Business Combinations and Acquisition of Non-controlling Interest

12 Months Ended

Oct. 31, 2014

Business Combinations [Abstract]

Business Combinations and Acquisition of Non-controlling Interest

Business Combinations and Acquisition of Non-controlling Interest

Fiscal 2014 Acquisitions

During fiscal 2014, the Company made four acquisitions that were accounted for as business combinations. The Company does not consider these acquisitions to be material, individually or in the aggregate, to the Company’s balance sheet and results of operations. The consolidated financial statements include the operating results of each acquired business from the respective date of acquisition.

Acquisition of Coverity, Inc. (Coverity)

On March 24, 2014, the Company acquired Coverity, the leading provider of software quality, testing and security tools, for $375.5 million in cash, payable to holders of Coverity capital stock and vested stock options. Additionally, the Company assumed outstanding unvested Coverity stock options. The Company believes this acquisition has enabled it to enter into a new, growing market dedicated to helping companies deliver better software faster, by finding software code defects as the code is being developed rather than at the end of the process. Coverity’s customer base includes the Company's semiconductor and systems customers, albeit different users and budgets, and extends well beyond to software developers such as independent software vendors and companies engaged in e-commerce.

The total purchase consideration and the preliminary purchase price allocation were as follows:

	(in thousands)
Total cash consideration	$	375,500
Goodwill	$	266,423
Identifiable intangibles assets acquired	101,900
Other tangible assets acquired, net	28,447
Deferred revenue	(21,270		)
Total purchase price allocation	$	375,500

As of the end of fiscal 2014, the Company’s preliminary purchase price allocation has not been finalized. The acquired gross deferred revenue amount of $68.5 million was recorded at fair value of $21.3 million as required by accounting rules. Goodwill of $266.4 million, which is not deductible for tax purposes, primarily resulted from the Company’s assembled workforce and expectation of sales growth due to its entrance into a new market and its new technology offerings. Acquired identifiable intangible assets of $101.9 million, consisting of technology, customer relationships, in-process R&D, backlog and trademarks, were valued using the income method, and are being amortized over two to eight years. The fair value of stock options assumed was approximately $15.0 million using the Black-Scholes option-pricing model and is expensed over their remaining service periods on a straight-line basis.

Other Fiscal 2014 Acquisitions

During fiscal 2014, the Company acquired three other companies for cash and preliminarily allocated the total purchase consideration of $40.2 million to the assets acquired and liabilities assumed based on their respective fair values at the acquisition dates, resulting in total goodwill of $24.0 million, which is not deductible for tax purposes. Acquired identifiable intangible assets totaling $22.3 million were valued using the income or cost methods and are being amortized over their respective useful lives ranging from two to eight years.

The preliminary fair value estimates for the assets acquired and liabilities assumed for all fiscal 2014 acquisitions are not yet finalized and may change as additional information becomes available during the respective measurement periods. The primary areas of those preliminary estimates relate to certain tangible assets and liabilities, identifiable intangible assets, and taxes. Additional information, which existed as of the acquisition date but is yet unknown to the Company, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Changes to amounts recorded as assets or liabilities will be recorded as retrospective adjustments to the provisional amounts recognized as of the acquisition date and may result in a corresponding adjustment to goodwill.

Fiscal 2013 Acquisition of Non-Controlling Interest

During the first quarter of fiscal 2013, the Company completed the acquisition of the non-controlling interest in SpringSoft, Inc. (SpringSoft), a company organized under the laws of the Republic of China (Taiwan), in which the remaining 8.4% of outstanding shares of SpringSoft along with the remaining outstanding vested stock options of SpringSoft were exchanged for cash of $44.0 million.

Fiscal 2012 Acquisitions

Acquisition of SpringSoft

On August 3, 2012, the Company’s wholly owned subsidiary incorporated under the laws of the Republic of China entered into a merger agreement pursuant to which it commenced a cash tender offer to acquire SpringSoft at a price of 57.00 New Taiwan Dollars per share. The Company acquired 91.6% of the outstanding shares of SpringSoft on October 1, 2012 for an aggregate cash consideration of $373.5 million. The remaining 8.4% of the outstanding shares along with the fair value of outstanding SpringSoft equity awards were reflected as a Non-controlling Interest (NCI) in the Company’s fiscal 2012 financial statements. This acquisition enables the Company to strengthen and widen its offerings in design, verification and debugging tools.

The Company allocated the total purchase consideration of $426.9 million (including the $44.0 million for the fair value of the non-controlling interest and $9.4 million related to equity awards assumed) to the assets acquired and liabilities assumed based on their respective fair values, including acquired identifiable intangible assets of $107.3 million, resulting in total goodwill of $257.6 million. Identifiable intangible assets are being amortized over three to eight years. Acquisition-related costs directly attributable to the business combination were $6.6 million for fiscal 2012 and were expensed as incurred in the consolidated statements of operations. These costs consisted primarily of employee separation costs and professional services.

Acquisition of Magma Design Automation, Inc. (Magma)

On February 22, 2012, the Company acquired Magma, a chip design software provider, at a per-share price of $7.35. Additionally, the Company assumed unvested restricted stock units (RSUs) and stock options, collectively called “equity awards.” The aggregate purchase price was approximately $550.2 million. This acquisition enables the Company to more rapidly meet the needs of leading-edge semiconductor designers for more sophisticated design tools.

The Company allocated the total purchase consideration of $550.2 million (including $6.8 million related to equity awards assumed) to the assets acquired and liabilities assumed based on their respective fair values at the acquisition date, including acquired identifiable intangible assets of $184.3 million, resulting in total goodwill of $316.3 million. Identifiable intangible assets are being amortized over three to ten years. Acquisition-related costs directly attributable to the business combination totaling $33.5 million for fiscal 2012 were expensed as incurred in the consolidated statements of operations and consist primarily of employee separation costs, contract terminations, professional services, and facilities closure costs.

Other Fiscal 2012 Acquisitions

During fiscal 2012, the Company acquired five other companies, including Emulation & Verification Engineering, S.A. (EVE), for cash and allocated the total purchase consideration of $213.2 million to the assets acquired and liabilities assumed based on their respective fair values, resulting in total goodwill of $118.1 million. Acquired identifiable intangible assets totaling $73.3 million were valued using appropriate valuation methods such as income or cost methods and are being amortized over their respective useful lives ranging from one to eight years. During fiscal 2012, acquisition-related costs totaling $6.8 million were expensed as incurred in the consolidated statements of operations.