Hypercom Corporation Annual Report - CiteSeer

The purchase price consisted of the following (dollars in thousands):
Cash paid to purchase TeT shares $ 120,000
Cash paid for working capital and assumed debt 23,611
Transaction costs and expenses 3,827
Working capital adjustment 3,086
Total purchase price $ 150,524
On December 18, 2009, the Company agreed to settle amounts owed under the TeT acquisition agreement for a cash payment
of approximately $4.1 million. The Company included $3.1 million as part of the purchase price and $1.0 million of professional fees
for accounting and tax services provided to Thales had been expensed as incurred in 2008. On December 28, 2009, the Company paid
$2.1 million of the settlement amount and the remaining $2.0 million was paid on January 8, 2010.
The acquisition was accounted for as a purchase business combination and accordingly, the results of TeT’s operations are
included in the Company’s consolidated results from the date of the acquisition.
Under the purchase method of accounting, the total estimated purchase price as shown in the table above is allocated to TeT’s
tangible and intangible assets acquired and liabilities assumed. The excess of the purchase price over the net tangible and intangible
assets is recorded as goodwill, which will not be deductible for tax purposes.
The purchase price allocation is as followed (dollars in thousands):
Cash $ 21,865
Accounts receivable 39,072
Inventory 9,023
Property, plant and equipment 5,679
Other assets 13,191
Amortizable intangible assets:
Customer relationships 66,350
Unpatented technology 5,688
Trademarks, trade names 2,127
Total assets 162,995
Deferred revenue (6,904 )
Other current liabilities (66,047 )
Net deferred tax liabilities (20,634 )
Non current liabilities (2,916 )
Total liabilities (96,501 )
Fair value of tangible and intangible assets acquired, net of liabilities assumed 66,494
Goodwill 84,030
Total purchase price $ 150,524
Intangible Assets. TeT’s customer relationships are represented through a distribution network of banks, distributors and
retailers through which TeT sells the majority of its products and services. The Company expects to amortize the fair value of these
assets over an average estimated life of five to ten years.
Supplier relationships represent third party manufacturing relationships through which the majority of TeT products are
produced. The Company expects to amortize the fair value of these assets over an average estimated life of four years.
Product technology includes TeT products, principally the Artema product line. TeT technology and products are designed for
hardware, software, solutions and services, serving the European markets. The Company expects to amortize the developed and core
technology and patents over an average estimated life of two years.
The fair value of intangible assets was determined using an income approach, based on discussions with TeT management and
a review of certain transaction-related documents and forecasts prepared by the Company and TeT management. The rate utilized to
discount net cash flows to their present values is 19%. This discount rate was determined after consideration of the Company’s
weighted average cost of capital specific to this transaction and the assets being purchased.
Estimated useful lives for the intangible assets were based on historical experience with technology life cycles, product
roadmaps, branding strategy, historical and projected maintenance renewal rates, historical treatment of the Company’s acquisition-
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