.5 million, inclusive of final net working capital adjustments. The acquisition empowers our customers to solve a new class of engineering challenges, including developing safer automobiles, aircraft and trains while reducing or even eliminating the need for costly physical testing. The purchase price was paid with $472.8 million in cash and 1.4 million shares of our common stock valued at $308.7 million. We issued $307.2 million of common stock in an unregistered offering to the prior owners of LST and the remaining $1.5 million was issued from shares held in treasury.

On February 1, 2019, we completed the acquisition of 100% of the shares of Granta Design Limited (Granta Design) for a purchase price of $208.7 million, paid in cash and inclusive of final net working capital adjustments. The acquisition of Granta Design, the premier provider of materials information technology, expands our portfolio into this important area, giving customers access to materials intelligence, including data that is critical to successful simulations.

Additionally, during the year ended December 31, 2019, we acquired DYNARDO GmbH, Helic, Inc. (Helic) and DfR Solutions to combine the acquired technologies with our existing comprehensive multiphysics portfolio. These acquisitions were not individually significant. The combined purchase price of these other acquisitions was $138.6 million, paid in cash and inclusive of final net working capital adjustments.

The operating results of each 2019 acquisition have been included in our condensed consolidated financial statements since each respective date of acquisition.