3. Acquisitions

Design by Front Ltd.

On October 29, 2012, the Company acquired all of the outstanding shares of Design by Front Limited, a privately held web strategy, design and technology studio located in Belfast, Northern Ireland, for approximately $4.6 million. The Company paid $2.5 million in cash upon closing, with the remainder of the purchase price to be paid contingent on attainment of certain criteria through 2014. The contingent consideration payable was recorded at $2.1 million, which represents the net present fair value of the estimated payment. We recognized approximately $2.5 million of intangible assets and approximately $2.5 million of goodwill, associated with the transaction. In connection with this acquisition, 13 Design by Front Limited employees joined the Company. Design by Front Limited’s Typecast^™ browser-based web authoring tool allows easy use of web fonts when designing web sites.

Bitstream Inc.

On March 19, 2012, we acquired all of the outstanding shares of Bitstream Inc. in an all cash merger for $49.6 million. The Company used approximately $24.6 million in cash on hand and borrowed $25.0 million from its revolving Credit Facility. The Agreement and Plan of Merger (“Merger Agreement”) dated November 10, 2011 is by and among the Company, Bitstream and Birch Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of the Company (the “Merger Subsidiary”). In accordance with the Merger Agreement, the Merger Subsidiary was merged with and into Bitstream, terminating the separate corporate existence of the Merger Subsidiary, with Bitstream continuing as the surviving corporation of the merger and a wholly-owned subsidiary of the Company. In accordance with the Merger Agreement, on March 14, 2012 Bitstream spun off its mobile browsing and variable data publishing businesses into a separate entity.

Bitstream Inc., a Delaware corporation, and its wholly owned subsidiary, Bitstream India Pvt. Ltd., became wholly-owned subsidiaries of Monotype Imaging Holdings Inc. following the acquisition. Included in the acquisition is the MyFonts.com^sm website, which featured 89,000 fonts from nearly 900 foundries, in addition to the widely used WhatTheFont^sm identification service. The transaction also includes the Bitstream^® typeface library, Font Fusion^® and a range of fonts for embedded and mobile environments, and 10 patents. Twelve employees from Bitstream’s U.S. operations and 42 engineers and type designers from Bitstream’s India operations joined the Company in connection with the acquisition.

The results of operations of Bitstream have been included in our consolidated financial statements since the date of acquisition and all intercompany balances have been eliminated. The total purchase price was allocated as follows:


	Fair Value At Acquisition Date (in thousands)
Cash, accounts receivable and other assets	$	1,136
Deferred tax asset, short term		1,732
Goodwill		30,397
Intangible assets		21,770
Accrued expenses and deferred revenue		(2,350	)
Deferred tax liability, long term		(3,113	)

Total purchase price	$	49,572

The estimated fair value of intangible assets acquired was recorded as follows:


	Fair Value At Acquisition Date (in thousands)		Useful Life (In Years)
Customer relationships	$	7,280	11—16
Technology		9,230	7—8
Trademarks		5,260	Indefinite

Total intangible assets	$	21,770

The goodwill reflects the value of the assembled workforce and the synergies we expect to realize from the Bitstream acquisition. Since we purchased the Bitstream legal entity, the goodwill and amortization of intangible assets are not deductible for tax purposes. The deferred tax assets acquired are primarily from Bitstream’s net operating loss carryforwards, which we expect to utilize going forward, subject to limitation. The acquired finite-lived intangible assets will be amortized over their respective useful lives, on a straight-line basis.