Business Combinations

9 Months Ended

Oct. 30, 2020

BUSINESS COMBINATIONS

On September 21, 2020, the Company acquired all of the outstanding shares (representing 100% of the voting interest) of Delve Laboratories, Inc. ("Delve") for approximately $15.4 million. Delve provides comprehensive vulnerability assessment solutions through its automated vulnerability platform. Delve's software-as-a-service solution is powered by artificial intelligence and machine learning to provide customers with more accurate and actionable data about the highest risk vulnerabilities across their network, endpoints and cloud. Secureworks plans to integrate the vulnerability discovery and prioritization technology into new offerings within its cloud-based portfolio, including its Red Cloak Platform and TDR application, expanding visibility and insights for users. The financial results of Delve have been included in the Company's condensed consolidated financial statements prospectively from the date of acquisition within the Company's single reporting unit. The goodwill recognized below in connection with the transaction is primarily attributable to the software intellectual property acquired and the anticipated synergies from future growth of the product and the Company’s Red Cloak Platform. The acquisition was treated as an asset transaction for tax purposes and $8.8 million of goodwill acquired is expected to be deductible for tax purposes. Transaction costs were approximately $0.6 million and were expensed as incurred by the Company. The acquired business did not have a material impact on our condensed consolidated financial statements, and therefore historical and pro forma disclosures have not been presented.

The following table summarizes the allocation of the aggregate purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands of USD):


	Amount
Assets acquired:
Cash and cash equivalents	$	343
Accounts and notes receivable	101
Other current assets	607


Intangibles	6,200
Total identifiable assets	7,251
Goodwill	8,831

Total assets acquired	16,082

Liabilities assumed:

Accounts payable	25
Accrued and other liabilities	413
Non-current liabilities	220
Total liabilities assumed	658


Purchase consideration	$	15,424

The intangibles identified in the transaction represent Technology-based assets with a preliminary useful life of 6 years. The value of the acquired assets was estimated using the relief-from-royalty method, an income approach (Level 3), which provides an estimate of cost savings that accrue to the owner of the asset which would otherwise be payable as royalties or license fees on revenue earned through the use of the asset.

The purchase accounting allocations above were determined based upon estimates of fair value. Based on the timing of the acquisition, the preliminary estimates associated with the respective purchase accounting is expected to be finalized in fiscal 2021. The assumptions used in these preliminary allocations are pending completion and subject to change. The effect of any changes could be significant.