Business Acquisitions

2016 Acquisition

On January 5, 2016, the Company completed the acquisition of all of the membership interests of Aesynt pursuant to a securities purchase agreement by and among the Company and Aesynt Holding Coöperatief U.A. for total cash consideration of $271.5 million, net of cash on hand at signing of $8.2 million. Aesynt is a provider of automated medication management systems, including central pharmacy dispensing robots with storage solutions, medication storage and dispensing carts and cabinets, I.V. sterile preparation robotics and software, including software related to medication management.

The Company accounted for the purchase of Aesynt 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 following table represents the preliminary estimated allocation of the purchase price to the assets acquired and the liabilities assumed by the Company, reconciled to the purchase price transferred included in the Company's Condensed Consolidated Balance Sheet:



	(In thousands)
Cash	$	8,164
Accounts receivable	44,412
Inventory	20,111
Other current assets	4,381
Total current assets	77,068
Property and equipment	10,389
Intangible assets	123,700
Goodwill	165,618
Other non-current assets	968
Total assets	377,743
Current liabilities	26,132
Deferred revenue, net	25,631
Non-current deferred tax liabilities	43,927
Other non-current liabilities	2,431
Total liabilities	98,121
Total purchase price	279,622
Total purchase price, net of cash received	$	271,458

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of Aesynt. The Aesynt acquisition created the broadest product portfolio in the industry with significant offerings in automated dispensing systems, central pharmacy robotics, IV robotics and enterprise analytics. Goodwill has been assigned to the Automation & Analytics 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. During the three months ended June 30, 2016 the Company adjusted the preliminary value assigned to goodwill by $0.8 million to reflect measurement period adjustments related to account receivable and current liabilities of $0.5 million and $0.3 million, respectively.

Identifiable intangible assets (preliminary) acquired and their respective estimated remaining useful lives over which each asset will be amortized areas are as follows:



	Fair value		Weighted average useful life
	(In thousands)		(In years)
Customer relationships	$	58,200	14-16
Developed technology	38,800		8
Backlog	20,200		1-3
In-process research and development ("IPR&D") ⁽¹⁾	3,900		-
Non-compete	1,800		3
Trade names	800		1
Total purchased intangible assets	$	123,700

⁽¹⁾The amortization of the in-process R&D assets begin when the in-process R&D projects are complete.

Customer relationships represent the fair value of the underlying relationships and agreements with Aesynt’s customers, acquired developed technology represents the fair value of Aesynt products that have reached technological feasibility and were part of Aesynt’s product offerings at the date of acquisition, backlog represents the fair value of sales order backlog at the date of acquisition, non-compete intangible asset represents the fair value of non-compete agreements with former key members of Aesynt's management, and trade name represents the fair value of brand and name recognition associated with the marketing of Aesynt’s products and services. In-process research and development ("IPR&D") represents the fair value of incomplete Aesynt research and development projects that had not reached technological feasibility as of the date of acquisition. Incremental costs incurred for those projects are expensed as incurred in research and development.

The fair value of trade names, acquired developed technology, and acquired IPR&D was determined based on an income approach using the relief-from-royalty method at the royalty rates of 0.5%, 4% to 8% and 12.5%, respectively. The fair value of customer relationships, backlog, and non-compete intangible assets were determined based on an income approach using the discounted cash flow method, at the discounted rates of 13%, 10% and 13%, respectively. The intangible assets, except customer relationship and IPR&D, are being amortized over their estimated useful lives using the straight line method of amortization. The customer relationship intangible asset is being amortized using a double-declining method of amortization as such method better represents the economic benefits to be obtained. In accordance with authoritative guidance, the IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts. IPR&D is tested for impairment during the period it is considered an indefinite lived asset. IPR&D related projects are expected to be completed in two to three years. As of June 30, 2016, none of the IPR&D projects has been completed, and they have progressed as previously estimated.

The Company incurred approximately $8.0 million in acquisition-related costs related to the Aesynt acquisition of which $2.9 million and $5.1 million was recognized in three and six months ended December 31, 2015 and June 30, 2016, respectively. These costs are included in selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations.

Revenues and losses from operations since the acquisition date through June 30, 2016 for Aesynt were $82.0 million and $(20.2) million, respectively. Losses from operations includes the amortization of intangible assets of $14.0 million for the period presented.

Pro forma financial information for 2016 and 2015 acquisitions

The following table presents certain unaudited pro forma information for illustrative purposes only, for the six months ended June 30, 2016 and 2015 as if Aesynt had been acquired on January 1, 2015. The pro forma information is not indicative of what would have occurred had the acquisitions taken place on January 1, 2015. The unaudited pro forma information combines the historical results of the acquisitions 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 adjustments include the impact of fair value adjustment related to deferred revenue, inventory fair value adjustment, amortization of intangible assets, stock-based compensation expense, interest expense and amortization of deferred issuance cost, and certain classification to conform to Omnicell's accounting policies.



	Six months ended June 30,
	2016				2015
	(In thousands, except per share data)
Pro forma net revenues	$	343,911		$	318,464
Pro forma net loss	$	(1,537	)	$	(764	)
Pro forma net loss per share basic	$	(0.04	)	$	(0.02	)
Pro forma net loss per share diluted	$	(0.04	)	$	(0.02	)

2015 Acquisitions

On April 21, 2015, the Company completed the acquisition of Mach4 Automatisierungstechnik GmbH ("Mach4"), a privately held German limited liability company with its registered office in Bochum, Germany, pursuant to a share purchase agreement (the “Mach4 Agreement”), under which Omnicell International, Inc., a wholly-owned subsidiary of Omnicell Inc., purchased the entire issued share capital of Mach4. Pursuant to the terms of Mach4 Agreement, the Company paid approximately $17.3 million in cash, of which $2.7 million was placed in an escrow fund to be distributed to Mach4's former stockholders within 18 months after the closing date of the transaction, subject to indemnification and other claims the Company may make.

On April 30, 2015, the Company completed the acquisition of Avantec Healthcare Limited ("Avantec"), the privately-held distributor of Omnicell’s products in the United Kingdom, pursuant to a share purchase agreement (the "Avantec Agreement"), wherein the Company acquired the remaining 85% of issued and outstanding ordinary shares of Avantec not previously owned by the Company. Pursuant to the terms of the Avantec Agreement, the Company agreed to pay $12.0 million in cash and potential earn-out payments of up to $3.0 million payable after December 31, 2015 and an additional $3.0 million payable after December 31, 2016, based on future bookings. The fair value of these potential earn-out payments as of the acquisition date was $5.6 million. Pursuant to the terms of the Avantec Agreement, the Company retained $1.8 million of the purchase consideration to be held for settlement of any future indemnification claims within the 18 month period following the closing of the transaction that the Company may make following the closing of the transaction. The fair value of the contingent consideration liability related to Avantec is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of this obligation are recorded as income or expense within other expense in our condensed consolidated statements of operation. The significant unobservable inputs used in the fair value measurement of the contingent consideration are the achievement of booking targets and the discount rate. Significant increases or decreases in any of those inputs in isolation would result in a significantly lower or higher fair value measurement. During the three months ended March 31, 2016, the Company paid a $3.0 million earn-out payment which was due after December 31, 2015 based on the achievement of certain metrics set forth in the Avantec Agreement.

The Company accounted for the acquisitions above 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 respective acquisition dates. The purchase price allocations are subject to certain post-closing working capital adjustments for the acquired current assets and current liabilities of both acquisitions at their respective acquisition dates. The total consideration and the allocation of consideration to the individual net assets is preliminary, as there are remaining uncertainties to be resolved, including the settlement of the final net working capital adjustment for each.

The following table represents the allocation of the purchase price to the assets acquired and the liabilities assumed by the Company as part of each 2015 acquisition:



	Mach4		Avantec		Total
	(In thousands)
Cash	$	397	$	3,392	$	3,789
Accounts receivable	3,743		3,607		7,350
Inventory	3,580		1,428		5,008
Deferred tax assets and other current assets	368		89		457
Total current assets	8,088		8,516		16,604
Property and equipment	463		—		463
Intangibles	7,710		6,341		14,051
Goodwill	10,591		15,606		26,197
Other non-current assets	52		—		52
Total assets	26,904		30,463		57,367
Current liabilities	3,684		4,125		7,809
Non-current deferred tax liabilities	2,564		1,269		3,833
Deferred service revenue and gross profit	2,314		928		3,242
Other non-current liabilities	1,056		—		1,056
Total purchase price	17,286		24,141		41,427
Total purchase price, net of cash received	$	16,889	$	20,749	$	37,638

Intangible assets acquired and their respective estimated remaining useful lives over which each asset will be amortized are as follows:



	Mach4			Avantec
	Fair value		Weighted average useful life	Fair value		Weighted average useful life
	(In thousands)		(In years)	(In thousands)		(In years)
Developed technology	$	3,290	8	$	—	—
Trade name	850		6	92		2
Customer relationships	3,570		10	5,834		12
Backlog	—		—	415		2
Total purchased intangible assets	$	7,710		$	6,341

Total revenues for Mach4 and Avantec for the six months ended June 30, 2016 were $9.8 million and $5.1 million, respectively. For the corresponding period, total operating losses for Mach4 was $3.0 million and total operating income for Avantec was $0.9 million. The operating loses/income for these entities included the amortization of intangible asset of $0.8 million and $0.5 million for Mach4 and Avantec, respectively.

Pro forma results of operations for these acquisitions have not been presented because they are not material to the consolidated results of operations, either individually or in aggregate.