Acquisitions and Investments

6 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Acquisition of Ascatron AB

On August 20, 2020, the Company acquired all of the outstanding shares of Ascatron AB, located in Sweden. The acquisition will add essential elements to the Company's vertically integrated silicon carbide technology platform. Purchase price consideration totaled $36.7 million.

preliminary allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition ($000):


	Previously Reported September 30, 2020		Measurement Period Adjustments (a)		As Adjusted (preliminary)


Assets
Developed technology	$	20,000	$	(3,622)	$	16,378
Goodwill	18,922		2,815		21,738
Other assets	2,511		33		2,543
Total assets acquired	$	41,433	$	(774)	$	40,659

Liabilities
Non-interest bearing liabilities	$	(203)	$	(247)	$	(450)
Deferred tax liability	(4,526)		1,021		(3,505)
Total liabilities assumed	(4,729)		774		(3,955)
Net assets acquired	$	36,704	$	—	$	36,704

(a) The Company recorded measurement period adjustments to its preliminary acquisition date fair values due to the refinement of its valuation models, assumptions and inputs. The measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.

The goodwill is recorded in the Compound Semiconductors segment and is attributed to the workforce acquired as part of the transaction. The goodwill is non-deductible for income tax purposes. Transaction expenses related to the acquisition totaled $2.0 million for six months ended December 31, 2020 and are included in Selling, General and Administrative expenses in the Condensed Consolidated Statements of Earnings. Technology is being amortized with a weighted average remaining life of approximately 17 years.

The amount of revenues and net earnings from the acquisition included in the Company’s Condensed Consolidated Statements of Earnings for the three and six months ended December 31, 2020 were insignificant.

Purchase of Equity Investment in INNOViON Corporation

On October 1, 2020, II-VI acquired the remaining 6.1% interest in INNOViON Corporation ("Innovion") for $4.4 million. Innovion is a provider of ion implantation services supporting unique capabilities in semiconductor materials processing. This acquisition will add essential elements to the Company's vertically integrated silicon carbide technology platform.

Through the period ended September 30, 2020, the Company held a 93.9% investment in Innovion which was accounted for as an equity method investment. The Company accounted for the acquisition of the remaining equity of Innovion as a step acquisition, which required remeasurement of the Company's previous ownership interest to fair value prior to completing purchase accounting. Using step acquisition accounting the Company increased the value of its previously held equity investment to its fair value of $66.6 million, which resulted in a gain of approximately $7.0 million, recorded in other expense (income), net in the Condensed Consolidated Statement of Operations.

The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation and determine the fair value of the previously held equity method investment. Income-based valuation approaches included the use of the multi-period excess earnings and relief-from-royalty methods for certain acquired intangible assets.

Due to the timing of the acquisition, the Company is in the process of measuring the fair value of assets acquired and liabilities assumed, including tangible and intangible assets and related deferred income taxes. The following table presents a preliminary allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition ($000):


Assets
Developed technology	$	15,000
Customer lists	10,000
Goodwill	29,478
Property, plant, & equipment	16,556
Right of use asset	10,644
Other assets	12,450
Total assets acquired	$	94,128

Liabilities
Non-interest bearing liabilities	$	(14,050)
Interest bearing liabilities	(3,430)
Deferred tax liabilities	(5,743)
Total liabilities assumed	(23,223)
Net assets acquired	$	70,905

The goodwill is recorded in the Compound Semiconductor segment and is attributed to the workforce acquired as part of the transaction. The goodwill is non-deductible for income tax purposes. Technology is being amortized with a weighted average

remaining life of approximately 16 years. Customer lists are being amortized with a weighted average remaining life of approximately 14 years. Transaction expenses for the six months ended December 31, 2020 were insignificant.