Business Combinations

On October 16, 2018, the Company completed the acquisition of Layered Insight ("Layered Insight"), a pioneer and global leader in container native application protection, providing accurate insight into container images, adaptive analysis of running containers, and automated enforcement of the container environment. Total consideration related to the acquisition was $13.4 million, of which $1.6 million is payable in the future subject to terms and conditions of the purchase agreement. All consideration is payable in cash. The Company also agreed to pay up to an additional $4.0 million if the acquired business achieves certain revenue milestones for the annual period ending December 31, 2019. The estimated fair value of these milestone payments was determined based on management’s estimate of fair value using a Monte Carlo simulation model, which uses Level 3 inputs for fair value measurements. This contingent consideration was included in the component of the purchase price and has been recorded as accrued liabilities in the accompanying consolidated balance sheet as of December 31, 2018 for $1.5 million. In addition to the prior milestone, shareholders of Layered Insight will receive $4.0 million in future payments if certain key employees continue their employment with the Company through December 31, 2019. The second milestone is being accounted for as post combinations services and is being expensed into our consolidated statement of income. The Company accounted for this acquisition as a business combination and allocated $9.6 million of the purchase price to technology-based intangible assets and $5.4 million to goodwill. The acquired intangible asset relating to Layered Insight's developed technology is being amortized over the estimated useful life of approximately four years. Goodwill arising from the Layered Insight acquisition is not deductible for tax purposes.

On April 1, 2018, the Company acquired the assets of 1Mobility Private Limited ("1Mobility"), a Singapore-based company. The acquisition allows the Company to provide enterprises of all sizes with the ability to create and continuously update an inventory of mobile devices on all versions of Android, iOS and Windows Mobile in their environment; and to continuously assess their security and compliance posture, while quarantining devices that are compromised or out-of-compliance. Total purchase consideration was $4.0 million, of which $0.6 million is payable in the future subject to terms and conditions of the purchase agreement. The Company accounted for this transaction as a business combination and allocated $3.7 million of the purchase price to technology-based intangible assets and $0.3 million to goodwill. The acquired intangible assets relating to 1Mobility's developed technology are being amortized over the estimated useful lives of approximately four years. Goodwill arising from the 1Mobility acquisition is deductible for tax purposes over 15 years.

The allocation of the consideration for business combinations completed in 2018 is summarized as follows (in thousands):



Acquiree	Purchase Consideration		Net Tangible Assets Acquired/ (liabilities assumed)		Purchased Intangible Assets		Goodwill		Deferred Tax Liability
1Mobility	$	4,000	$	—	$	3,700	$	300	$	—
Layered Insight	$	13,434	$	80	$	9,600	$	5,376	$	(1,622	)

In 2017, the Company purchased certain assets of Nevis Networks (India) Private Limited (“Nevis”) and Defensative, LLC (NetWatcher). The Nevis acquisition accelerates the Company's development of network security solutions for detection and awareness of external intrusions to computer networks. The NetWatcher acquisition expands the Company's threat protection and management capabilities and adds new offerings to managed security service providers. Total purchase consideration related to the Company’s business combinations was $5.8 million in cash for Nevis, and $7.7 million for NetWatcher of which $1.0 million is payable in the future subject to terms and conditions of the purchase agreement. Total cash paid in the business combinations completed during 2017 was $12.5 million. Pro forma financial information for these acquisitions have not been presented because they are not material to our consolidated financial statements, either individually or in aggregate.

In connection with the NetWatcher acquisition, certain founders of NetWatcher will receive future payments with continued employment at their one year and two-year anniversaries with the Company. These future payments are being recorded as employee compensation expense ratably over the two-year period.

The Company accounted for the acquisition of certain assets of Nevis and Netwatcher as business combinations.

The allocation of the consideration for business combinations completed in the year of 2017 is summarized as follows (in thousands):



Acquiree	Purchase Consideration		Net Tangible Assets Acquired/ (liabilities assumed)		Purchased Intangible Assets		Goodwill
Nevis	$	5,753	$	14	$	5,156	$	583
NetWatcher	7,729		80		7,000		649
Total	$	13,482	$	94	$	12,156	$	1,232

Purchased intangible assets represent the estimated fair value of purchased technology from our acquisitions of Nevis and NetWatcher. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. Goodwill generated from these acquisitions was primarily related to the acquired workforce, expected improvements in technology performance and additional product functionality. The fair values assigned to tangible assets acquired and identifiable intangible assets are based on management's estimates and assumptions. The intangible assets have an estimated useful life of 5 years. Goodwill is deductible for tax purposes over 15 years.

On January 10, 2019, the Company acquired certain assets of Adya, Inc. ("Adya"), a Delaware corporation. Adya’s technology expands the Company's solutions to help customers administer their critical SaaS applications from one console, save costs on SaaS licenses, set and enforce security policies in one place, and report and audit on all activity with a single tool. The purchase consideration related to the acquisition was $1 million in cash, in addition to $0.2 million and $0.6 million that is payable in the future subject to terms and conditions of the purchase agreement. The acquisition will be accounted for as an asset purchase.