Acquisitions

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

The Company completed no acquisitions during the three month period ended March 31, 2023 and three acquisitions during fiscal year 2022, as described further in the section below. The Company’s acquisitions have been accounted for under ASC 805, Business Combinations. Accordingly, the accounts of the acquired companies, after adjustments to reflect fair values assigned to assets and liabilities, have been included in the condensed consolidated financial statements from their respective dates of acquisition.

The Company records purchase price in excess of amounts allocated to identifiable assets and liabilities as goodwill. Goodwill includes, but is not limited to, the value of the workforce in place, ability to generate profits and cash flows, and an established going concern.

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 names have 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. The useful lives of the assets were determined based on management’s estimate of the period of time the name will be in use.

Technology has been valued using the multi-period excess earnings method, a derivative of the income approach. The net earnings attributed to the existing technology considers items such as projected research and development costs expected to be incurred to maintain the technology. The useful lives were determined based on the length and trend of projected cash flows after considering items such as the projected research and development expected to be incurred to maintain the technology.

Transactions Completed in fiscal year 2022

On October 24, 2022, the Company acquired the remaining outstanding interest of its majority-owned subsidiary, Remote Maintenance Systems LP, doing business as Parasol (“Parasol”), the provider of 24/7 remote support service based on the Company’s remote management tool, OvrC, creating new opportunities for the Company’s integrators.

The Company acquired the remaining outstanding equity shares of Parasol in exchange of $1,100 of the Company’s common shares. The Company made an initial investment and established its controlling interest in 2018, and has included the results of operations, assets and liabilities in its consolidated financial reports since 2018.

The Company completed two additional acquisitions during fiscal year 2022 with Clare Controls, LLC (“Clare”) on August 8, 2022 and Staub Electronics, LTD (“Staub”) on January 20, 2022. The acquisitions added either products to the Company’s proprietary product lines or distribution services. The final allocation of the purchase price for Clare and Staub is as follows:


	Clare		Staub
Total purchase consideration	$	6,300	$	26,395
Cash and cash equivalents	$	—	$	756
Accounts receivable	—		1,801
Inventory	—		5,472
Prepaid expenses	263		1,616
Property and equipment, net	26		451
Operating lease right-of-use assets	160		2,309
Identifiable intangible assets	4,300		14,209
Total identifiable assets acquired	4,749		26,614
Accounts payable	568		1,570
Accrued liabilities	284		2,206
Current operating lease liability	43		343
Deferred income tax liabilities	—		3,585
Operating lease liability, net of current portion	117		1,953
Other liabilities	183		—
Total liabilities assumed	1,195		9,657
Net identifiable assets acquired	3,554		16,957
Goodwill	2,746		9,438
Net assets acquired	$	6,300	$	26,395

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


	Clare			Staub
	Useful Lives (Years)	Acquired Value		Useful Lives (Years)	Acquired Value
Customer relationships	—	$	—	10	$	12,684
Technology	4	3,400		—	—
Trade name	6	900		6	1,525
Total intangible assets		$	4,300		$	14,209

Goodwill arising from the Clare acquisition primarily consists of synergies from integrating Clare’s automation and security products into the Company’s existing product portfolio. Goodwill arising from the Staub acquisition primarily consists of synergies from integrating the distribution channels of Staub into the Company’s distribution channels.

As a result of the Clare transaction, the Company had, for income tax purposes, goodwill of $2,746 that will be deductible in future periods.

The Company recognized $328 of transaction-related expenses for Staub consisting primarily of advisory, legal, and other professional fees, during the three months ended April 1, 2022, which were included in selling, general, and administrative expenses in the consolidated statement of operations.

Pro forma financial information related to the Clare and Staub acquisitions 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.