Business Combination

On September 11, 2017, we acquired 100.0% of the outstanding equity interests of Lightning Diversion Systems, LLC (“LDS”), a privately-held, worldwide leader in lightning protection systems serving the aerospace and defense industries, located in Huntington Beach, California. The acquisition of LDS is part of our strategy to enhance revenue growth by focusing on advanced proprietary technology on various aerospace and defense platforms.

The purchase price for LDS was $60.0 million, net of cash acquired, all payable in cash. Upon the closing of the transaction, we paid $61.4 million with the remaining $0.6 million paid in October 2017. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase price over the aggregate fair values was recorded as goodwill.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):



	Estimated Fair Value
Cash	$	2,223
Accounts receivable	918
Inventories	1,732
Other current assets	54
Property and equipment	138
Intangible assets	22,400
Goodwill	34,881
Total assets acquired	62,346
Current liabilities	(325		)
Total liabilities assumed	(325		)
Total purchase price allocation	$	62,021



	Useful Life (In years)	Estimated Fair Value (In thousands)
Intangible assets:
Customer relationships	15	$	21,100
Trade name	15	1,300
		$	22,400

The intangible assets acquired of $22.4 million were determined based on the estimated fair values using valuation techniques consistent with the income approach to measure fair value. The useful lives were estimated based on the underlying agreements or the future economic benefit expected to be received from the assets. The fair values of the identifiable intangible assets were estimated using several valuation methodologies, which represented Level 3 fair value measurements. The value for customer relationships was estimated based on a multi-period excess earnings approach, while the value for the trade name was assessed using the relief from royalty methodology. Further, we analyzed the technology acquired and concluded no fair value should be assigned to it.

The goodwill of $34.9 million arising from the acquisition is attributable to the benefits we expect to derive from expected synergies from the transaction, including complementary products that will enhance our overall product portfolio, opportunities within new markets, and an acquired assembled workforce. All the goodwill was assigned to the Electronic Systems segment. Since the LDS acquisition, for tax purposes, was deemed an asset acquisition, the goodwill recognized is deductible for income tax purposes.

Acquisition related transaction costs are not included as components of consideration transferred but have been expensed as incurred. Total acquisition-related transaction costs incurred by us were $0.3 million during 2017 and charged to selling, general and administrative expenses.

LDS’ results of operations have been included in our consolidated statements of operations since the date of acquisition as part of the Electronic Systems segment. Pro forma results of operations of the LDS acquisition have not been presented as the effect of the LDS acquisition was not material to our financial results.