4. Acquisitions

Acquisitions Completed in Fiscal Year 2018

Acquisition of BioSpeciMan

On April 20, 2018, the Company acquired BioSpeciMan Corporation (“BioSpeciMan”), a Canadian provider of storage services for biological sample materials. BioSpeciMan, founded in 2002, provides temperature controlled biological sample storage services to an attractive mix of pharma, biotech and contract lab customers. This acquisition is expected to expand customer relationships and geographic reach within its growing sample management storage services business in the Brooks Life Sciences segment. The total cash payment made by the Company was $5.2 million, net of cash acquired and subject to working capital adjustments.

The Company allocated the purchase price of $5.2 million based on the fair value of the assets and liabilities acquired as of the acquisition date, which included $0.3 million of accounts receivable, $2.6 million of customer relationships, $2.7 million of goodwill and $0.7 million of assumed liabilities. The Company applied the excess earnings method, a variation of the income approach to determine the fair value of the customer relationship intangible asset. The purchase price allocation was based on a preliminary valuation which is subject to further adjustments within the measurement period when additional information becomes available. The goodwill from this acquisition is reported within the Brooks Life Sciences segment and is not tax deductible.

At the acquisition date, a cash payment of $0.5 million was held back for potential working capital adjustments and the sellers' satisfaction of general representations and warranties. These holdback payments were ascribed to the purchase price.

The operating results of the acquisition have been reflected in the results of operations for the Brooks Life Sciences segment from the date of the acquisition. The Company did not present a pro forma information summary for its consolidated results of operations for the three and nine months ended June 30, 2018 and 2017 as if the acquisition of BioSpeciMan occurred on October 1, 2016 because such results were immaterial.

During the three months ended June 30, 2018, the Company incurred $0.2 million in transaction costs related to the BioSpeciMan acquisition. The transaction costs were recorded in "Selling, general and administrative" expenses within the accompanying unaudited Consolidated Statements of Operations.

Acquisition of Tec-Sem

On April 6, 2018, the Company acquired approximately 93% of the outstanding capital stock of Tec-Sem Group AG (“Tec-Sem”), a Switzerland-based manufacturer of semiconductor fabrication automation equipment with a focus on reticle management. The total cash payment made by the Company as of June 30, 2018 was $12.8 million, net of cash acquired and subject to working capital adjustments. The Company expects to acquire the remaining 7% noncontrolling interest upon the completion of certain procedural steps. The acquisition of Tec-Sem expands the Company’s contamination control solutions business within the Brooks Semiconductor Solutions Group segment.

The preliminary amounts recorded were as follows (in thousands):


	Fair Value of Assets and Liabilities
Accounts receivable (approximates contractual value)	$	988
Inventories		4,297
Prepaid expenses and other current assets		4,038
Property, plant and equipment		85
Intangible assets		10,694
Goodwill		7,573
Accounts payable		(1,049)
Accrued liabilities		(6,962)
Deferred tax liabilities		(772)
Accrued pension liability		(3,328)
Noncontrolling interest		(987)
Total purchase price, net of cash acquired	$	14,577

The Company applied variations of the income approach to estimate the fair values of the intangibles assets acquired. The identifiable intangible assets include completed technology (excess earnings method) of $8.4 million with a useful life of 10 years, backlog (excess earnings method) of $1.6 million with a useful life of 1 year, and customer relationships (distributor method) of $0.7 million with a useful life of 9 years. The intangible assets acquired are amortized over the total weighted average period of 8.6 years using methods that approximate the pattern in which the economic benefits are expected to be realized.

Goodwill of $7.6 million largely reflects the potential synergies and expansion of technical capabilities to the Company's existing contamination control solutions business. The goodwill from this acquisition is reported within the Brooks Semiconductor Solutions Group segment and is not tax deductible.

As part of the acquisition, the Company assumed all the assets and liabilities of Tec-Sem’s Swiss defined benefit plan, which covered substantially all its full-time employees. At acquisition date, the plan was fully funded for each employee’s pension contribution plus an expected rate of return equal to the statutory discount rate. Total plan assets were $6.2 million at acquisition date. The Company recorded an additional liability of $3.3 million for the unfunded projected benefit obligation related to each plan participant’s future services. The total liability for this plan is $9.5 million.

The fair value of the Company’s noncontrolling interest in Tec-Sem represents the expected amount to be settled in cash upon acquisition of the remaining 7% interest.

The Company reports the results of operations for Tec-Sem in the Brooks Semiconductor Solutions Group segment starting from the acquisition date. The revenues and net loss from Tec-Sem included in the Company's consolidated results for the three months ended June 30, 2018 were $4.3 million and $1.6 million, respectively. During the three months ended June 30, 2018, the net loss included $0.7 million related to the step-up in value of the acquired inventories and $1.0 million related to amortization expense of acquired intangible assets. During the three months ended June 30, 2018, the Company incurred $0.1 million in transaction costs related to the Tec-Sem acquisition. Net loss attributable to noncontrolling interest for both the three and nine months ended June 30, 2018 was $0.1 million which represents the 7% minority interest in Tec-Sem.

The escrow at closing had a balance of $2.6 million which consisted of $1.8 million related to potential working capital adjustments and the sellers' satisfaction of general representations and warranties. The remaining $0.8 million of the escrow balance is related to a performance obligation that the Company assumed at the acquisition date for the transfer of non-core wafer stocker technology to an unrelated third party. Upon successful delivery of such technology, the Company expects to collect a portion of the $0.8 million which will represent reimbursement of costs incurred to complete development.

The Company did not present a pro forma information summary for its consolidated results of operations for the three and nine months ended June 30, 2018 and 2017 as if the acquisition of Tec-Sem occurred on October 1, 2016 because such results were immaterial.

Acquisition of 4titude Limited

On October 5, 2017, the Company acquired all the outstanding capital stock of 4titude Limited (“4titude”), a U.K.-based manufacturer of scientific consumables for biological sample materials used in a variety of genomic and DNA analytical applications. The acquisition of 4titude will expand the Company’s existing offerings of consumables and instruments within the Brooks Life Sciences segment. The aggregate purchase price of $65.1 million, net of cash acquired, consisted primarily of a cash payment of $64.8 million subject to working capital adjustments and the assumption of the seller’s liabilities of $0.4 million.

The Company used a market participant approach to record the assets acquired and liabilities assumed in the 4titude acquisition as follows (in thousands):


	Fair Value of
	Assets and
	Liabilities
Accounts receivable (approximates contractual value)	$	1,581
Inventories		2,667
Prepaid expenses and other current assets		140
Property, plant and equipment		1,555
Intangible assets		27,212
Goodwill		38,185
Accounts payable		(286)
Accrued liabilities		(845)
Deferred tax liabilities		(5,090)
Total purchase price, net of cash acquired	$	65,119

The Company applied variations of the income approach to estimate the fair values of the intangibles assets acquired. The identified intangible assets include customer relationships (excess earnings method) of $21.4 million with a useful life of 10 years, completed technology (relief from royalty method) of $5.2 million with a useful life of 13 years, backlog (excess earnings method) of $0.4 million with a useful life of 1 year and trademarks (excess earnings method) of $0.2 million with a useful life of 1 year. The intangible assets acquired are amortized over the total weighted average period of 10.4 years using methods that approximate the pattern in which the economic benefits are expected to be realized.

At the closing of the acquisition of 4titude, a cash payment of $0.4 million was placed into escrow which was ascribed to the purchase price. The escrow was related to potential working capital adjustments and the sellers’ satisfaction of general representations and warranties. The escrow balance was $0.2 million as of June 30, 2018.

Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired and has been assigned to the Brooks Life Sciences segment. Goodwill is primarily the result of expected synergies from combining the operations of 4titude with the Company’s operations and is not deductible for tax purposes.

The operating results of 4titude have been reflected in the results of operations for the Brooks Life Sciences segment from the date of the acquisition, which included approximately nine months of activity during the first three quarters of fiscal year 2018. During the three months ended June 30, 2018, revenue and net income from 4titude recognized in the Company’s results of operations were $3.9 million and less than $0.1 million, respectively. During the nine months ended June 30, 2018, revenue and net loss from 4titude recognized in the Company’s results of operations were $11.6 million and $1.2 million, respectively. During the three and nine months ended June 30, 2018, the net income or loss included recurring charges of $1.0 million and $3.1 million, respectively, related to amortization expense of acquired intangible assets. During the nine months ended June 30, 2018, the net loss also included non-recurring charges of $1.2 million related to the step-up in value of the acquired inventories. There was no such charge during the three months ended June 30, 2018.

During the nine months ended June 30, 2018, the Company incurred $1.0 million in non-recurring transaction costs with respect to the 4titude acquisition, which were recorded in "Selling, general and administrative" expenses within the accompanying unaudited Consolidated Statements of Operations. There were no transaction costs related to the 4titude acquisition during the three months ended June 30, 2018.

The Company did not present a pro forma information summary for its consolidated results of operations for the three and nine months ended June 30, 2018 and 2017 as if the acquisition of 4titude occurred on October 1, 2016 because such results were immaterial.

Acquisitions Completed in Fiscal Year 2017

Acquisition of Pacific Bio-Material Management, Inc. and Novare, LLC

On July 5, 2017, the Company entered into an asset purchase agreement with Pacific Bio-Material Management, Inc. (“PBMMI”) and Novare, LLC, a wholly owned subsidiary of PBMMI (collectively, the “sellers”), pursuant to which the Company acquired substantially all of the assets and liabilities of the sellers’ business related to providing storage, transportation, management, and cold chain logistics of biological materials. The Company paid to the sellers cash consideration of $34.3 million, net of cash acquired and subject to working capital adjustments.

At the closing of the acquisition of PBMMI, a cash payment of $3.3 million was placed into escrow which was ascribed to the purchase price. The escrow balance of $3.3 million included $2.9 million related to satisfaction of the sellers' indemnification obligations with respect to their representations and warranties and other indemnities, as well as $0.4 million payable to the former owner of Novare as a compensation for a sale of his ownership interest. This escrow arrangement is administered by the Company on behalf of the sellers. As of June 30, 2018, the escrow balance related to satisfaction of the sellers' indemnification obligations was $2.7 million, and the $0.4 million Novare escrow balance had been released.

The operating results of PBMMI have been reflected in the results of operations for the Brooks Life Sciences segment from the date of the acquisition. During the three months ended June 30, 2018, revenue and net income from PBMMI recognized in the Company’s results of operations were $3.2 million and $0.4 million, respectively. During the nine months ended June 30, 2018, revenue and net income from PBMMI recognized in the Company’s results of operations were $8.0 million and $0.3 million, respectively. During the three and nine months ended June 30, 2018, the net income included recurring charges of $0.4 million and $1.2 million, respectively, related to amortization expense of acquired intangible assets. Please refer to Note 3, "Acquisitions" to the Company's consolidated financial statements included in the 2017 Annual Report on Form 10-K for further information on PBMMI acquisition.

Acquisition of Cool Lab, LLC

On November 28, 2016, the Company acquired 100% of the equity of Cool Lab, LLC ("Cool Lab") from BioCision, LLC ("BioCision"). The Company held a 20% equity ownership interest in BioCision prior to the acquisition. The Company used a market participant approach to record the assets acquired and liabilities assumed in the Cool Lab acquisition. The purchase price allocation had been finalized as of June 30, 2018. Please refer to Note 3, “Acquisitions” to the Company’s consolidated financial statements included in the 2017 Annual Report on Form 10-K for further information on this transaction.

The Company recorded a liability of $0.7 million in the purchase price allocation that represented a pre-acquisition contingency incurred on the acquisition date. The obligation is related to a rebate that is due to a particular customer if the annual product sales volume metrics exceed threshold amounts under the provisions of the contract assumed by the Company. Fair value of such liability was determined based on a probability-weighted discounted cash flow model. The carrying amount of the liability was $0.8 million and $0.7 million, respectively, at June 30, 2018 and September 30, 2017.

The operating results of Cool Lab have been reflected in the results of operations for the Brooks Life Sciences segment from the date of the acquisition, which included approximately one month of activity during the first quarter of fiscal year 2017. During the three months ended June 30, 2018, revenue and net income from Cool Lab recognized in the Company’s results of operations were $0.9 million and $0.1 million, respectively. During the nine months ended June 30, 2018, revenue and net loss from Cool Lab recognized in the Company’s results of operations were $2.6 million and $0.1 million, respectively. During the three and nine months ended June 30, 2018, the net income or loss included recurring charges of $0.3 million and $1.1 million, respectively, related to amortization expense of acquired intangible assets.