Mergers and Acquisitions

9 Months Ended

Mar. 30, 2013

Mergers and Acquisitions

Mergers and Acquisitions

Note 5. Mergers and Acquisitions

Arieso Ltd. (“Arieso”)

On March 7, 2013 (“Closing Date”), the Company completed the acquisition of Arieso, a privately-held company headquartered in the United Kingdom. Arieso is a provider of location-aware software solutions that enable mobile network operators to boost 2G, 3G and 4G/Long Term evolution (“LTE”) network performance and enrich the mobile subscriber experience.

Arieso brings high-caliber mobile software engineering expertise to the Company to address the rapidly growing deployment of small cells and challenges associated with limited spectrum capacity. Utilized by leading wireless network operators and equipment manufacturers, Arieso’s solutions locate, store and analyze data from billions of mobile connection events that translate into rich intelligence, which help enable mobile operators to optimize network performance, improve customer experience and create new revenue-generating services. Arieso will be integrated in the Company’s Communications Test and Measurement segment (“CommTest”).

The Company acquired all outstanding shares of Arieso for approximately $89.6 million in cash subject to working capital adjustments, including holdback payments of approximately $12.8 million which are reserved for potential breaches of representations and warranties. The holdback payments, minus any deductions for actual or pending claims, will be released more than one year after the Closing Date.

The Company accounted for the transaction in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

The purchase price was allocated as follows (in millions):

Net tangible assets acquired	$	0.5
Intangible assets acquired:
Developed technology	32.8
Customer relationships	14.5
Order backlog	1.4
Goodwill	40.4
Total purchase price	$	89.6

The amounts above are considered preliminary and are subject to change once the Company receives certain information it believes is necessary to finalize its determination of the fair value of assets acquired and liabilities assumed under the acquisition.

The following table summarizes the components of the tangible assets acquired at fair value (in millions):

Cash	$	4.1
Accounts receivable	8.4
Property and equipment	0.6
Accounts payable	(0.3		)
Accrued expenses, net of other assets	(1.4		)
Employee related liabilities	(1.4		)
Deferred revenue	(1.7		)
Deferred tax liabilities, net	(7.8		)
Net tangible assets acquired	$	0.5

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of acquired developed technology, customer relationships and order backlog was determined based on an income approach using the discounted cash flow method. The acquired developed technology and customer relationship intangible assets are being amortized over their estimated useful lives of five years. Order backlog is being amortized over 4 months.

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of Arieso. Goodwill will be assigned to the CommTest segment and is not deductible for tax purposes. Goodwill is not being amortized but is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with authoritative guidance.

In accordance with the authoritative guidance, the Company expensed $1.6 million of acquisition-related costs incurred as Selling, general and administrative expenses in the Company’s Consolidated Statement of Operations for the three and nine months ended March 30, 2013.

The estimated amount of Arieso’s net revenue and net loss (excluding acquisition-related costs), included in the Company’s Consolidated Statement of Operations for three and nine months ended March 30, 2013 was $0.4 million and $2.2 million, respectively. Arieso’s net revenue and earnings disclosed above reflect Management’s best estimate, based on information available at the reporting date.

The following table presents certain unaudited pro forma information for illustrative purposes only, for 2013 and 2012 as if Arieso had been acquired on July 3, 2011. The unaudited estimated pro forma information combines the historical results of Arieso with the Company’s consolidated historical results and includes certain adjustments reflecting the estimated impact of fair value adjustments for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisition taken place on July 3, 2011. Additionally, the pro forma financial information does not include the impact of possible business model changes and does not reflect pro forma adjustments to conform accounting policies between Arieso and the Company. The Company expects to achieve further business synergies, including revenue growth, as a result of the acquisition that are not reflected in the pro forma amounts that follow. As a result, actual results will differ from the unaudited pro forma information presented(in millions):

	Three Months Ended				Nine Months Ended
	March 30,		March 31,		March 30,		March 31,
	2013		2012		2013		2012
Pro forma net revenue	$	406.0	$	407.6	$	1,259.3	$	1,239.9
Pro forma loss from continuing operations, net of tax	31.1		17.6		46.8		33.0

GenComm Co., Ltd. (“GenComm”)

On August 17, 2012, the Company completed the acquisition of Seoul, South Korea-based GenComm, a provider of test and measurement solutions for troubleshooting, installation and maintenance of wireless base stations and repeaters, based in Seoul, South Korea. The Company acquired tangible and intangible assets and assumed liabilities of GenComm for a total purchase price of approximately $15.2 million in cash, including holdback payments of approximately $3.8 million which are reserved for potential breaches of representations and warranties. The holdback payments, minus any deductions for actual or pending claims, will be released more than one year after the closing date. After the closing date, GenComm was integrated in the Company’s CommTest segment.

The Company accounted for the transaction in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

The purchase price was allocated as follows (in millions):

Net tangible assets acquired	$	5.9
Intangible assets acquired:
Developed technology	3.2
Customer relationships	0.2
Order backlog	0.2
Goodwill	5.7
Total purchase price	$	15.2

The following table summarizes the components of the tangible assets acquired at fair value (in millions):

Cash	$	1.9
Accounts receivable	2.3
Inventories	2.4
Property and equipment	2.9
Tax liabilities, net	(1.7		)
Employee related liabilities	(1.5		)
Other assets and liabilities, net	(0.4		)
Net tangible assets acquired	$	5.9

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of acquired developed technology, customer relationships and order backlog was determined based on an income approach using the discounted cash flow method. The acquired developed technology and customer relationship intangible assets are being amortized over their estimated useful lives of four years. Order backlog was fully amortized as of September 29, 2012.

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of GenComm. Goodwill has been assigned to the CommTest segment and is not deductible for tax purposes. Goodwill is not being amortized but is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with authoritative guidance.

GenComm’s results of operations have been included in the Company’s consolidated financial statements subsequent to the closing date. Pro forma results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.

Dyaptive Systems Inc. (“Dyaptive”)

In January 2012, the Company completed the acquisition of Dyaptive based in Vancouver, Canada. The Company acquired tangible and intangible assets and assumed liabilities of Dyaptive for a total purchase price of CAD 14.9 million (approximately USD 14.8 million) in cash, including a holdback payment of CAD 2.0 million (approximately USD 2.0 million). The holdback payment of CAD 2.0 million (approximately USD 2.0 million) was made during the three months ended December 29, 2012.

Dyaptive is a provider of wireless laboratory test tools for base station and network load simulators. The Company acquired Dyaptive to strengthen its laboratory product portfolio and to offer field service and production test tools that complement its current products. After the closing date, Dyaptive was integrated in the Company’s CommTest segment.

The Company accounted for the transaction in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

The purchase price was allocated as follows (in millions, in USD):

Net tangible assets acquired	$	3.4
Intangible assets acquired:
Developed technology	6.2
Customer relationships	2.3
Others	0.9
Goodwill	2.0
Total purchase price	$	14.8

The following table summarizes the components of the tangible assets acquired and liabilities assumed at fair value (in millions):

Cash	$	4.0
Accounts receivable	0.9
Inventories	0.8
Property and equipment	0.5
Accounts payable	(0.2		)
Deferred revenue	(0.3		)
Employee related liabilities	(2.3		)
Net tangible assets acquired	$	3.4

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of acquired developed technology and customer relationships was determined based on an income approach using the discounted cash flow method. The acquired developed technology and customer relationship intangible assets are being amortized over their estimated useful lives of four years.

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of Dyaptive. Goodwill has been assigned to the CommTest segment and is not deductible for tax purposes. Goodwill is not being amortized but is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with authoritative guidance.

Dyaptive’s results of operations have been included in the Company’s consolidated financial statements subsequent to the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.