Acquisitions

3 Months Ended

Oct. 01, 2021

PENTEK ACQUISITION

On May 27, 2021, the Company acquired Pentek Technologies, LLC and Pentek Systems, Inc. (collectively, "Pentek"). for a purchase price of $65,000, subject to net working capital and net debt adjustments. Based in Upper Saddle River, New Jersey, Pentek is a leading designer and manufacturer of ruggedized, high-performance, commercial off-the-shelf software-defined radio and data acquisition boards, recording systems and subsystems for high-end commercial and defense applications. The acquisition and associated transaction expenses were funded through a combination of cash on hand and Mercury's existing revolving credit facility (the "Revolver").

The following table presents the net purchase price and the fair values of the assets and liabilities of Pentek on a preliminary basis:


	Amounts
Consideration transferred
Cash paid at closing	$	65,668
Less cash acquired	(746)
Net purchase price	$	64,922

Estimated fair value of tangible assets acquired and liabilities assumed
Cash	$	746
Accounts receivable	1,370
Inventory	6,575
Fixed assets	152
Other current and non-current assets	2,864
Accounts payable	(1,016)
Accrued expenses	(520)
Other current and non-current liabilities	(4,090)
Estimated fair value of net tangible assets acquired	6,081
Estimated fair value of identifiable intangible assets	24,110
Estimated goodwill	35,477
Estimated fair value of net assets acquired	65,668
Less cash acquired	(746)
Net purchase price	$	64,922

The amounts above represent the preliminary fair value estimates as of October 1, 2021 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates. The preliminary identifiable intangible asset estimate includes customer relationships of $15,560 with a useful life of 21 years, completed technology of $6,340 with a useful life of seven years and backlog of $2,210 with a useful life of one year. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.

The goodwill of $35,477 largely reflects the potential synergies and expansion of the Company's offerings across product lines and markets complementary to the Company's existing products and markets. The goodwill from this acquisition is included in the Microelectronics reporting unit. The transaction was a combination of asset and stock, with the asset portion of goodwill being deductible for tax purposes. The Company has estimated the tax value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes. As of October 1, 2021, the Company had $29,703 of goodwill deductible for tax purposes.

PHYSICAL OPTICS CORPORATION ACQUISITION

On December 7, 2020, the Company signed a definitive agreement to acquire Physical Optics Corporation ("POC") for a purchase price of $310,000, subject to net working capital and net debt adjustments. On December 30, 2020, the transaction closed and the Company acquired POC. Based in Torrance, California, POC expands the Company's global avionics business and its collective footprint in the platform and mission management market. The Company funded the acquisition through a combination of cash on hand and the Company's existing revolving credit facility (the "Revolver"). On May 28, 2021 the Company and representative of the former owners of POC agreed to post closing-adjustments totaling $2,641, which increased the Company’s net purchase price.

The following table presents the net purchase price and the fair values of the assets and liabilities of POC on a preliminary basis:


	Amounts
Consideration transferred
Cash paid at closing	$	251,229
Cash paid post closing	61,626
Working capital and net debt adjustment	(2,096)

Less cash acquired	(2,855)
Net purchase price	$	307,904

Estimated fair value of tangible assets acquired and liabilities assumed
Cash	$	2,855

Accounts receivable and Unbilled Receivables	28,022
Inventory	11,125
Fixed assets	23,236
Other current and non-current assets	16,453
Accounts payable	(3,777)
Accrued expenses	(5,572)

Other current and non-current liabilities	(32,999)
Estimated fair value of net tangible assets acquired	39,343
Estimated fair value of identifiable intangible assets	116,000
Estimated goodwill	155,416
Estimated fair value of net assets acquired	310,759
Less cash acquired	(2,855)
Net purchase price	$	307,904

The amounts above represent the preliminary fair value estimates as of October 1, 2021 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates, including the ongoing assessment of collectability of receivable balances. The preliminary identifiable intangible asset estimate includes customer relationships of $83,000 with a useful life of 11 years, completed technology of $25,000 with a useful life of 9 years and backlog of $8,000 with a useful life of one year. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill.

The estimated goodwill of $155,416 largely reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to the Company’s existing products and markets and is not deductible for tax purposes. The goodwill from this acquisition is reported in the Processing reporting unit.

AVALEX ACQUISITION

On September 27, 2021, the Company announced that it had signed a definitive agreement to acquire Avalex Technologies Corporation (“Avalex”). Based in Gulf Breeze, Florida. Avalex is a provider of mission-critical avionics, including rugged displays, integrated communications management systems, digital video recorders, and warning systems. Pursuant to the terms of the agreement, the Company will acquire Avalex for an all-cash purchase price of $155,000, subject to net working capital and net debt adjustments. On November 5, 2021, the transaction closed and the Company acquired Avalex. See Note N "Subsequent Events" to the consolidated financial statements for further discussion.