Acquisitions

3 Months Ended

Apr. 01, 2022

Business Combination and Asset Acquisition [Abstract]

AcquisitionsThe Company has had one acquisition in 2022 as described below, and it has been accounted for under ASC 805, Business Combinations. Accordingly, the accounts of the acquired company, after adjustments to reflect fair values assigned to assets and liabilities, have been included in the consolidated financial statements from the date of acquisition. There was one acquisition during the year ended December 31, 2021, when the Company acquired the issued and outstanding shares of ANLA, LLC. (“Access Networks”), an enterprise-grade networking solutions provider offering networking products, design, configuration, monitoring and support services.

On January 20, 2022, the Company, through its wholly owned subsidiary, Snap One Acquisition Corp., entered into a Purchase Agreement (“Purchase Agreement”) pursuant to which it acquired the issued and outstanding shares of Staub Electronics, LTD. (“Staub”), a long-time Canadian distribution partner. The acquisition adds two Canadian locations to the Company’s distribution footprint. The Company agreed to a purchase price of $26,395.

The Company recorded tangible and intangible assets acquired and liabilities assumed in the transaction according to the acquisition method of accounting, under ASC 805, Business Combinations. The consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of the closing date and are subject to change within the measurement period, which does not exceed twelve months after the closing date. The purchase price allocation and consideration are considered preliminary based on potential working capital adjustments. The Company allocated any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill.

Customer relationships have been valued using the multi-period excess earnings method, a derivative of the income approach. The multi-period excess earnings method estimates the discounted net earnings attributable to the customer relationships that were acquired after considering items such as possible customer attrition. Estimated useful lives were determined based on the length and trend of projected cash flows. The length of the projected cash flow period was determined based on the expected attrition of the customer relationships, which is based on the Company’s historical experience in renewing and extending similar customer relationships and future expectations for renewing and extending similar existing customer relationships. The useful life of the customer relationships intangible assets represents the number of years over which the Company expects the customer relationships to economically contribute to the business.

The trade name has been valued using the relief from royalty method under the income approach to estimate the cost savings that will accrue to the Company, which would otherwise have to pay royalties or license fees on revenue earned by using the asset. Estimated useful life was determined based on management’s estimate of the period of time the name will be in use.

The preliminary allocation of the purchase price for the acquisition is as follows:


Total purchase consideration	$	26,395
Cash and cash equivalents	$	756
Accounts receivable	1,801
Inventory	5,472
Prepaid expenses	1,616
Property and equipment	451
Operating lease right-of-use assets	2,309
Identifiable intangible assets	14,209
Total identifiable assets acquired	26,614
Accounts payable	1,570
Accrued liabilities	2,174
Current operating lease liability	343
Deferred income tax liabilities	3,585
Operating lease liability, net of current portion	1,953
Total liabilities assumed	9,625
Net identifiable assets acquired	16,989
Goodwill	9,406
Net assets acquired	$	26,395

The Company recorded intangible assets related to the acquisition based on estimated fair value, which consisted of the following:


	Useful Lives (Years)	Acquired Value
Customer relationships	10	$	12,684
Trade name	6	1,525
Total intangible assets		$	14,209

The Company recognized $328 of transaction-related expenses, consisting primarily of advisory, legal, and other professional fees related to the acquisition. These transaction-related expenses were incurred by and for the benefit of the Company, and were included in selling, general, and administrative expenses in the condensed consolidated statements of operations.

Pro forma financial information related to the Staub acquisition has not been provided as it is not material to the Company’s consolidated results of operations. The results of operations of the Staub acquisition are included in the Company’s consolidated results of operations from the date of acquisition and were not significant for the three months ended April 1, 2022.