Acquisitions

3 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

Acquisition-related costs during the three months ended March 31, 2022 were $10.3 million and are included in general and administrative expense in the condensed consolidated statements of income. Pro forma results of operations for the acquisition completed during the three months ended March 31, 2022 have not been presented because the effects of the acquisition were not material to the Company's consolidated financial results. Revenue and earnings of the acquired company since the date of the acquisition that are included in the Company's condensed consolidated statements of income are also not presented separately because they are not material.

Linode

In March 2022, the Company acquired all the outstanding equity interests of Linode Limited Liability Company ("Linode"), for $898.8 million in cash. Linode is an infrastructure-as-a-service platform provider that allows for developer-friendly cloud computing capabilities. The acquisition is intended to enhance the Company’s edge computing services by creating a unique cloud platform to build, run and secure applications from the cloud to the edge. As of March 31, 2022, the purchase price allocation is preliminary, pending finalization of the fair value of the tangible and intangible assets acquired, certain income tax matters and net working capital.

The following table presents the preliminary allocation of the purchase price for Linode (in thousands):

Total purchase consideration	$	898,777
Allocation of the purchase consideration:
Cash	$	26,678
Accounts receivable	7,220
Prepaid expenses and other current assets	6,288
Property and equipment	60,670
Operating lease right-of-use assets	16,970
Identifiable intangible assets	212,520
Goodwill	588,440
Deferred income tax assets	2,901
Other assets	652
Total assets acquired	922,339
Accounts payable	(5,387)
Accrued expenses	(970)
Operating lease liabilities	(17,205)
Total liabilities assumed	(23,562)
Net assets acquired	$	898,777

The value of the goodwill can be attributed to a number of business factors, including a trained technical workforce and cost synergies expected to be realized. The Company expects that all of the goodwill related to the acquisition of Linode will be deductible for tax purposes.

The following were the identified intangible assets acquired and their respective weighted average useful lives (in thousands, except years):

	Gross Carrying Amount		Weighted Average Useful Life (in years)
Customer-related intangible assets	$	100,700	11
Completed technologies	70,900		6
Acquired license rights	34,320		15
Trademarks	6,600		9
Total	$	212,520

The Company applied the relief-from-royalty method to estimate the fair values of the completed technologies and trademarks and the excess earnings method to estimate the fair values of the customer-related acquired intangible assets. The Company used readily available market data to estimate the fair values of the acquired license rights. The total weighted average amortization period for the intangible assets acquired from Linode is 9.7 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized.