Acquisitions and Acquisition-Related Contingent Consideration

12 Months Ended

Jan. 03, 2015

Business Combinations [Abstract]

ACQUISITIONS AND ACQUISITION-RELATED CONTINGENT CONSIDERATION

ACQUISITIONS AND ACQUISITION-RELATED CONTINGENT CONSIDERATION

2014 Acquisitions

On June 13, 2014, Cadence acquired Jasper Design Automation, Inc., or Jasper, a privately held provider of formal analysis solutions based in Mountain View, California. The acquired technology complements Cadence’s existing system design and verification platforms. Total cash consideration for Jasper, after taking into account adjustments for certain costs, and cash held by Jasper at closing of $28.7 million, was $139.4 million. Cadence will also make payments to certain employees over a three year period subject to continued employment and other conditions.

The following table summarizes the fair value of assets acquired and liabilities assumed in the acquisition of Jasper:

	(In thousands)
Cash and cash equivalents	$	28,678
Property, plant and equipment	520
Other assets	15,901
Acquired intangibles:
Existing technology	68,200
Agreements and relationships	13,600
Tradenames and trademarks	900
In-process technology	10,300
Goodwill	78,229
Total assets acquired	$	216,328
Deferred revenue	(11,900		)
Other liabilities	(5,607		)
Long-term deferred tax liabilities	(30,740		)
Net assets acquired	$	168,081

The allocation of purchase consideration to certain assets and liabilities has not been finalized. Cadence will continue to evaluate estimates and assumptions related to certain contingencies during the measurement period (up to one year from the acquisition date).

During fiscal 2014, Cadence also completed two other business combinations for total cash consideration of $27.5 million, after taking into account cash acquired of $2.1 million. The total purchase consideration was preliminarily allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates. Cadence recorded a total of $20.3 million of goodwill, $16.9 million of other intangible assets and $7.6 million of net liabilities consisting primarily of long-term deferred income taxes and deferred revenue.

The weighted-average amortization period for definite-lived intangible assets acquired during fiscal 2014 is approximately 8 years.

The goodwill related to Cadence’s fiscal 2014 acquisitions is primarily related to expected synergies from combining operations of the acquired companies with Cadence. Cadence expects that approximately $2.9 million of goodwill related to its fiscal 2014 acquisitions will be deductible for tax purposes.

Results of operations and the estimated fair value of acquired assets and assumed liabilities are recorded in the consolidated financial statements from the date of acquisition. The fair values of acquired intangible assets, including in-process technology and assumed liabilities, were determined using significant inputs that are not observable in the market. For an additional description of these fair value calculations, see Note 8 in the notes to consolidated financial statements.

2013 Acquisitions

On April 22, 2013, Cadence acquired Tensilica, Inc., or Tensilica, a privately held provider of configurable dataplane processing units. Total cash consideration for Tensilica, after taking into account adjustments for certain costs and cash held by Tensilica at closing of $26.3 million, was $319.3 million. Cadence also assumed certain unvested Tensilica options with a fair value of $15.3 million, of which $0.5 million was allocated to purchase consideration. The remaining $14.8 million of assumed options is being expensed over the remaining vesting periods of the awards. Cadence will also make payments to certain employees over a three year period subject to continued employment and other conditions.

During fiscal 2013, Cadence completed other business combinations, including Cosmic Circuits Private Limited, or Cosmic, and an asset acquisition for total cash consideration of $73.9 million, net of cash acquired. Cadence allocated the total purchase consideration to the assets acquired and liabilities assumed based on their respective fair values on the acquisition dates. Lip-Bu Tan, Cadence’s president, chief executive officer and director, was also a member of the board of directors of Cosmic. In addition, a trust for the benefit of the children of Mr. Tan owned approximately 8.5% of Cosmic, and Mr. Tan and his wife serve as co-trustees of the trust. Mr. Tan was not involved in the transaction. He recused himself from the discussions and negotiations between and at Cadence and Cosmic throughout the duration of the transaction, including any discussions and negotiations related to the consideration provided to Cosmic. A financial advisor provided a fairness opinion to Cadence in connection with the transaction, and the Board of Directors of Cadence reviewed the transaction and concluded that it was in the best interests of Cadence to proceed with such transaction.

2012 Acquisition

During fiscal 2012, Cadence acquired Sigrity, Inc., or Sigrity, a provider of signal and power integrity analysis tools for system, printed circuit board and integrated circuit package designs. Total cash consideration for Sigrity, after taking into account cash held by Sigrity at closing of $7.5 million, was $64.3 million.

Acquisition-related Transaction Costs

Transaction costs associated with acquisitions were $3.7 million, $8.7 million and $1.5 million during fiscal 2014, 2013 and 2012, respectively. These costs consist of professional fees and administrative costs and were expensed as incurred in Cadence’s consolidated income statements.

Acquisition-Related Contingent Consideration

Cadence may be obligated to make cash payments in connection with its business combinations and asset acquisitions completed in prior fiscal years, subject to the satisfaction of future financial measures associated with the acquired technology. If performance is such that these payments are fully achieved, Cadence will be obligated to pay up to an aggregate of $10.0 million over the next 15 months. Of the $10.0 million, up to $8.0 million would be recorded as operating expenses in the consolidated income statements.