Acquisitions

Technology

In March 2018, we acquired certain assets, principally technology, for a total cash consideration of $5.0 million. The purchase price consisted of $4.5 million of cash paid at closing and an additional $0.5 million to be held back until March 2019 as security for certain representations, warranties, and obligations of the seller. The acquisition met the definition of a business combination as it contained inputs and processes that are capable of being operated as a business. We allocated, on a preliminary basis, $1.0 million of the purchase price to developed technology and $4.0 million to goodwill. The fair value of the developed technology of $1.0 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 three 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.

Apex Optimisation

On February 5, 2018, we completed the acquisition of all the outstanding shares of Apex Optimisation and affiliates (“Apex”), a provider of software which aligns Advanced Process Control with Planning and Scheduling to unify production optimization, for a total cash consideration of $23.0 million. The purchase price consisted of $18.4 million of cash paid at closing and an additional $4.6 million to be held back until February 2020 as security for certain representations, warranties, and obligations of the sellers. The holdback 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, 2018:



	Amount
	(Dollars in Thousands)
Assets acquired, net	$	62
Identifiable intangible assets:
Technology-related	4,400
Customer relationships	3,500
Goodwill	16,579
Deferred tax liabilities	(1,541		)
Total assets acquired, net	$	23,000

We used the relief from royalty and income approaches to derive the fair value of the technology-related and customer relationship intangible assets, respectively. The weighted-average discount rate (or rate of return) used to determine the value of the Apex intangible assets was 28% and the effective tax rate used was 21%. The technology-related and customer relationship intangible assets are each being amortized on a straight-line basis over their estimated useful lives of seven years.

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 Apex products and services to our existing customers. The results of operations of Apex have been included prospectively in our results of operations since the date of acquisition.

RtTech Software, Inc.

In December 2017, we acquired certain net assets, principally technology, from RtTech Software, Inc. (“RtTech”) for a total cash consideration of $12.0 million. The purchase price consisted of $10.8 million of cash paid at closing and an additional $1.2 million to be held back until December 2018 as security for certain representations, warranties, and obligations of the sellers. The acquisition met the definition of a business combination as it contained inputs and processes that are capable of being operated as a business. We allocated $8.0 million of the purchase price to developed technology and $4.0 million to goodwill. The fair value of the developed technology of $8.0 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 seven 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.

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 current liabilities in our consolidated balance sheet.

An allocation of the purchase price is as follows:



	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.