Acquisitions

12 Months Ended

Dec. 31, 2019

2019 Acquisitions

On November 1, 2019, we completed the acquisition of 100% of the shares of LST, the premier provider of explicit dynamics and other advanced finite element analysis technology. The acquisition empowers our customers to solve a new class of engineering challenges, including developing safer automobiles, aircraft and trains while reducing or even eliminating the need for costly physical testing. The transaction closed with a purchase price of $777.8 million, which included $470.6 million in cash and the issuance of 1.4 million shares of our common stock in an unregistered offering to the prior owners of LST. The fair value of the common stock issued as consideration was based on the volume-weighted average price of our common stock on November 1, 2019 of $220.74, resulting in a fair value of $307.2 million.

On February 1, 2019, we completed the acquisition of 100% of the shares of Granta Design for a purchase price of $208.7 million, paid in cash and inclusive of final net working capital adjustments. The acquisition of Granta Design, the premier provider of materials information technology, expands our portfolio into this important area, giving customers access to materials intelligence, including data that is critical to successful simulations.

Additionally, during the year ended December 31, 2019, we acquired Dynardo, Helic and DfR Solutions to combine the acquired technologies with our existing comprehensive multiphysics portfolio. These acquisitions were not individually significant. The combined purchase price of these other acquisitions was $136.2 million, paid in cash.

During the year ended December 31, 2019, we incurred $6.6 million in acquisition-related expenses, recognized as selling, general and administrative expense on the consolidated statements of income.

The assets and liabilities of the acquisitions have been recorded based upon management's estimates of their fair market values as of each respective date of acquisition. The following tables summarize the fair values of consideration transferred and the fair values of identified assets acquired and liabilities assumed at each respective date of acquisition:

Fair Value of Consideration Transferred:



(in thousands)	LST		Granta Design		Other Acquisitions		Total
Cash	$	470,623	$	208,736	$	136,232	$	815,591
Ansys common stock	307,173		—		—		307,173
Total consideration transferred at fair value	$	777,796	$	208,736	$	136,232	$	1,122,764

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:



(in thousands)	LST			Granta Design			Other Acquisitions			Total
Cash	$	8,520		$	13,644		$	6,231		$	28,395
Accounts receivable and other tangible assets	20,568			6,941			10,746			38,255
Developed software and core technologies (10-year weighted-average life)	167,700			32,445			25,018			225,163
Customer lists (15-year weighted-average life)	25,900			20,016			15,743			61,659
Trade names (10-year weighted-average life)	10,600			4,579			2,051			17,230
Indemnification asset	34,039			—			—			34,039
Accounts payable and other liabilities	(3,721		)	(6,714		)	(6,425		)	(16,860		)
Deferred revenue	(3,565		)	(1,426		)	(1,889		)	(6,880		)
Uncertain tax positions	(34,039		)	—			(257		)	(34,296		)
Net deferred tax liabilities	(47,596		)	(9,822		)	(8,294		)	(65,712		)
Total identifiable net assets	$	178,406		$	59,663		$	42,924		$	280,993
Goodwill	$	599,390		$	149,073		$	93,308		$	841,771

LST has uncertain tax positions inclusive of interest and penalties of $34.0 million and a corresponding indemnification asset. The uncertain tax positions reflect potential federal and state tax liabilities associated with tax years 2016 to 2019. Settlements of the tax positions, if any, will be funded by the indemnification asset that was created in accordance with the executed Agreement and Plan of Merger.

The goodwill, which is generally not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the assembled workforce of the acquired business and the synergies expected to arise as a result of the acquisitions.

The fair values of the assets acquired and liabilities assumed are based on preliminary calculations. The estimates and assumptions for these items are subject to change as additional information about what was known and knowable at the acquisition date is obtained during the measurement period (up to one year from the acquisition date).

We determined the fair value of our intangible assets using various valuation techniques, including the relief-from-royalty method and the multi-period excess earnings method. These models utilize certain unobservable inputs classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include, but are not limited to: royalty rate, discount rate and attrition rate.

The valuation method and assumptions used to determine the fair value of the significant intangible assets acquired in 2019 are as follows:



Intangible Asset	Valuation Method	LST Assumptions	Granta Design Assumptions
Developed software and core technologies	Relief-from-royalty	Royalty rate: 50% Discount rate: 10%	Royalty rate: 8% - 10% Discount rate: 12.5%
Trade names	Relief-from-royalty	Royalty rate: 2% Discount rate: 10%	Royalty rate: 2% Discount rate: 14%
Customer lists	Multi-period excess earnings	Attrition rate: 10% Discount rate: 11%	Attrition rate: 10% Discount rate: 12.5%

The operating results of each acquisition have been included in our consolidated financial statements since each respective date of acquisition. The effects of the business combinations were not material to our consolidated results of operations individually. The table presented below reflects the aggregate impact on our results of operations of the 2019 acquisitions from the date of acquisition to December 31, 2019. The operating income does not include integration costs borne directly by us and our non-acquired subsidiaries as a result of the acquisitions.



(in thousands)	Year Ended December 31, 2019
Revenue	$	44,079
Operating income	$	6,733

2018 Acquisition

On May 2, 2018, we completed the acquisition of 100% of the shares of OPTIS, a premier provider of software for scientific simulation of light, human vision and physics-based visualization, for a purchase price of $291.0 million, paid in cash. The acquisition extends our portfolio into the area of optical simulation to provide comprehensive sensor solutions, covering visible and infrared light, electromagnetics and acoustics for camera, radar and lidar.

The operating results of OPTIS have been included in our consolidated financial statements since May 2, 2018, the date of acquisition.

The assets and liabilities of OPTIS have been recorded based upon management's estimates of their fair market values as of the acquisition date. The following tables summarize the fair value of consideration transferred and the fair values of identified assets acquired and liabilities assumed at the acquisition date:

Fair Value of Consideration Transferred:



(in thousands)	OPTIS
Cash	$	290,983

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:



(in thousands)	OPTIS
Cash	$	7,957
Accounts receivable and other tangible assets	15,910
Developed software and core technologies (10-year weighted-average life)	47,597
Customer lists (12-year life)	41,303
Trade names (9-year weighted-average life)	10,749
Accounts payable and other liabilities	(11,941		)
Deferred revenue	(2,470		)
Net deferred tax liabilities	(23,438		)
Total identifiable net assets	$	85,667
Goodwill	$	205,316

During the one-year measurement period since the OPTIS acquisition date, we adjusted the fair values of the assets acquired and liabilities assumed, with the offset recorded as a $2.6 million increase to goodwill. These adjustments were made as we obtained new information about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

Full pro forma results of operations have not been presented as the effects of the OPTIS business combination were not material to our consolidated results of operations. The table presented below reflects the impact of OPTIS from the date of acquisition to December 31, 2018. The operating loss does not include integration costs borne directly by us and our non-OPTIS subsidiaries as a result of the acquisition.



(in thousands)	Year Ended December 31, 2018
Revenue	$	18,532
Operating loss	$	(5,462	)

2017 Acquisitions

During the year ended December 31, 2017, we completed various acquisitions to expand our customer base and accelerate the development of new and innovative products to the marketplace while lowering design and engineering costs for customers. The acquisitions were not individually significant. The combined purchase price of the acquisitions was approximately $67.0 million. The 2017 technology acquisitions are further described in the table below:



Date of Closing	Company	Details
November 15, 2017	3DSIM	3DSIM, a developer of premier additive manufacturing technology, gives us a complete additive manufacturing simulation workflow solution. 3DSIM's software solutions empower manufacturers, designers, materials scientists and engineers to achieve their objectives through simulation-driven innovation rather than physical trial and error.
July 5, 2017	Computational Engineering International, Inc. (CEI Inc.)	CEI Inc., the developer of EnSight, aids engineers and scientists in their ability to analyze, visualize and communicate large simulation data sets in clear, higher-resolution outputs.
March 10, 2017	CLK Design Automation (CLK-DA)	CLK-DA offers fast transistor simulation technology that complements our semiconductor product portfolio.