5. Acquisitions

2016 Acquisitions

Acquisition of Zindagi

On January 1, 2016, we acquired the assets of Zindagi, a provider of social games, for purchase consideration of approximately $13.8 million, which consisted of cash paid of $12.5 million (net of prepaid compensation expense of $2.5 million) and contingent consideration with a fair value of $1.3 million as of March 31, 2016 (see Note 3 – “Fair Value Measurements” for changes in this estimate). The contingent consideration may be payable based on the achievement of certain future performance targets during the three year period following the acquisition date and could be up to $60.0 million. We will record changes in the fair value of contingent consideration liabilities within operating expenses in our consolidated statement of operations each future reporting period.

We acquired Zindagi to accelerate our ability to execute against new opportunities in Slots and other game genres.

The following table summarizes the purchase date fair value of net tangible and intangible assets acquired from Zindagi (in thousands, unaudited):

	Total
Developed technology, useful life of 3 years	$	3,257
Goodwill		10,503
Total	$	13,760

Goodwill, which is deductible for tax purposes, represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired, and is primarily attributable to the assembled workforce of the acquired business and expected synergies at the time of the acquisition.

Acquisition of PuzzleSocial

On July 1, 2016, we acquired 100% of the equity interests of PuzzleSocial, a provider of mobile crossword puzzle games, for purchase consideration of approximately $20.4 million, which consisted of cash paid of $20.0 million and contingent consideration with a fair value of $0.4 million as of September 30, 2016 (see Note 3 – “Fair Value Measurements” for changes in this estimate). The contingent consideration may be payable based on the achievement of certain future performance targets during the two and a half year period following the acquisition date and could be up to $42.0 million. We will record changes in the fair value of contingent consideration liabilities within operating expenses in our consolidated statement of operations each future reporting period.

We acquired PuzzleSocial as their crossword puzzle game complements our existing Words With Friends franchise with a similar audience of word game players.

The following table summarizes the purchase date fair value of net tangible and intangible assets acquired from PuzzleSocial (in thousands, unaudited):

	Total
Developed technology, useful life of 4.5 years	$	6,923
Customer base, useful life of 1 year		3,499
Net tangible assets acquired (liabilities assumed)		2,144
Goodwill		11,811
Deferred tax liabilities		(3,948	)
Total	$	20,429

Goodwill, which is not deductible for tax purposes, represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired, and is primarily attributable to the assembled workforce of the acquired business and expected synergies at the time of the acquisition.

The information above provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, however, the preliminary measurements of fair value are subject to change including in the area of income taxes payable and deferred taxes which may change subject to the completion of certain tax returns.

Transaction costs incurred by the Company in connection with the Zindagi and PuzzleSocial acquisitions, including professional fees, were $0.5 million, of which $0.2 million was included in our statement of operations in 2015 related to the Zindagi acquisition and the remaining $0.3 million was included in our statement of operations in 2016.

The results of operations for the acquisitions of Zindagi and PuzzleSocial have been included in our consolidated statement of operations since the dates of acquisition. Pro forma results of operations related to our acquisitions have not been presented as it is not material to our 2016 consolidated statements.

2015 Acquisitions

Acquisition of Rising Tide

On September 11, 2015, we acquired Rising Tide, a provider of social games, for purchase consideration of approximately $44.2 million, which consisted of cash paid of $22.4 million and contingent consideration with a fair value of $21.8 million as of September 30, 2015 (see Note 3 – “Fair Value Measurements” for changes in this estimate). Under the terms of the original agreement, the contingent consideration may be payable based on the achievement of certain future performance targets during the three year period following the acquisition date and could be up to $140.0 million. In the fourth quarter of 2016, we executed an amended agreement with Rising Tide. Under the terms of the amendment, the maximum amount payable by the Company is $10.2 million, of which $5.1 million was held in escrow and recorded to restricted cash and other current liabilities, to fully settle the consideration liability related to Rising Tide. The contingent consideration liability was $18.5 million as of December 31, 2015; thus, we recorded a net benefit of $8.3 million within research and development in our consolidated statement of operations in 2016.

We acquired Rising Tide to expand our footprint in the social casino games space.

The following table summarizes the acquisition date fair value of net tangible and intangible assets acquired from Rising Tide (in thousands, unaudited):

	Total
Developed technology, useful life of 5 years	$	27,000
Net tangible assets acquired (liabilities assumed)		2,445
Goodwill		25,050
Deferred tax liabilities		(10,300	)
Total	$	44,195

Transaction costs incurred by the Company in connection with the acquisition, including professional fees, were $0.9 million and are included in our statement of operations in 2015.

The results of operations for the acquisition of Rising Tide have been included in our consolidated statement of operations since the date of acquisition. Pro forma results of operations related to our acquisition have not been presented as it is not material to our 2015 consolidated statements.