Business Combinations

12 Months Ended

Sep. 30, 2022

3. BUSINESS COMBINATIONS

On July 26, 2021, the Company acquired the Infrastructure and Automotive (“I&A”) business of Silicon Laboratories Inc. (the “Asset Purchase”). The Asset Purchase accelerated the Company’s expansion into high-growth segments, including electric and

hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication, data center, automotive, smart home, and several other applications.

The Company acquired the business for total cash consideration of $2.75 billion. Net revenue and net income from this acquisition have been included in the Consolidated Statements of Operations from the acquisition date through the end of the fiscal year on October 1, 2021, and the impact of the acquisition to the ongoing operations on the Company’s net revenue and net income was not material. The Company incurred $40.7 million in transaction-related costs during the fiscal year ended October 1, 2021, which were included within the selling, administrative, and general expense.

The allocation of the purchase price to the assets and liabilities recognized in the Company’s acquisition of the I&A business was considered final at the time of filing the 2021 Annual Report on Form 10-K. The allocation of the purchase price is based on the estimated fair values of the assets acquired and liabilities assumed by major class related to the Asset Purchase and are reflected, as of the acquisition date, in the accompanying financial statements as follows (in millions):


	As of
Purchase Price	July 26, 2021
Cash consideration	$	2,750.0
Fair value of partially vested equity awards	4.1
Total purchase consideration	$	2,754.1

Allocation
Inventory, including step up	$	56.3
Property, plant, and equipment	4.4
Other long-term assets	0.7
Intangible assets	1,708.3
Goodwill	986.2
Liabilities assumed	(1.8)
Estimated fair value of net assets acquired	$	2,754.1

Goodwill is primarily attributable to the assembled workforce and planned growth in strategic markets. This goodwill is expected to be deductible for tax purposes.


	As of
Intangible Assets	July 26, 2021
Developed technology	$	960.1
Backlog	154.6
Customer relationships and tradename	2.5
Total identified finite-lived intangible assets	1,117.2
In-process research and development (“IPR&D”)	591.1
Total identified intangible assets	$	1,708.3

Developed semiconductor technology relates to timing products including clocks and oscillators, power products including isolation and power-over-ethernet devices, and broadcast products including consumer and automotive radio devices.

Developed technology was valued using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The weighted-average amortization period of approximately four years was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

Customer relationships and backlog represent the fair value of future projected revenue that will be derived from sales of products to existing customers of the I&A business. Backlog was valued using the multi-period excess earnings method under

the income approach, and customer relationships were valued using the replacement cost method under the cost approach. The cost approach estimates the amount of money required to replace the investment or asset with another having equivalent utility. The weighted-average amortization period of the customer relationships was determined based on historical customer acquisition rates under a distributor model and was fully amortized as of October 1, 2021. The weighted-average amortization period of the backlog of approximately two years was determined based on the expected life of the backlog and the cash flows over the forecast period.

Tradename relates to the “Silicon Laboratories” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a market royalty rate to forecasted revenue under the trade name. The weighted-average amortization period was determined based on the expected life of the trade name and was fully amortized as of October 1, 2021.

The fair value of IPR&D was determined using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected net cash flows that are expected to be generated by the IPR&D, less charges representing the contribution of other assets to those cash flows.

The unaudited pro forma financial results for the fiscal years ended October 1, 2021, and October 2, 2020, combine the historical results of Skyworks with the unaudited historical results of the I&A business for the fiscal years ended October 1, 2021, and October 2, 2020, respectively. The results include the effects of unaudited pro forma adjustments as if the I&A business was acquired at the beginning of the prior fiscal year. The unaudited pro forma results presented include amortization charges for acquired intangible assets, adjustments for increases in the fair value of acquired inventory, interest expense, other charges, and related tax effects. The pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisition. These unaudited results are presented for informational purposes only and are not necessarily indicative of future operations (in millions):


	Fiscal Years Ended
(unaudited)	October 1, 2021		October 2, 2020
Revenue	$	5,440.0	$	3,735.4
Net income	1,514.3		637.8