Business Combinations

12 Months Ended

Jan. 01, 2016

Business Combinations [Abstract]

Business Combinations

NOTE 3—BUSINESS COMBINATIONS

On September 8, 2015, we acquired Great Wall Semiconductor Corporation, or GWS, a privately held manufacturer of metal oxide semiconductor field-effect transistors. We acquired GWS to broaden our product portfolio to better serve our customers who purchase certain commercial and radiation-hardened power management products.

The purchase consideration consisted of $18.9 million in cash, of which $2.8 million is held in escrow for a period of 16 months and is subject to claims for contingent liabilities and working capital adjustments. In addition, the acquisition agreement provides for a cash earn-out payment of up to an additional $4.0 million if either specified revenue targets are achieved or a disposition event occurs on or before December 30, 2016. A disposition event would include transfer of GWS or its assets, or a transfer of a majority of the assets or acquisition of Intersil by a third party. We estimated that the fair value of the earn-out as of the acquisition date based on the probability of achievement was not material.

The purchase price was allocated to the identifiable assets and liabilities of GWS based on their estimated fair value at the acquisition date. We engaged an independent third party to assist with the determination of the fair value of certain identifiable intangible assets and the earn-out. In determining the fair value of the purchased intangible assets and earn-out, management made various estimates and assumptions from significant unobservable inputs (Level 3). The fair value of purchased identifiable intangible assets was determined using discounted cash flow models from projections prepared by management. The fair value of the earn-out was derived using a Monte Carlo simulation model that includes significant unobservable inputs.

The purchase price was preliminarily allocated as of the date of the acquisition as follows (in thousands):

Assets acquired
Current assets:
Cash	$	201
Account receivable		346
Prepaid expenses & other assets		319
Non-current assets:
Developed technology		13,232
Customer relationships		2,500
Goodwill		6,346
Total assets acquired		22,944
Liabilities acquired
Current liabilities:
Accounts payable		703
Accrued expenses		97
Deferred revenue		266
Non-current liabilities:
Deferred taxes		2,969
Total liabilities acquired		4,035
Net assets acquired		18,909

We prepared an initial determination of the fair value of the assets acquired and liabilities assumed as of the acquisition date using preliminary information.  Developed Technology and Customer Relationships have estimated useful lives of seven and three years, respectively.  The excess of the fair value of consideration paid over the fair value of the net assets and the identifiable intangible assets acquired and the liabilities assumed resulted in recognition of goodwill of $6.3 million, including the value of workforce. The recognition of goodwill primarily related to expected future products and technologies. All of the goodwill recorded was assigned to our Industrial & Infrastructure reporting unit.