Business Acquisitions and Divestitures

Point Grey Research, Inc.

During 2016, the Company completed a transaction to acquire the assets of Point Grey Research Inc. (“Point Grey”), a global leader in the development of advanced visible imaging cameras and solutions that are used in industrial automation systems, medical diagnostic equipment, people counting systems, intelligent traffic systems, military and defense products, and advanced mapping systems, for approximately $259.2 million in cash. During 2017, the Company finalized the purchase price allocation which had no change to the previously recorded allocation of $39.8 million to identifiable intangible assets and $183.7 million to goodwill. These amounts have been recorded in the Company’s OEM & Emerging Markets segment.


Note 19.	Business Acquisitions and Divestitures - (Continued)

Point Grey Research, Inc. - (Continued)

The allocation of the purchase price for Point Grey is as follows (in thousands):



Cash acquired	$	2,994
Other tangible assets and liabilities, net	35,127
Net deferred taxes	(2,438		)
Identifiable intangible assets	39,800
Goodwill	183,678
Total purchase price	$	259,161

The allocation of the purchase price related to this acquisition is based on management’s judgments after evaluating several factors, including valuation assessments of tangible and intangible assets, and estimates of the fair value of liabilities assumed. The goodwill of $183.7 million represents future economic benefits expected to arise from synergies from combining operations and the ability of Point Grey to provide the Company domain knowledge and distribution channels in adjacent markets.

In connection with the 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 estimated fair values, and estimated useful lives (in thousands, except years):



	Estimated Useful Life	Amount
Developed technology	10.0 years	$	23,100
Customer relationships	7.0 years	13,200
Backlog	1.0 year	2,300
Non-Competition Agreements	5.0 years	1,000
Other	n/a	200
		$	39,800

Acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, backlog, and non-competition agreements. Developed technology represents the economic advantage of having certain technologies in place that lowers manufacturing and operating costs and drives higher margins. Customer relationships represents the relationships Point Grey has established in the OEM and people counting markets as of the date of the acquisition. Backlog represents “pre-sold” business at the date of acquisition, which provides positive earning streams post acquisition that exceed what is required to provide a return on the other assets employed. Non-competition agreements represent the economic benefit of having agreements with certain current and former employees and shareholders of Point Grey that restrict their ability to compete directly with the Company.

The developed technology was valued using the income approach and relief from royalty method. Customer relationships and backlog were valued using the income approach and multi-period excess earnings method. Non-competition agreements were valued using the income approach and the with-and-without method.

Prox Dynamics, AS

During 2016, the Company acquired 100% of the outstanding stock of Prox Dynamics AS. (“Prox Dynamics”), a leading developer and manufacturer of nano-class UAS for military and para-military intelligence, surveillance, and reconnaissance applications, for approximately $134.4 million in cash, which resulted in the allocation of $11.3 million to net tangible asset and the excess purchase price of approximately $123.1 million to other long-term assets. During 2017, the Company finalized the purchase price allocation, which has been recorded in the Company’s Surveillance business segment.


Note 19.	Business Acquisitions and Divestitures - (Continued)

Prox Dynamics, AS - (Continued)

The allocation of the purchase price for Prox Dynamics is as follows (in thousands):



Cash acquired	$	11,706
Other tangible assets and liabilities, net	(900		)
Net deferred taxes	(4,250		)
Identifiable intangible assets	31,400
Goodwill	96,431
Total purchase price	$	134,387

The goodwill of $96.4 million million represents future economic benefits expected to arise from synergies from combining operations the ability of Prox Dynamics to provide the Company domain knowledge and distribution channels in adjacent markets.



	Estimated Useful Life	Amount
Developed technology	8 years	$	23,400
Customer relationships	7 years	3,500
Patents	8 years	3,100
Trade name	8 years	1,400
		$	31,400

Acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, patents, and trade name. Developed technology and patents represent the economic advantage of having certain technologies in place that lower manufacturing and operating costs and drive higher margins. Customer relationships represents the relationships Prox Dynamics has established in the military and defense ministries of countries throughout the world. Trade name represents the "Black Hornet" name, which is well recognized within the industry and is known as a leading product within the nano-class UAS segment.

The developed technology and customer relationships were valued using the income approach and multi-period excess earnings method. Patents and trade name were valued using the income approach and relief from royalty method.

Fishing Hot Spots, Inc.

On March 26, 2018, the Company completed a transaction to acquire 100% of the outstanding stock of Fishing Hot Spots, Inc., a privately held technology company, for approximately $7.1 million in cash. During the third quarter of 2018, the Company finalized the purchase price allocation and recorded $2.2 million of identified intangible assets and goodwill of $4.7 million in the Commercial business unit.

Fishidy, Inc.

On April 3, 2018, the Company completed a transaction to acquire 100% of the outstanding stock of Fishidy, Inc., a privately held startup technology company, for approximately $7.1 million in cash. During the fourth quarter of 2018, the Company finalized the purchase price allocation and recorded $3.8 million of identified intangible assets and goodwill of $4.6 million in the Commercial business unit.


Note 19.	Business Acquisitions and Divestitures - (Continued)

Acyclica, Inc.

On September 10, 2018, the Company completed a transaction to acquire 100% of the outstanding stock of Acyclica, Inc., a privately held software developer for automotive roadway and intersection data generation and analysis. The allocation of the purchase price to identified intangible assets and goodwill is subject to the final determination of the valuation of the assets acquired and liabilities assumed. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of intangible assets and related taxes. The final allocation of the purchase price to the assets acquired and liabilities assumed will be completed when the final assessments of the intangible assets and related taxes are completed during the first half of 2019. Goodwill and intangibles will be recorded in the Commercial business unit. The preliminary unallocated purchase price of approximately $10.3 million, including an estimate for contingent consideration pursuant to the stock purchase agreement, has been reported in other assets as of December 31, 2018.

SeaPilot AB

On October 16, 2018, the Company acquired substantially all of the outstanding shares of SeaPilot AB, a privately held technology company. The allocation of the purchase price to identified intangible assets and goodwill is subject to the final determination of the valuation of the assets acquired and liabilities assumed. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of intangible assets and related taxes. The final allocation of the purchase price to the assets acquired and liabilities assumed will be completed when the final assessments of the intangible assets and related taxes are completed during the first half of 2019. Goodwill and intangibles will be recorded in the Commercial business unit. The preliminary unallocated purchase price of approximately $4.6 million has been reported in other assets as of December 31, 2018.

The business acquisitions listed above are not significant as defined in Regulation S-X under the Securities Exchange Act of 1934, nor are they significant compared to the Company's overall results of operations. Consequently, no pro forma financial information is provided.

Divestitures of the Consumer and Small and Medium-Sized Security Businesses

On February 6, 2018 the Company sold the Consumer and Small and Medium-sized ("SMB") Security businesses within the Commercial business unit for total cash consideration of approximately $28.8 million. As a result of this combined sale and subsequent negotiations with the buyer, the Company recognized an incremental pre-tax loss of $13.7 million during 2018. This group of assets was previously classified as held for sale during the fourth quarter of 2017, when the Company recorded an estimated pre-tax loss on net assets held for sale of $23.6 million. This disposal does not qualify as discontinued operations and therefore, its operating results are included in the Company’s continuing operations for all periods presented through the date of the sale.

The carrying amounts of the assets and liabilities that were expected to be included in the sale were classified as held for sale as of December 31, 2017 as follows (in thousands):



Accounts receivable, net	$	20,414
Inventories	43,050
Other current assets	1,031
Property and equipment, net	4,888
Intangible assets, net	8,359
Goodwill	13,090
Loss on net assets held for sale	(23,488		)
Assets held for sale, net	$	67,344

Accounts payable and accrued expenses	$	39,544
Liabilities held for sale	$	39,544