ACQUISITIONS & DIVESTITURES

9 Months Ended

Dec. 31, 2019

Eastwind Acquisition

On April 3, 2019 (the Eastwind Closing Date), the Company completed the acquisition of certain assets and liabilities of Eastwind for $5.2 million. Eastwind's breach analytics cloud analyzes data to identify malicious activity, insider threats and data leakage.

The Company completed the purchase accounting related to the Eastwind acquisition as of June 30, 2019. Goodwill and intangible assets recorded as part of the acquisition are deductible for tax purposes.



Initial cash payment	$	4,154
Estimated fair value of contingent purchase consideration	1,000
Estimated purchase price	$	5,154

The following table reflects the estimated fair value of assets acquired and liabilities assumed (in thousands):



Property, plant and equipment	$	17
Intangible assets	4,230
Accrued other liabilities	(96		)
Goodwill	$	1,003

Of the total consideration, $1.0 million was deposited into an escrow account. The escrow account was established to cover damages NetScout may suffer related to any liabilities that NetScout did not agree to assume or as a result of the breach of representations and warranties of the seller as described in the acquisition agreement. Generally, indemnification claims that Eastwind would be liable for are limited to the total amount of the escrow account, which shall be the sole source for the satisfaction of any damages to the Company for such claims, but such limitation does not apply with respect to the seller's breach of certain fundamental representations or related to other specified indemnity items, for which certain of Eastwind's shareholders may be liable for additional amounts in excess of the escrow amount. Except to the extent that valid indemnification claims are made prior to such time, the $1.0 million will be paid to the seller in April 2020.

In connection with the Eastwind acquisition, certain former employees of Eastwind received cash retention payments totaling $0.3 million on the Eastwind Closing Date. Because these employees were not required to provide future services to the Company, the cash retention payments were accounted for as part of the purchase price. These former Eastwind employees will also receive cash retention payments subject to such employee's continued employment with the Company through the next regularly scheduled payroll dates following each of the first and second anniversaries of the Eastwind Closing Date. The cash retention payment liability related to these future cash retention payments were accounted for separately from the business combination as the cash retention payment is automatically forfeited upon termination of employment. The Company will record the liability over the period it is earned as compensation expense for post-combination services.

The fair value of intangible assets was based on a valuation using a cost method approach. The underlying assumptions include estimates of cost to replace or reproduce the asset, less adjustments for physical deterioration and functional obsolescence, if relevant. This fair value measurement was based on significant inputs not observable in the market and thus represents Level 3 fair value measurements.

The following table reflects the fair value of the acquired identifiable intangible asset and related estimated useful life (in thousands):



	Fair Value		Useful Life (Years)
Developed technology	$	4,230	10

The average useful life of the developed technology acquired from Eastwind is 10 years.

HNT Tools Business Divestiture

On September 14, 2018 (the HNT Divestiture Date), the Company divested its HNT tools business. As part of the divestiture, the Company recorded contingent consideration which represents potential future earnout payments of up to $4.0 million over two years that are contingent on the HNT tools business achieving certain milestones. The Company recorded a $0.5 million change in the fair value of the contingent consideration, which is included in other income (expense), net within the Company’s consolidated statements of operations for the nine months ended December 31, 2019. The fair value of the contingent consideration was $0.2 million and $0.8 million at December 31, 2019 and March 31, 2019, respectively. The contingent consideration is included within other assets within the Company’s consolidated balance sheet.

In connection with the divestiture, the Company has entered into a transitional services agreement with the buyer to provide certain services for a period of up to eighteen months. Income (expense) associated with the transitional services agreement for the three and nine months ended December 31, 2019 and 2018 was $(25) thousand, $1.1 million, $1.2 million, and $1.3 million respectively. Transitional services agreement income is included within other income (expense), net in the Company's consolidated statements of operations.