Business Combinations

3 Months Ended

Mar. 31, 2020

2. Business Combinations

On February 5, 2020, the Company completed its acquisition of Big Switch Networks, Inc. (“Big Switch”) a network monitoring and software-defined networking pioneer headquartered in Santa Clara, California. With the acquisition of Big Switch, we expect to expand our data center networking solutions and further strengthen our network monitoring and observability suite delivered through Arista’s software platform CloudVision and DANZ (DataANalyZer) capabilities.

We paid an aggregate of $73.3 million in cash for the acquisition, of which $5.3 million in severance and other costs was accounted for as post-combination expense and was excluded from the purchase consideration. We also incurred certain acquisition-related expenses and restructuring costs of $6.6 million, which primarily consisted of retention bonuses to continuing employees, professional and consulting fees, and facilities restructuring costs. The following table summarizes the purchase consideration of $68.0 million, and the preliminary purchase price allocation based on the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):



	Preliminary Purchase Price Allocation
Tangible assets	13,376
Liabilities	(24,346		)
Intangible assets	49,040
Goodwill	29,926
Net assets acquired	$	67,996

The acquired intangible assets are amortized on a straight-line basis over their estimated useful lives as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. The following table shows the valuation of the intangible assets acquired (in thousands) along with their estimated useful lives.



	Acquisition Date Fair Value		Estimated Useful Life
Developed technology	$	31,040	5 years
Customer relationships	13,150		7 years
Non-compete agreements	4,060		2 years
Trade name	790		1 year
Total intangible assets acquired	$	49,040

Goodwill of $29.9 million is primarily attributable to the expected synergies created by incorporating the solutions of the acquired businesses into our technology platform, and the value of the assembled workforce. Goodwill is not deductible for income taxes purposes. In addition, the acquisition of Big Switch did not have a material impact on our revenue and net income for the current period, and therefore pro forma financial information has not been presented.