Acquisition Acquisition

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Acquisition

ACQUISITION

On August 30, 2013, the Company signed a definitive agreement to acquire specific net assets of Discera, Inc. (“Discera”), a private company based in San Jose, California, which qualifies as an acquisition of a business for financial accounting purposes. The acquisition closed on September 9, 2013. The total consideration was approximately $7.1 million, plus $1.1 million assumed liabilities. Of the $7.1 million, $6.1 million was paid upon closing, and approximately $1.0 million was withheld to secure the indemnification obligations from the closing date through September 9, 2014. The objective of the acquisition is to complement and expand Micrel's high performance clock and timing product portfolio, as well as expand its MEMS (micro-electrical mechanical systems) capabilities. The addition of the Discera MEMS product line will also enhance Micrel's MEMS presence, intellectual property and capability. The Company has included the financial results of Discera in its condensed consolidated financial statements beginning on the acquisition date. Pro forma financial disclosures are not presented herein as the financial results of this acquisition are considered insignificant.

Recognized amounts of identifiable assets acquired and liabilities assumed

The Company accounted for the transaction using the acquisition method of accounting for business combinations and, accordingly, the consideration has been allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date. For the three months ended September 30, 2013, acquisition costs of $173,000 were expensed as incurred. While the Company uses best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, estimates and assumptions are subject to refinement. The Company’s allocation of the total purchase price is summarized below as of the date of acquisition (in thousands):

Accounts receivable	$	677
Inventories	1,141
Other assets	24
Property, plant and equipment	1,165
Developed technology	940
Customer relationships	800
Trademarks	100
Non-competition agreements	40
In-process research and development	890
Goodwill	2,425
Liabilities	(1,090		)
Total purchase consideration	$	7,112

Identifiable intangible assets

Fair values for the acquired developed technology, customer relationships, trademarks and non-competition agreements and in-process research and development (“IPR&D”) were determined based on various methods including excess earnings method, relief from royalty method and with-or-without method. The values of the developed technology and customer relationships will be amortized over an estimated useful life of 10 years. The non-competition agreements will be amortized over a one-year period. The values of trademarks will be amortized over 2 years.

The fair value of the acquired IPR&D was determined through estimates and valuation techniques based on the terms and details of the acquisition. As it was determined that the underlying projects had not reached technological feasibility at the date of acquisition, the amounts allocated to IPR&D will not be expensed until completion of the related projects. Upon the completion of development for each project, the acquired IPR&D will be amortized over its useful life.

The following table summarizes the identifiable intangible assets acquired as part of the acquisition (in thousands):

	Fair Value as of Acquisition Date September 9, 2013		Accumulated Amortization as of September 30, 2013			Net Carrying Amount as of September 30, 2013
Developed technology	$	940	$	(10	)	$	930
Customer relationships	800		(13		)	787
Trademarks	100		(6		)	94
Non-competition agreements	40		(3		)	37
In-process research and development	890		—			890
Total	$	2,770	$	(32	)	$	2,738

Goodwill

Goodwill represents the excess of the estimated acquisition consideration over the fair value of the underlying net tangible and intangible assets. The Company’s primary reasons for the Discera acquisition were to complement Micrel's high performance clock and timing products, as well as expand its MEMS capabilities. The addition of the Discera MEMS product line will also enhance Micrel's MEMS presence and capability. Furthermore, the Discera technical team gives Micrel the intellectual property and technical know-how to pursue not only MEMS-based timing devices but also other types of MEMS devices. These significant factors were the basis for the recognition of goodwill.