Acquisitions

3 Months Ended

Mar. 31, 2023

During the quarter ended March 31, 2023, we completed the acquisition of DYNAmore for a purchase price of $139.2 million, or $126.4 million net of cash acquired. The acquisition expands our position as a simulation solution provider within the automotive industry. The effects of the acquisition were not material to our condensed consolidated results of operations.

During the three months ended March 31, 2023, we incurred acquisition-related expenses of $2.2 million. Acquisition-related expenses are recognized as selling, general and administrative and research and development expenses on the condensed consolidated statements of income.

The assets acquired and liabilities assumed in connection with the acquisition have been recorded based upon management's estimates of the fair market value as of the date of acquisition. The following tables summarize the fair value of consideration and the fair value of identified assets acquired and liabilities assumed for the acquisition at the date of acquisition:

Fair Value of Consideration:


(in thousands)
Cash	$	134,103
Non-cash consideration	5,056
Total consideration	$	139,159

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:


(in thousands)
Cash	$	12,779
Accounts receivable and other tangible assets	15,751
Developed software and core technologies	3,594
Customer lists	75,690
Trade names	2,220
Accounts payable and other liabilities	(7,944)
Deferred revenue	(6,555)
Net deferred tax liabilities	(24,997)
Total identifiable net assets	$	70,538
Goodwill	$	68,621

The goodwill, which is 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 acquisition.

The fair value 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: selection of a valuation methodology, royalty rate, discount rate and attrition rate.

The weighted-average useful life, valuation method and assumptions used to determine the fair value of the intangible assets acquired are as follows:

Intangible Asset

Weighted-Average Useful Life

Valuation Method

Assumptions

Developed software and core technologies

8 years

Relief-from-royalty

Royalty rate: 20.0%

Discount rate: 15.5%

Trade names

5 years

Relief-from-royalty

Royalty rate: 1.0%

Discount rate: 15.5%

Customer lists

14 years

Multi-period excess earnings

Attrition rate: 5.0%

Discount rate: 15.5%

2022 Acquisitions

During the year ended December 31, 2022, we completed several acquisitions to enhance our customers' experience. These acquisitions were not individually significant. The combined purchase price of these acquisitions during the year ended December 31, 2022 was $401.7 million, or $390.9 million net of cash acquired.

The operating results of each acquisition have been included in our condensed consolidated financial statements since each respective date of acquisition. The effects of the acquisitions were not material to our condensed consolidated results of operations.