On July 31, 2019, the Company acquired 100% of the outstanding shares of ARGES GmbH (“ARGES”), a Wackersdorf, Germany-based manufacturer of innovative laser scanning subsystems used in industrial materials processing and medical applications, for a total purchase price of €65.5 million ($72.9 million), subject to customary working capital adjustments. The purchase price consists of €24.0 million ($26.7 million) cash paid at closing, 124 thousand Novanta common shares issued upon closing (with a fair market value of €9.8 million, or $10.9 million, based on the closing market price of $87.58 per share on July 30, 2019), €7.1 million ($7.9 million) estimated fair value of contingent consideration and €24.7 million ($27.4 million) deferred cash consideration, which is expected to be paid on June 29, 2020. The contingent consideration payments will be payable annually based on actual revenue achievement against certain revenue targets from August 2019 through December 2026, with the first payment due in the first quarter of 2021. The undiscounted range of contingent consideration is zero to €10.0 million. The initial cash purchase price was financed with borrowings under the Company’s revolving credit facility. The addition of ARGES complements and expands the Company’s existing portfolio of lasers and laser beam steering solutions capabilities within the Photonics reportable segment.

On June 5, 2019, the Company acquired 100% of the outstanding stock of Med X Change, Inc. (“Med X Change”), a Bradenton, Florida-based provider of medical grade, high definition and 4K video recording and documentation solutions to OEMs in the medical market. The purchase price of $21.9 million, net of working capital adjustments, was financed with cash on hand and $21.0 million borrowings under the Company’s revolving credit facility. The addition of Med X Change complements and broadens the range of technology capabilities within the Company’s Vision reportable segment by providing its medical OEM customers with more integrated operating room solutions.

On April 16, 2019, the Company acquired 100% of the outstanding stock of Ingenia-CAT, S.L. (“Ingenia”), a Barcelona, Spain-based provider of high-performance servo drives and control software to OEMs in the medical and advanced industrial markets, for a total purchase price of €14.3 million ($16.2 million), net of working capital adjustments. The purchase price consists of €8.5 million ($9.6 million) of cash consideration and €5.8 million ($6.6 million) estimated fair value of contingent consideration. The contingent consideration payments will be payable annually based on actual revenue achievement against certain revenue targets from April 2019 through March 2022, with the first payment due in the second quarter of 2020. The undiscounted range of contingent consideration is zero to €8.0 million. The initial cash purchase price was financed with cash on hand and borrowings under the Company’s revolving credit facility. The Ingenia purchase and sale agreement requires €0.8 million ($0.9 million) of the purchase price to be held back by the Company for indemnification of certain representations and warranties claims by the Company until the

expiration of the holdback agreement in October 2021. The addition of Ingenia enhances the Company’s strategic position in the precision motion control industry by enabling it to offer a broader range of motion control technologies and integrated solutions. Ingenia is included in the Company’s Precision Motion reportable segment.

The acquisitions of ARGES, Med X Change and Ingenia have been accounted for as business combinations. The allocation of the purchase price is based upon a valuation of assets acquired and liabilities assumed. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using an income approach, with estimates and assumptions developed by management. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The Company’s estimates and assumptions in determining the estimated fair values of certain assets and liabilities are subject to change within the measurement period (up to one year from the acquisition date) as a result of additional information obtained with regards to facts and circumstances that existed as of the acquisition date.

Based upon a preliminary valuation, the total purchase price for ARGES was allocated as follows (in thousands):

	Purchase Price
	Allocation
Cash	$	3,159
Accounts receivable		1,542
Inventories		8,295
Property, plant and equipment		13,884
Intangible assets		24,713
Goodwill		42,355
Other assets		1,990
Total assets acquired		95,938
Accounts payable		2,598
Deferred tax liabilities		7,457
Other liabilities		12,954
Total liabilities assumed		23,009
Total assets acquired, net of liabilities assumed		72,929
Less: cash acquired		3,159
Total purchase price, net of cash acquired		69,770
Less: contingent consideration		7,870
Less: issuance of common shares		10,900
Less: deferred cash consideration		27,442
Net cash used for acquisition of business	$	23,558

The purchase price allocation is preliminary as the Company is in the process of collecting additional information for the valuation of inventories, intangible assets, contingent consideration and unrecognized tax benefits.

The fair value of intangible assets for ARGES is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Developed technologies	$	11,355	15 years
Customer relationships		11,800	15 years
Trademarks and trade names		1,225	10 years
Backlog		333	5 months
Total	$	24,713

The purchase price allocation resulted in $24.7 million of identifiable intangible assets and $42.4 million of goodwill. As the ARGES acquisition is an acquisition of outstanding common shares, none of the resulting goodwill is expected to be deductible for tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) ARGES’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) ARGES’s ability to grow the business through new product introductions; and (iii) cost improvements due to the integration of ARGES’s operations into the Company’s existing infrastructure.

The operating results of ARGES were included in the Company’s results of operations beginning on July 31, 2019. ARGES contributed revenues of $1.9 million and a loss before income taxes of $1.4 million for the nine months ended September 27, 2019. Loss before income taxes for the nine months ended September 27, 2019 included amortization of inventory fair value adjustments and amortization of purchased intangible assets of $0.9 million.

The pro forma financial information reflecting the operating results of ARGES, as if it had been acquired as of January 1, 2018, would not differ materially from the operating results of the Company as reported for the year ended December 31, 2018.

Based upon a preliminary valuation, the total purchase price for Med X Change and Ingenia was allocated as follows (in thousands):

	Purchase Price
	Allocation
Cash	$	1,000
Accounts receivable		1,739
Inventories		2,372
Property, plant and equipment		496
Intangible assets		22,376
Goodwill		13,539
Other assets		601
Total assets acquired		42,123
Accounts payable		604
Deferred tax liabilities		2,550
Other liabilities		910
Total liabilities assumed		4,064
Total assets acquired, net of liabilities assumed		38,059
Less: cash acquired		1,000
Total purchase price, net of cash acquired		37,059
Less: contingent consideration		6,569
Less: purchase price holdback		905
Net cash used for acquisition of businesses	$	29,585

The purchase price allocation is preliminary as the Company is in the process of collecting additional information for the valuation of unrecognized tax benefits.

The fair value of intangible assets for Med X Change and Ingenia is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Developed technologies	$	11,072	10 years
Customer relationships		10,465	15 years
Trademarks and trade names		639	9 years
Backlog		200	7 months
Total	$	22,376

The Company recorded an aggregate of $22.4 million of identifiable intangible assets and $13.5 million of goodwill from these acquisitions. Goodwill amounting to $6.2 million from the Med X Change acquisition is expected to be fully deductible for tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) their ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) their ability to grow business through new product introductions; and (iii) cost improvements due to the integration of Med X Change and Ingenia operations into the Company’s existing infrastructure.

The operating results of Med X Change and Ingenia were included in the Company’s results of operations beginning on the respective acquisition dates. These acquisitions contributed revenues of $4.0 million and a loss before income taxes of $0.1 million for the nine months ended September 27, 2019. Loss before income taxes for the nine months ended September 27, 2019 included amortization of inventory fair value adjustments and amortization of purchased intangible assets of $1.0 million.

The pro forma financial information reflecting the operating results of Med X Change and Ingenia, as if they had been acquired as of January 1, 2018, would not differ materially from the operating results of the Company as reported for the year ended December 31, 2018.

Acquisition costs are included in restructuring and acquisition related costs in the consolidated statements of operations. Acquisition costs for ARGES, Ingenia and Med X Change were $1.4 million for the nine months ended September 27, 2019.