9. Acquisitions

Telegesis

On November 20, 2015, the Company acquired Telegesis (UK) Limited, a limited liability company incorporated in England and Wales. Telegesis is a supplier of wireless mesh networking modules based on the Company's ZigBee and Thread technology, targeting applications in the smart energy, home automation and industrial automation markets. The Company acquired Telegesis for cash consideration of $19.9 million. Approximately $2.9 million of the consideration was held in escrow as security for breaches of warranties and certain other expressly enumerated matters.

The Company believes that this strategic acquisition accelerates its roadmap for ZigBee and Thread modules. 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	$	10		Not amortized
Developed technology		4,980		7
Customer relationships		2,000		3
Trademarks		400		3

		7,390
Cash and cash equivalents		717
Other current assets		4,545
Goodwill		9,344
Other non-current assets		131
Current liabilities		(689	)
Non-current deferred tax liabilities		(1,508	)

Total purchase price	$	19,930

The allocation of the purchase price is preliminary and subject to change, primarily for the valuation of certain assets and accruals and 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.

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 $0.5 million of acquisition-related costs in selling, general and administrative expenses during fiscal 2015.

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 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		34,597
Other non-current assets		208
Current liabilities		(3,289	)
Non-current deferred tax liabilities		(3,780	)
Long-term debt		(2,232	)
Other non-current liabilities		(220	)

Total purchase price	$	58,022

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 fiscal 2015.

Energy Micro

On July 1, 2013, the Company acquired Energy Micro AS, a late-stage private company. Energy Micro designed and developed energy-efficient 32-bit microcontrollers based on ARM Cortex-M architecture. Energy Micro's energy-friendly solutions are designed to enable a broad range of power-sensitive applications for the Internet of Things (IoT), including smart energy, home automation, security and portable electronics markets.

The Company acquired Energy Micro for approximately $140.6 million, including: 1) Initial consideration of $107.4 million; 2) Deferred consideration in the form of a promissory note with an estimated fair value of $19.2 million at the date of acquisition (the promissory note was subsequently exchanged for approximately 0.5 million shares of the Company's restricted stock after a mandatory two-month creditor notice.); 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 up to approximately $33.3 million based on the extent to which the annual revenue growth rate from certain Energy Micro and Silicon Laboratories products (the "Earn-Out Products") exceeds 25% per year, on an annual basis over a five-year period from fiscal 2014 through 2018 (the "Earn-Out Period"). The Earn-Out is payable on an annual basis 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"). The Holdback was recorded in other non-current liabilities in the Consolidated Balance Sheet.

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.

The Company believes that this strategic acquisition will accelerate its deployment of energy-friendly solutions across the IoT industries, while further scaling the Company's engineering team. These factors 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	$	18,600		Not amortized
Core and developed technology		29,100		7
Customer relationships		6,400		8
Trademarks		1,300		8

		55,400
Cash and cash equivalents		919
Other current assets		6,486
Goodwill		98,515
Other non-current assets		3,117
Current liabilities		(8,000	)
Non-current deferred tax liabilities, net		(6,288	)
Long-term debt		(8,434	)
Other non-current liabilities		(1,133	)

Total purchase price	$	140,582

The IPR&D recorded in connection with the acquisition of Energy Micro consisted of a multi-protocol wireless RF solution. The fair value of this technology was determined using the income approach. The discount rate applicable to the cash flows was 13.0%.

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 $2.4 million of acquisition-related costs in selling, general and administrative expenses during fiscal 2013.

During fiscal 2015, the Company made the following payments in connection with the Energy Micro 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.