Business Acquisitions

12 Months Ended

Dec. 31, 2015

Business Acquisitions [Abstract]

Business Acquisition

er 30, 2015, the Company acquired 100% of the outstanding stock of DVTEL, a provider of software and hardware technologies for advanced video surveillance, for approximately $97.5 million in cash, subject to customary post-closing adjustments. The excess of the purchase price over the preliminary net tangible and identifiable intangible assets has been recorded as goodwill within the Company's Security segment and is subject to the final determination on the valuation of assets acquired and liabilities assumed.

The preliminary allocation of the purchase price for DVTEL is as follows (in thousands):

Cash acquired	$	5,232
Other tangible assets and liabilities, net	5,160
Net deferred taxes	1,727
Identifiable intangible assets	27,380
Goodwill	57,992
Total purchase price	$	97,492

The allocation of the purchase price related to this acquisition is preliminary and is based on management’s judgments after evaluating several factors, including preliminary valuation assessments of tangible and intangible assets, and preliminary estimates of the fair value of liabilities assumed. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of the identifiable intangible assets, property and equipment, income taxes (including uncertain tax positions) and certain other tangible assets and liabilities. The final allocation of the purchase price to the assets acquired and liabilities assumed will be completed when the final valuation assessments of tangible and intangible assets are completed and estimates of the fair value of liabilities assumed are finalized during the year ended December 31, 2016. The preliminary goodwill of $58.0 million represents future economic benefits expected to arise from synergies from combining operations and the ability of DVTEL to provide the Company domain knowledge and distribution channels in adjacent security markets. 

The Company made an election under Section 338 of the Internal Revenue Code of 1986, as amended, which resulted in tax-deductible goodwill related to the acquisition of DVTEL. The Company estimates that the tax-deductible goodwill and intangibles resulting from the election will be approximately $24.8 million, to be amortized for United States tax purposes over a 15 year period. The value of tax-deductible goodwill and intangibles differs from the amounts listed in the preliminary purchase price allocation above as the impact of the elections made under Section 338 only affects United States income taxes for the goodwill and intangibles that are owned by the Company's United States subsidiaries.

In connection with the preliminary allocation of purchase price to the assets acquired and liabilities assumed, the Company identified certain intangible assets. The following table presents the acquired intangible assets, their preliminary estimated fair values, and preliminary estimated useful lives (in thousands, except years):

	Estimated Useful Life	Amount
Developed technology	7.5 years	$	21,500
Customer relationships	10.0 years	3,800
In-process research and development	indefinite	1,700
Other	1.0 year	380
		$	27,380

Preliminary acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, and in-process research and development. Developed technology represents completed software related to internal and external software platforms. In-process research and development represents the value assigned to acquired research and development projects that, as of the acquisition date, had not established technological feasibility and had no alternative future use. The in-process research and development intangible assets are capitalized and accounted for as indefinite-lived intangible assets and are subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project and launch of the product, we will make a separate determination of useful life of the in-process research and development intangible assets and the related amortization will be recorded as an expense over the estimated useful life of the specific projects.

Note 18. Business Acquisitions - (Continued)

An average 10-year useful life for customer relationships has been estimated based on the projected economic benefits associated with this asset. The average 10-year estimated useful life represents the approximate point in the projection period in which a majority of the asset’s cash flows are expected to be realized based on assumed attrition rates.

The developed technology, customer relationships, and in-process research and development were valued using the multi-period excess earnings method.

The operating results of DVTEL are included in the Company's results of operations since the date of acquisition and are not material.

This acquisition is not significant as defined in Regulation S-X under the Securities Exchange Act of 1934, nor is it significant compared to the Company's overall results of operations. Consequently, no pro forma financial information is provided.