Acquisitions

On October 26, 2016, we completed the acquisition of all the outstanding shares of Mtelligence Corporation (“Mtelligence”), a California-based provider of predictive and prescriptive maintenance software and related services used to optimize asset performance, for total cash consideration of $37.4 million. The purchase price consisted of $31.9 million of cash paid at closing and up to an additional $5.5 million to be held back until April 2018 as security for certain obligations of the Sellers.

In August 2016, we acquired certain technology and trademarks for total cash consideration of $6.0 million. The purchase price consisted of $5.4 million of cash paid at closing and up to an additional $0.6 million to be paid in August 2017. The acquisition met the definition of a business combination as it contained inputs and processes that are capable of being operated as a business. The preliminary allocation of the purchase price as of September 30, 2016 allocated $4.0 million to developed technology and $2.0 million to goodwill. The fair value of the developed technology of $4.0 million was determined using the replacement cost approach. The developed technology is being amortized on a straight-line basis over its estimated useful life of 6 years. The acquisition is treated as an asset purchase for tax purposes and accordingly, the goodwill resulting from the acquisition is expected to be deductible.

Fidelis Group, LLC

In June 2016, we completed the acquisition of all the outstanding shares of Fidelis Group, LLC ("Fidelis"), a provider of asset reliability software used to predict and optimize asset performance. The purchase price consisted of $8.0 million of cash paid at closing and up to an additional $2.0 million to be paid in December 2017.

A preliminary allocation of the purchase price is as follows. The valuation of the net assets acquired and the deferred tax liabilities, including adjustments identified subsequent to the acquisition date, are considered preliminary as of September 30, 2016.



	Amount
	(Dollars in Thousands)
Tangible assets acquired, net	$	65
Identifiable intangible assets:
Developed technology	1,272
Customer relationships	753
In-process research and development	3,097

Goodwill	6,706
Deferred tax liabilities, net	(1,893		)
Total assets acquired	$	10,000

We used the income approach to determine the values of the identifiable intangible assets. The weighted-average discount rate (or rate of return) used to determine the value of the Fidelis intangible assets was 18% and the effective tax rate used was 34%. The values of the developed technology, in-process research and development and customer relationships are being amortized on a straight-line basis over their estimated useful lives of 10 years, 11 years and 8 years, respectively. The in-process research and development will begin amortization upon completion, which is expected in fiscal 2017.

The goodwill, which is not deductible for tax purposes, reflects the value of the assembled workforce and the company-specific synergies we expect to realize by selling Fidelis products and services to our existing customers. The results of operations of Fidelis have been included prospectively in our results of operations since the date of acquisition.