Acquisitions

12 Months Ended

Jan. 26, 2020

There were no acquisitions during the fiscal year ended January 26, 2020.

Fiscal Year 2019 Acquisitions

Trackio International AG

On August 17, 2018, the Company, through its subsidiary Semtech (International) AG, a Swiss corporation, entered into a share purchase agreement to purchase all of the outstanding equity interests of Trackio International AG, a Swiss corporation, and its subsidiaries (collectively, "TrackNet"), for an aggregate purchase price of approximately $8.5 million (the "TrackNet Acquisition"). TrackNet is a provider of LoRa-based end-to-end solutions for the IoT and provides expertise and intellectual property that will be integrated into the Company's business to support its goal of enabling the growing ecosystem around the Company's LoRa® devices and wireless radio frequency technology. $4.3 million was attributed to goodwill (see Note 8) and $3.0 million and $0.3 million was attributed to the estimated fair values of the intangible and tangible net assets acquired, respectively. The goodwill is not deductible for tax purposes. The transaction was completed on December 11, 2018 and accounted for as a business combination. The purchase price allocation for the TrackNet acquisition is complete. Net sales, earnings and pro forma results of operations have not been presented because they are not material to the Company’s consolidated financial statements. A summary of the purchase price allocation is as follows:



(in thousands)	Estimated Useful Life	January 27, 2019
Finite-lived intangible asset - Core Technologies	3 years	$	3,000
Goodwill		4,316
Other assets (liabilities), net		1,184
Total consideration		$	8,500

IC Interconnect, Inc.

On May 2, 2018, the Company acquired substantially all of the assets of IC Interconnect, Inc. (“ICI”) for an aggregate purchase price of approximately $7.4 million. The addition of ICI is aimed at further enhancing the Company’s U.S. research and development capabilities for its next-generation Z-Pak platform. $4.9 million was attributed to goodwill (see Note 8) and $2.5 million was attributed to the estimated fair values of the tangible net assets acquired. The goodwill is deductible for tax purposes. The transaction was accounted for as a business combination. Net sales, earnings, and pro forma results of operations have not been presented because they are not material to the Company’s consolidated financial statements.

Fiscal Year 2018 Acquisition

AptoVision Technologies Inc.

On July 1, 2017, the Company acquired AptoVision Technologies Inc. ("AptoVision"), a privately-held provider of uncompressed, zero-frame latency, video-over-IP solutions addressing the professional audio visual market. The unique combination of AptoVision's advanced algorithms for real-time, full bandwidth video transmission over IP networks, and Semtech's industry leading high-speed signal integrity and chip development expertise is expected to enable the adoption of Software Defined Video over Ethernet ("SDVoE") accelerating this natural progression in the evolution of video transport.

Under the terms of the share purchase agreement, the Company acquired all of the outstanding equity interest in AptoVision for a cash payment of $17.6 million at closing, net of acquired cash, and a commitment to pay additional contingent consideration of up to a maximum of $47.0 million over three years if certain goals are achieved in each of the earn out periods (the "AptoVision Earn-Out"). To date, we have made $9.4 million in payments related to the AptoVision Earn-out, and based on our assessment of performance, we do not expect to make any future payments. The fair value of the AptoVision Earn-out as of January 27, 2019 was $2.2 million, of which $1.3 million was presented in "Accrued liabilities" and $0.9 million was presented in "Other long-term liabilities" in the Balance Sheets. The Company fully released its liability for the AptoVision Earn-out during the fiscal year ended January 26, 2020, based on the Company's assessment of performance. For the fiscal year ended January 28, 2018, acquisition related transaction costs of $1.6 million were accounted for as an expense in the period in which the costs were incurred and were presented in "Selling, general and administrative" expense in the Statements of Income.

AptoVision met the definition of a business and was accounted for under the acquisition method of accounting in accordance with the FASB’s ASC Topic 805, Business Combinations. The consideration to acquire AptoVision was allocated to the acquired tangible and intangible assets and assumed liabilities of AptoVision based on their respective estimated fair values as of the acquisition date. A summary of the allocation is as follows:



(in thousands)	Estimated Useful Life	January 28, 2018
Finite-lived intangible asset - Developed Technology	6-7 years	$	20,000
Finite-lived intangible asset - Customer Relationships	3 years	4,000
Indefinite-lived intangible asset - in-process research and development ("IPR&D")		2,300
Goodwill		12,194
Other (liabilities) assets, net		(3,875		)
Total consideration		$	34,619

The fair value of the developed technology rights acquired was determined by estimating the probability-weighted net cash flows attributable to these rights discounted to present value using a discount rate that represents the estimated rate that market participants would use to value this intangible asset. The developed technology rights acquired relate to AptoVision’s BlueRiver™ platform.

The fair value of the customer relationships was determined by estimating the amount that would be required currently to replace the customers from lead generations to product shipment.

The IPR&D primarily relates to an assumed license agreement that had been executed in close proximity to the acquisition date. The investment in the license approximates fair value. During the fourth quarter of fiscal year 2020, the IPR&D became fully developed and was, therefore, transfered to finite-lived intangible assets as part of core technologies.

The $12.2 million excess of the acquisition consideration over the fair value of the assets acquired and liabilities assumed was allocated to goodwill. The goodwill resulted from expected synergies and other benefits from the transaction. The Company expects that all such goodwill will be deductible for tax purposes. The purchase price allocation for the AptoVision acquisition is complete.

Net sales and earnings attributable to AptoVision since the acquisition date were not material. Pro forma results of operations have not been presented as AptoVision’s annual financial results were not material to the Company’s consolidated financial statements.