Note 22 – Acquisitions

TowerSec Ltd.

On March 10, 2016 (the “TowerSec Acquisition Date”), Harman Becker Automotive Systems Manufacturing Kft, our indirect wholly-owned subsidiary (“Harman Becker Kft”), acquired all of the outstanding shares of TowerSec (the “TowerSec Acquisition”), a global automotive cyber security company, for a purchase price of $45.0 million, subject to certain adjustments (the “TowerSec Adjustments”). On the TowerSec Acquisition Date we paid $37.9 million which excludes $2.3 million for an indemnification holdback and $3.0 million for a deferred consideration amount (the “Deferred Consideration Amount”). The indemnification holdback will be released within 18 months of the TowerSec Acquisition Date, if not used. The Deferred Consideration Amount will be released on the second anniversary of the TowerSec Acquisition Date. Approximately $2.6 million of third-party debt was assumed and paid off at the closing. The TowerSec Adjustments were finalized during the fiscal year ended June 30, 2016 and we recorded an increase to the purchase price of approximately $0.1 million. The TowerSec Acquisition is also subject to an earn-out of up to $30.0 million, contingent on TowerSec’s achievement of certain targets through March 10, 2019. Our preliminary estimate of the fair value of this contingent consideration liability is $27.7 million.

The total cost of the TowerSec Acquisition was allocated on a preliminary basis, subject to final allocation, to the assets acquired and liabilities assumed based on their fair values at the TowerSec Acquisition Date, as follows:

	March 10, 2016
Cash and cash equivalents	$	472
Other current assets		84
Total current assets		556
Property, plant and equipment		205
Goodwill		69,438
Intangible assets		4,600
Other non-current assets		89
Total assets		74,888
Accounts payable		119
Accrued liabilities		66
Total current liabilities		185
Other non-current liabilities		3,723
Total liabilities		3,908
Net assets	$	70,980

Based on our preliminary valuation, goodwill and intangibles were recorded in connection with the TowerSec Acquisition based on third-party valuations and management’s estimates for those acquired intangible assets. The valuation of the acquired net assets is subject to change as we obtain additional information for our estimates during the measurement period. The primary areas of those purchase price allocations that are not yet finalized relate to identifiable intangible assets and residual goodwill. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. None of the goodwill recognized is deductible for tax purposes. Intangible assets include internally developed technology of $4.6 million with an approximate useful life of six years. Expenses of $0.6 million were recognized in connection with this acquisition and are included in SG&A in our Condensed Consolidated Statement of Income for the quarter ended March 31, 2016. The operating results of TowerSec are included in our condensed consolidated financial statements from the TowerSec Acquisition Date within our Connected Car segment. Pro forma financial information has not been provided as the TowerSec Acquisition is not material to our results of operations.

Southern Vision Systems, Inc.

On June 10, 2015 (the “SVSI Acquisition Date”), Harman Professional, Inc., our wholly-owned subsidiary, acquired all of the issued and outstanding shares of SVSI (the “SVSI Acquisition”), a developer, manufacturer and marketer of audio/video over internet protocol products and services, for a total purchase price of $20.0 million, subject to certain adjustments (the “SVSI Adjustments”). On the SVSI Acquisition Date we paid $19.5 million which excludes $2.4 million for certain indemnification holdbacks. These holdbacks will be released within 18 months of the SVSI Acquisition Date if not used. The SVSI Adjustments were finalized during the three months ended September 30, 2015 and we recorded an increase to the purchase price of approximately $0.1 million. The SVSI Acquisition is also subject to an earn-out of up to $10.0 million to be paid in fiscal years 2017, 2018 and 2019, based upon the achievement of certain contribution margin targets related to the sale of certain products through fiscal year 2018. Our estimate of the fair value of this contingent consideration liability is $3.0 million at the end of the measurement period for this acquisition. During the three months ended September 30, 2016, we made a contingent consideration payment of $2.1 million related to fiscal year 2016 results. Refer to Note 14- Fair Value Measurements for more information on our ongoing evaluation of this contingent consideration liability.

Bang & Olufsen Automotive Assets

On June 1, 2015 (the “B&O Acquisition Date”), we acquired certain automotive assets and liabilities of Bang &Olufsen A/S (“B&O”), a developer of home audio systems and car audio solutions, including a perpetual exclusive license to use the Bang & Olfusen and B&O Play^® trademarks, for a total purchase price of €150.8 million (the “B&O Preliminary Purchase Price”) or approximately $165.7 million (the “B&O Acquisition”), subject to a final purchase price adjustment (the “B&O Adjustment”). On the B&O Acquisition Date, we paid the B&O Preliminary Purchase Price, of which €12.5 million was placed in escrow for certain indemnification matters, which will be released within 15 months of the B&O Acquisition Date if not used. The B&O Adjustment was finalized during the three months ended September 30, 2015 and we recorded a decrease to the purchase price of approximately €0.5 million or $0.5 million. During the three months ended September 30, 2016, the €12.5 million placed in escrow was released to the sellers.

Symphony Teleca Corporation

On April 8, 2015 (the “STC Acquisition Date”), we acquired all of the outstanding shares of Symphony Teleca Corporation (“STC”) (the “STC Acquisition”), a global software services company, that provides software, engineering and integration services, for an estimated total base purchase price of $720.8 million (the “STC Purchase Price”), of which $491.5 million was paid at closing, consisting of $299.7 million in cash and $191.8 million in shares of our common stock. Approximately $115.6 million of third-party debt was assumed and paid off at closing and we also acquired $61.9 million of cash, of which $14.8 million was restricted, related to the acquisition of the remaining portion of a non-controlling interest that we did not own at the STC Acquisition Date. The STC Acquisition was subject to an earn-out which was based upon STC’s calendar year 2015 revenue. The STC Acquisition was also subject to a final base purchase price adjustment (the “Final Base Purchase Price Adjustment”) comprised of both a net debt and net working capital component which was estimated to be $0.

During the fiscal year ended June 30, 2016, the calculation of the remainder of the STC Purchase Price and the earn-out (the “Additional Payments”) of $231.1 million and $23.3 million, respectively, and the Final Base Purchase Price Adjustment of $0 were finalized and settled in cash. There is a $42.0 million holdback related to specified indemnification matters which was withheld from our settlement of the Additional Payments. There are also holdbacks of $31.2 million and $21.0 million which were placed in separate escrow accounts to be used for other specified indemnification matters. The amounts placed in escrow or withheld from the Additional Payments will be released based on certain defined events.

Red Bend Ltd.

On February 26, 2015 (the “Redbend Acquisition Date”), Harman Becker Kft acquired all of the outstanding shares of Redbend, a provider of software management technology for connected devices, over-the-air software and firmware upgrading services, in a cash and stock transaction valued at approximately $195.3 million (the “Redbend Acquisition”), of which $71.0 million was paid in cash and $124.3 million was paid in shares of our common stock (the “Redbend Purchase Price”), subject to certain adjustments (the “Post-Closing Adjustment”). Approximately $5.6 million of third party debt was assumed and paid off at the closing. The Redbend Acquisition is also subject to an earn-out of up to $30.0 million to be paid in the third quarter of fiscal year 2017, based upon the achievement of Redbend’s cumulative bookings target for awarded business from January 1, 2015 through December 31, 2016. Our estimate of the fair value of this contingent consideration liability is $20.9 million at the end of the measurement period. Refer to Note 14- Fair Value Measurements for more information on our ongoing evaluation of this contingent consideration liability. Our final calculation of the Post-Closing Adjustment was $0.4 million, which was paid during the fiscal year ended June 30, 2015. Approximately $16.0 million of the Redbend Purchase Price was placed in escrow for certain indemnification matters which will be released within 18 months of the Redbend Acquisition Date if not used. During the three months ended September 30, 2016, approximately $15.4 million of the amounts placed in escrow were released to the sellers.

S1nn GmbH & Co. KG

On February 1, 2015 (the “S1nn Acquisition Date”), Harman Becker Automotive Systems GmbH (“HBAS”), our indirect wholly-owned subsidiary, acquired all of the issued and outstanding shares of S1nn GmbH & Co. KG (“S1nn”), a developer of infotainment systems, connectivity and car audio solutions, for a total purchase price of €49.0 million or approximately $55.4 million, which includes €4.1 million, or approximately $4.6 million, placed in escrow for certain indemnification holdbacks. During the three months ended September 30, 2016, €2.6 million or approximately $2.9 million of the amounts placed in escrow were released to the sellers. The remaining €1.5 million or approximately $1.7 million was released to us for specified indemnification matters.

I.P.S.G./VFX

On December 30, 2014 (the “IPSG/VFX Acquisition Date”), Harman International Industries Pty. Ltd., our indirect wholly-owned subsidiary, acquired all of the outstanding shares of IPSG/VFX (the “IPSG/VFX Acquisition”), a developer, manufacturer and distributor of audio products, for an aggregate purchase price of $5.0 million, less certain adjustments determined at the IPSG/VFX Acquisition Date (the “IPSG/VFX Purchase Price”), which was paid in cash on the IPSG/VFX Acquisition Date. The IPSG/VFX Acquisition is subject to cumulative earn-outs of up to $8.0 million payable primarily based on expectations of the gross profit of IPSG/VFX (the “IPSG/VFX Contingent Consideration”). The IPSG/VFX Purchase Price and the IPSG/VFX Contingent Consideration are subject to a holdback of 15 percent payable contingent upon the outcome of certain events within 18 months of the IPSG/VFX Acquisition Date. During the three months ended September 30, 2016, a holdback of $0.7 million was released to the sellers. Our preliminary value of the IPSG/VFX Contingent Consideration liability was $0 at the end of the measurement period for this acquisition. Refer to Note 14- Fair Value Measurements for more information on our ongoing evaluation of this contingent consideration liability.