Acquisitions

Mtelligence Corporation

On October 26, 2016, we completed the acquisition of all the outstanding shares of Mtelligence Corporation (“Mtell”), a provider of predictive and prescriptive maintenance software and related services used to optimize asset performance, for total cash consideration of $37.4 million. The purchase price consisted of $31.9 million of cash paid at closing and an additional $5.5 million to be held back until April 2018 as security for certain representations, warranties, and obligations of the sellers. The holdback was recorded at its fair value as of the acquisition date of $5.3 million, and is recorded in other non-current liabilities in our consolidated balance sheet.

A preliminary allocation of the purchase price is as follows. The valuation of the net assets acquired and the deferred tax liabilities are considered preliminary as of March 31, 2017.



	Amount
	(Dollars in Thousands)
Tangible assets acquired, net	$	779
Identifiable intangible assets:
Developed technology	11,385
Customer relationships	679
Non-compete agreements	553

Goodwill	25,888
Deferred tax liabilities, net	(2,099		)
Total assets acquired	$	37,185

We used the income approach to determine the values of the identifiable intangible assets. The weighted-average discount rate (or rate of return) used to determine the value of the Mtell intangible assets was 19% and the effective tax rate used was 34%. The values of the developed technology, customer relationships and non-compete agreements are being amortized on a straight-line basis, except technology, which is being amortized on a proportional use basis, over their estimated useful lives of 12 years, 6 years and 3 years, respectively.

The goodwill, which is not deductible for tax purposes, reflects the value of the assembled workforce and the company-specific synergies we expect to realize by selling Mtell products and services to our existing customers. The results of operations of Mtell have been included prospectively in our results of operations since the date of acquisition.

Technology and Trademarks

In August 2016, we acquired certain technology and trademarks for total cash consideration of $6.0 million. The purchase price consisted of $5.4 million of cash paid at closing and up to an additional $0.6 million to be paid in August 2017. The acquisition met the definition of a business combination as it contained inputs and processes that are capable of being operated as a business. The preliminary allocation of the purchase price as of September 30, 2016 allocated $4.0 million to developed technology and $2.0 million to goodwill. The fair value of the developed technology of $4.0 million was determined using the replacement cost approach. The developed technology is being amortized on a straight-line basis over its estimated useful life of 6 years. The acquisition is treated as an asset purchase for tax purposes and accordingly, the goodwill resulting from the acquisition is expected to be deductible.

In April 2017, we acquired certain technology for total cash consideration of $1.9 million. The purchase price consisted of $1.4 million of cash paid at closing and up to an additional $0.5 million to be paid in April 2018.

Fidelis Group, LLC

In June 2016, we completed the acquisition of all the outstanding shares of Fidelis Group, LLC ("Fidelis"), a provider of asset reliability software used to predict and optimize asset performance. The purchase price consisted of $8.0 million of cash paid at closing and up to an additional $2.0 million to be paid in December 2017.

An allocation of the purchase price is as follows, including adjustments identified subsequent to the acquisition date.



	Amount
	(Dollars in Thousands)
Tangible assets acquired, net	$	49
Identifiable intangible assets:
Developed technology	1,272
Customer relationships	753
In-process research and development	3,097

Goodwill	6,722
Deferred tax liabilities, net	(1,893		)
Total assets acquired	$	10,000