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2013 Purchase Price Allocation Study

October 2014

Table of Contents

Page

Executive Summary 2

2013 Observations and Results 9

Appendices 28

2012 Summary Results 29

Annual Comparison 39

About Houlihan Lokey 45

Disclaimers 47

2013 Purchase Price Allocation Study

1

Executive Summary

Introduction Executive Summary

3

The United States economy showed continued improvement throughout 2013. Unemployment at year end fell 1.2% to 6.7%, which is the lowest point since October 2008. Job growth averaged 182,000 jobs per month, similar to the 183,000 rate in 2012. Inflation rose slightly less than the prior three years at a moderate 1.5%.

During the fourth quarter of 2013, consumer debt rose by $241 billion to a total of $11.52 trillion, the biggest quarterly gain since 2007. This rise in debt shows improved consumer confidence and spending. A report by the St. Louis Federal Reserve Bank shows average consumer sentiment reached its highest point since 2007. Fears surrounded the Affordable Care Act beginning in 2014; however, the economic impact is not predicted to be felt until 2017. U.S. GDP grew by approximately $555 billion, or a 2% overall increase from 2012. In addition, the stock markets showed strong gains throughout the year with the S&P 500 rising by 30% and the Nasdaq by 38%.

Houlihan Lokey has completed its 13th annual Purchase Price Allocation Study (the “2013 Study”) by reviewing public filings for 1,223 completed transactions in 2013 and summarizing the results for certain transactions. The 2013 Study provides statistics, other annual data and a comparison to certain 2012 results (the “2012 Study”) and 2011 results (the “2011 Study”).

For more information regarding this study, please contact your Houlihan Lokey representative or one of the following individuals:

Mike Giffin Managing Director 214.220.8485 [email protected] Michael DeLuke Director 214.220.8487 [email protected]

Sources: Bloomberg and FederalReserve.gov

Screening Criteria and Methodology Executive Summary

4

The universe of transactions initially considered in the 2013 Study was obtained from S&P Capital IQ using the following search criteria:

Transaction closed in 2013;

Acquirer was a U.S. publicly traded company;

Ownership percentage sought by acquirer was 50% or greater; and

Base equity purchase price was disclosed.

The initial sample consisted of 1,223 transactions. We reviewed public filings for each company in the initial sample with the objective of finding detailed disclosures regarding purchase consideration (PC), identifiable intangible asset fair values and goodwill. Sufficient disclosures were provided for 422 transactions, which represented approximately 35% of the initial sample.

These 422 transactions formed the basis of the 2013 Study. Note that where a transaction allocated zero value to an asset category, it was treated as a non-meaningful figure and excluded from the low, high, median and mean.

Screening Criteria and Methodology (cont.) Executive Summary

5

The primary objective of the 2013 Study was to review the amount of PC allocated to tangible assets, identifiable intangible assets and goodwill. In addition, the 2013 Study marks the third year contingent consideration (CC) recorded by acquirers, a component of PC per Generally Accepted Accounting Principles (GAAP), has been analyzed. PC is defined as the sum of the purchase price paid and liabilities assumed in connection with a business combination. PC is equivalent to the fair value of the “total assets” of the target.

For the 2013 Study, identifiable intangible assets were classified into five categories, including:

Developed technology (including patents);

In-process research and development (IPR&D);

Customer-related assets (including backlog, customer contracts and customer relationships);

Trademarks and trade names (including domain names); and

Other (including non-compete agreements, licenses, contracts and core deposits, among others).

Screening Criteria and Methodology (cont.) Executive Summary

6

In addition to summarizing the allocation data according to intangible asset classes, we also conducted studies based on industry, deal size (as defined by PC) and lifing characteristics.

With respect to lifing characteristics, we classified the summarized data for intangibles as either definite- or indefinite-lived assets. It should be noted that the indefinite-lived assets exclude IPR&D, which must be recorded as such per ASC 805. IPR&D were

considered as definite-lived assets in the 2013 Study. It should be noted that sufficient data was not available in the Business Services, MSE, Real Estate, Lodging & Leisure, and

Transportation industries due to the small number of transactions disclosed in 2013.

With respect to industry, we classified the 2013 transactions into 13 categories: Aerospace, Defense & Government (ADG) Business Services Consumer, Food & Retail (CFR) Energy Financial Institutions Healthcare Industrials Infrastructure Services & Materials (ISM) Media, Sports & Entertainment (MSE) Real Estate, Lodging & Leisure (Real Estate) Technology Telecom Transportation & Logistics (Transportation)

With respect to deal size, we stratified the allocation results across seven categories (PC, $ in millions): > $5,000 $1,000–$5,000 $500–$1,000 $250–$500 $100–$250 $50–$100 < $50

Allocation of Intangible Assets and Goodwill Executive Summary

7

Summary Allocation Percentages 2013 Study

* Purchase consideration represents the equivalent to total assets, including equity, debt and non-interest bearing liabilities assumed, as applicable. ** Includes transactions done by U.S. listed public company acquirers completed in 2013. *** Negative goodwill is generally indicative of a bargain purchase transaction.

$ in millions Purchase Consideration Intangible Assets, % of PC Goodwill, % of PC

Count Median Mean Low High Median Mean Low High Median Mean

All Industries 422 $63 $607 0% 100% 31% 34% 0% 99% 35% 38%

Aerospace, Defense & Government 6 314 549 3% 41% 20% 19% 14% 71% 33% 36%

Consumer, Food & Retail 71 75 935 1% 98% 34% 33% -1% *** 92% 27% 31%

Energy 12 82 719 2% 86% 31% 35% 1% 58% 30% 29%

Financial Institutions 55 301 1,454 0% 90% 2% 13% -9% *** 74% 5% 15%

Healthcare 80 45 616 2% 100% 43% 43% 1% 82% 36% 36%

Industrials 62 41 302 1% 100% 36% 37% 5% 99% 42% 41%

Infrastructure Services & Materials 18 132 510 3% 74% 21% 24% 7% 53% 21% 27%

Technology 111 26 183 1% 100% 33% 36% -7% *** 90% 55% 49%

Telecom 7 23 47 34% 100% 49% 62% 17% 49% 23% 31%

Contingent Consideration Executive Summary

8

ASC 805 requires that CC (i.e., an earnout) be included in PC at its fair value.

Similar to 2012, approximately 18% of the transactions in the 2013 Study had CC in the purchase price.

The median fair value of CC in 2013 was $5 million while the mean was $15 million. In 2012, the median fair value was $4 million and the mean was $14 million.

CC represented 21% and 24% of PC when measured on the median and mean, respectively. This increased from 2012, where CC represented 14% and 19% of PC when measured on the median and mean.

Transaction-related contingent compensation and retention bonuses are not included in PC. These employee compensation expense items are generally accounted for under ASC 718.

Summary of Contingent Consideration 2013 Study

$ in millions Count CC PC CC, % of PC

CC All % Median Mean Median Mean Low High Median Mean

All Industries 75 422 18% $5 $15 $32 $107 0% 69% 21% 24%

Aerospace, Defense & Government 1 6 17% 1 1 1 1 69% 69% 69% 69%

Consumer, Food & Retail 6 71 8% 3 9 30 36 4% 51% 14% 18%

Energy 2 12 17% 3 3 37 37 8% 48% 28% 28%

Financial Institutions 4 55 7% 3 6 65 64 1% 58% 17% 23%

Healthcare 28 80 35% 14 27 65 193 0% 59% 23% 23%

Industrials 14 62 23% 2 5 14 92 4% 51% 14% 16%

Technology 19 111 17% 3 10 12 38 3% 68% 24% 30%

Telecom 1 7 14% 1 1 23 23 4% 4% 4% 4%

2013 Observations and Results

Transaction Volume 2013 Observations and Results

10

The number of transactions with sufficient disclosures for analysis decreased 17% year-over-year, from 511 in 2012 to 422 in 2013.

Our initial screening generated a population of 1,223 transactions. Of these deals, 801 transactions were not considered for the following reasons:

Financial statements did not present intangible asset values and/or PC information in a clear, reconcilable format for our purposes.

The general asset and liability segmentation was insufficient for us to determine the nature of the intangible assets acquired.

The number of initial transactions increased 4% year-over-year, from 1,173 in 2012 to 1,223 in 2013.

The number of transactions with sufficient disclosures decreased to 35% in 2013 from 44% in 2012.

Industry Results 2013 Observations and Results

11

Seven of the 13 industries experienced year-over-year decreases in the number of transactions available for the 2013 Study similar to the number of transactions available for the 2012 Study.

On a percentage basis, Energy, Industrials, ADG and Technology recorded the largest decreases at 57%, 37%, 33% and 27%, respectively. Due to limited disclosure, MSE had zero transactions in 2013 as compared to four in 2012.

By transaction volume, Technology recorded the largest decrease, declining by 42 transactions followed by Industrials at 37 transactions.

Energy, ADG, MSE, Financial Institutions, Telecom recorded a decrease in the range of one to 16 transactions.

ISM recorded the largest increase in both percentage and transaction count, up by 50% or six transactions from 2012.

Healthcare and CFR experienced increases of 7% and 6%, respectively. On a volume basis, the two industries increased by five and four transactions, respectively.

When measured across all industries, the median percentage of PC allocated to identifiable intangible assets increased very slightly from 30% in 2012 to 31% in 2013.

ADG, Business Services, MSE, Real Estate, Lodging & Leisure, Telecom, and Transportation & Logistics were the only industries with less than 10 transactions in both the 2012 and 2013 Studies. ADG declined 33% from nine to six transactions, while Business Services remained flat without any qualifying transactions in either year. MSE decreased from four transactions in 2012 to zero in 2013, while Real Estate, Lodging & Leisure remained flat at zero qualifying transactions each year. Telecom declined 13% from eight to seven transactions, and Transportation & Logistics remained flat without any qualifying transactions in either year.

It should be noted that the small number of Business Services, MSE, Real Estate, Lodging & Leisure, and Transportation & Logistics transactions (five or fewer in each industry in 2012 and 2013) skews results, making comparisons generally not meaningful.

Industry Results (cont.) 2013 Observations and Results

12

The median percentage of PC allocated to intangible assets remained relatively flat, increasing from 30% in 2012 to 31% in 2013.

The median percentage of PC allocated to goodwill decreased to 35% in 2013 from 39% in 2012.

The percentage of PC allocated to goodwill increased when measured on a weighted-average basis, from 22% in 2012 to 26% in 2013.

No single industry was a driver in the overall increase to goodwill allocation. ADG and Healthcare represented the highest increase in goodwill allocation at 5.4% and 6.9% respectively year over year.


13

Summary Allocation Percentages 2013 Study

* Purchase consideration represents the equivalent to total assets, including equity, debt and non-interest bearing liabilities assumed, as applicable. ** Includes transactions done by U.S. listed public company acquirers completed in 2013. *** Consumer, Food & Retail, Financial Institutions, and Technology industries contained some bargain purchase transactions.

$ in millions Purchase Consideration Intangible Assets, % of PC Goodwill, % of PC


All Industries 422 $63 $607 0% 100% 31% 34% 0% 99% 35% 38%

Aerospace, Defense & Government 6 314 549 3% 41% 20% 19% 14% 71% 33% 36%

Consumer, Food & Retail 71 75 935 1% 98% 34% 33% -1% 92% 27% 31%

Energy 12 82 719 2% 86% 31% 35% 1% 58% 30% 29%

Financial Institutions 55 301 1,454 0% 90% 2% 13% -9% 74% 5% 15%

Healthcare 80 45 616 2% 100% 43% 43% 1% 82% 36% 36%

Industrials 62 41 302 1% 100% 36% 37% 5% 99% 42% 41%

Infrastructure Services & Materials 18 132 510 3% 74% 21% 24% 7% 53% 21% 27%

Technology 111 26 183 1% 100% 33% 36% -7% 90% 55% 49%

Telecom 7 23 47 34% 100% 49% 62% 17% 49% 23% 31%


14

Similar to the overall results, roughly half of the industries showed only a small change (i.e., 5% or less) in the median amount of PC allocated to identifiable intangible assets compared to 2012.

Telecom recorded the largest percentage increase of 19%, while Technology recorded the largest percentage decrease of 1%.

Summary Allocation Percentages by Industry 2013 vs. 2012

$ in millions

2013 2012 % Chg. 2013 2012 % Chg. 2013 2012 BPS Chg. 2013 2012 BPS Chg.

All Industries 422 511 -17% $63 $66 -5% 31% 30% 2% 35% 39% -4%

Aerospace, Defense & Government 6 9 -33% 314 46 582% 20% 17% 2% 33% 45% -12%

Business Services 0 0 0% NA NA NA NA NA NA NA NA NA

Consumer, Food & Retail 71 67 6% 75 106 -29% 34% 30% 3% 27% 32% -5%

Energy 12 28 -57% 82 190 -57% 31% 19% 13% 30% 28% 3%

Financial Institutions 55 56 -2% 301 374 -20% 2% 1% 0% 5% 6% -1%

Healthcare 80 75 7% 45 80 -43% 43% 40% 4% 36% 42% -6%

Industrials 62 99 -37% 41 46 -10% 36% 27% 9% 42% 36% 6%

Infrastructure Services & Materials 18 12 50% 132 83 60% 21% 22% 0% 21% 28% -7%

Media, Sports & Entertainment 0 4 -100% NA 5 NA NA 34% NA NA 64% NA

Real Estate, Lodging & Leisure 0 0 0% NA NA NA NA NA NA NA NA NA

Technology 111 153 -27% 26 39 -33% 33% 35% -1% 55% 49% 6%

Telecom 7 8 -13% 23 55 -57% 49% 30% 19% 23% 27% -5%

Transportation & Logistics 0 0 0% NA NA NA NA NA NA NA NA NA

Count

Median Results

Purchase Consideration Intangible Assets, % of PC Goodwill, % of PC

Transaction Size 2013 Observations and Results

15

Approximately 71% of the transactions in the 2013 Study had PC below $250 million, which is a decrease from 75% in 2012.

Smaller transactions generally recorded slightly higher allocations to intangible assets and goodwill in 2013.

For transactions with PC below $250 million, intangible assets and goodwill averaged 29% and 41% of PC, respectively. In 2012, the corresponding percentages were 27% and 42%, respectively.

For transactions with PC above $250 million, intangible assets and goodwill averaged 19% and 33% of PC, respectively. In 2012, the corresponding percentages were 23% and 30%, respectively.

The average transaction size decreased from $1,007 million in 2012 to $607 million in 2013, and the median transaction size also decreased from $66 million to $63 million.

Transaction Size (cont.) 2013 Observations and Results

16

Summary Allocation Percentages by Size 2013 Study

Summary Allocation Percentages by Size 2013 vs. 2012

$ in millions Median Results

PC Intangible Assets, % of PC Goodwill, % of PC


All Transactions 422 $63 $607 0% 100% 31% 34% 0% 99% 35% 38%

PC > $5,000 8 $10,426 $15,154 1% 73% 10% 17% 3% 48% 26% 24%

$1,000 < PC < $5,000 39 1,956 2,181 0% 74% 19% 19% 0% 73% 28% 32%

$500 < PC < $1,000 20 747 756 0% 79% 21% 22% 0% 79% 44% 40%

$250 < PC < $500 54 356 351 0% 75% 19% 21% -2% 79% 40% 37%

$100 < PC < $250 61 146 158 0% 96% 21% 22% -9% 83% 42% 39%

$50 < PC < $100 50 66 69 0% 98% 19% 22% 0% 87% 45% 43%

PC < $50 190 12 15 1% 100% 40% 44% 0% 99% 40% 40%

Below $250 71% 27% 29% 42% 41%

Above $250 29% 17% 19% 34% 33%

$ in millions Count Median Goodwill, % of PC

2013 2012 % Chg. 2013 2012 Chg.

All Transactions 422 511 -17% 35% 39% -10%

PC > $5,000 8 17 -53% 26% 22% 17%

$1,000 < PC < $5,000 39 43 -9% 28% 25% 9%

$500 < PC < $1,000 20 44 -55% 44% 31% 43%

$250 < PC < $500 54 48 13% 40% 42% -5%

$100 < PC < $250 61 66 -8% 42% 42% -1%

$50 < PC < $100 50 64 -22% 45% 44% 2%

PC < $50 190 251 -24% 40% 43% -7%

Indefinite-Lived Intangible Assets (cont.) 2013 Observations and Results

17

Indefinite-lived intangible assets accounted for 4% of the total intangible asset value in 2013, as compared to 5% in 2012.

The following are noteworthy transactions with a relatively large portion of intangible assets:

Amgen Inc.’s acquisition of Onyx Pharmaceuticals, Inc. ($9.9 billion of the PC of $13.4 billion)

PVH Corp.’s acquisition of Warnaco Group Inc. ($1.6 billion of the PC of $4.7 billion)

Trademarks and trade names were the most common intangible assets to be considered as indefinite-lived.

In 2013, the number of transactions in the sample that ascribed PC to trademarks and trade names increased to 48% as compared to 41% in 2012.

Acquirers considered the purchased trademarks and trade names to be indefinite-lived assets more frequently in 2013 compared to the prior year (23% in 2013 vs. 21% in 2012). It should be noted that the percentage of trademarks and trade names considered as indefinite-lived assets in 2013 is greater than the amount recorded in 2011 on both a count and percentage basis.

Other intangible assets classified as indefinite-lived included (but are not limited to) license agreements, franchise licenses, artistic-related assets, and capitalized data.

Trademark and Trade Name Lifing Classification 2011 – 2013

2013 2012 2011

Trademarks and Trade Names Count % of Total Count % of Total Count % of Total

All Indefinite-Lived 47 23% 44 21% 48 18%

All Definite-Lived 157 77% 162 78% 203 77%

Mix of Definite- and Indefinite-Lived 0 0% 1 0% 13 5%

Total 204 100% 207 100% 264 100%

Frequently Identified Intangible Assets 2013 Observations and Results

18

Developed technology, IPR&D, customer-related assets, and trademarks and trade names were the most commonly identified intangible assets. Other intangible assets typically included, among others, non-compete agreements, licenses, permits and other contracts or agreements.

Three out of the four categories (developed technology, customer-related assets, and trademarks and trade names) recorded increases in the frequency of identification from 2012 to 2013; whereas, IPR&D recorded a decrease.

With respect to the amount of PC allocated to each of these categories from 2012 to 2013, developed technology and trademarks and trade names remained relatively flat. IPR&D assets increased, while customer-related assets recorded a decrease.

Frequently Identified Intangible Assets 2011 – 2013

2013 2012 2011 2013 2012 2011

Developed Technology 49% 44% 57% 14% 14% 13%

Change 5% -13% 6% 0% 2% -1%

IPR&D 11% 14% 17% 15% 7% 5%

Change -3% -3% 3% 8% 2% -4%

Customer-related Assets 61% 57% 79% 11% 14% 16%

Change 4% -22% 2% -3% -2% 0%

Trademarks and Trade Names 48% 45% 58% 3% 3% 3%

Change 4% -14% 1% 0% 0% -1%

Count, % of Sample Median % of PC

Developed Technology 2013 Observations and Results

19

In the 2013 Study, 207 transactions (49%) allocated PC to developed technology.

The median allocation of PC to developed technology was 15%, while the mean was 23%.

The following are observations for PC allocated to developed technology:

The Technology industry comprises the greatest number of observations (93 with a median of 16%), down from last year of 105 observations with a median of 15%.

The Energy sector’s PC allocated to developed technology increased from a median of 29% in 2012 to 62% in 2013. This increase is mainly due to the limited number of transactions in the Energy sector with developed technology.

Summary of PC Allocated to Developed Technology 2013 Study

$ in millions Count PC Developed Technology, % of PC Goodwill, % of PC

Developed All % Median Mean Low High Median Mean Low High Median Mean

All Industries 207 422 49% $39 $397 0% 100% 15% 23% 1% 90% 45% 44%

Aerospace, Defense & Government 3 6 50% 459 730 2% 7% 2% 4% 14% 41% 29% 28%

Consumer, Food & Retail 24 71 34% 114 642 1% 29% 8% 11% -1% 81% 30% 35%

Energy 2 12 17% 2 2 38% 86% 62% 62% 32% 32% 32% 32%

Financial Institutions 5 55 9% 117 435 5% 49% 11% 18% 1% 63% 32% 32%

Healthcare 46 80 58% 43 729 0% 100% 19% 32% 1% 76% 36% 38%

Industrials 23 62 37% 28 269 2% 97% 8% 21% 19% 68% 50% 45%

Infrastructure Services & Materials 6 18 33% 436 505 3% 35% 4% 11% 20% 43% 34% 33%

Technology 93 111 84% 27 209 0% 100% 16% 22% -7% 90% 55% 49%

Telecom 5 7 71% 23 50 1% 77% 21% 39% 17% 49% 33% 33%

Developed Technology (cont.) 2013 Observations and Results

20

As illustrated below, the percentage of PC allocated to developed technology was widely distributed evenly across the intervals. Of the deals that allocated PC to developed technology, 51% of deals attributed for 15% or less.

Distribution of PC Allocated to Developed Technology 2013 Study

In-Process Research & Development 2013 Observations and Results

21

In the 2013 Study, 45 transactions (11%) allocated PC to IPR&D.

The median allocation of PC to IPR&D was 15%, while the mean was 30%. The large difference between the median and mean is primarily attributable to the small number of transactions where allocations of PC to IPR&D were high.

Summary of PC Allocated to IPR&D 2013 Study

$ in millions Count PC IPR&D, % of PC Goodwill, % of PC

IPR&D All % Median Mean Low High Median Mean Low High Median Mean

All Industries 45 422 11% $138 $724 0% 93% 15% 30% 2% 76% 31% 36%

Aerospace, Defense & Government 0 6 0% NA NA NA NA NA NA NA NA NA NA

Consumer, Food & Retail 2 71 3% 1,848 1,848 2% 7% 5% 5% 21% 52% 36% 36%

Energy 0 12 0% NA NA NA NA NA NA NA NA NA NA

Financial Institutions 0 55 0% NA NA NA NA NA NA NA NA NA NA

Healthcare 24 80 30% 96 830 1% 87% 44% 40% 2% 70% 31% 31%

Industrials 1 62 2% 574 574 9% 9% 9% 9% 65% 65% 65% 65%

Infrastructure Services & Materials 0 18 0% NA NA NA NA NA NA NA NA NA NA

Technology 18 111 16% 139 465 0% 93% 7% 19% 3% 76% 31% 40%

Telecom 0 7 0% NA NA NA NA NA NA NA NA NA NA

In-Process Research & Development (cont.) 2013 Observations and Results

22

As illustrated below, of the deals that allocated PC to IPR&D, 23 deals (51%) allocated 15% or less, while 22 deals (49%) allocated more than 25%.

Distribution of PC Allocated to IPR&D 2013 Study

Trademarks and Trade Names 2013 Observations and Results

23

In the 2013 Study, 204 transactions (48%) allocated PC to trademarks and trade names.

The median allocation of PC to trademarks and trade names was 3%, while the mean was 8%.

Summary of PC Allocated to Trademarks and Trade Names

2013 Study $ in millions Count PC Trademarks and Trade Names, % of PC Goodwill, % of PC

Trademarks and Trade

Names All % Median Mean Low High Median Mean Low High Median Mean

All Industries 204 422 48% $71 $682 0% 97% 3% 8% 0% 90% 38% 39%

Aerospace, Defense & Government 4 6 67% $314 $548 0% 7% 3% 4% 14% 41% 33% 30%

Consumer, Food & Retail 48 71 68% 81 651 0% 97% 10% 16% -1% 55% 21% 25%

Energy 3 12 25% 89 850 1% 13% 1% 5% 9% 53% 32% 31%

Financial Institutions 5 55 9% 1,615 9,016 0% 3% 0% 1% 4% 63% 7% 26%

Healthcare 33 80 41% 55 646 0% 86% 3% 6% 1% 82% 45% 45%

Industrials 37 62 60% 51 413 0% 34% 7% 8% 9% 75% 42% 40%


Technology 60 111 54% 49 243 0% 88% 1% 4% 10% 90% 54% 50%

Telecom 4 7 57% 50 67 0% 10% 1% 3% 22% 49% 43% 38%

Trademarks and Trade Names (cont.) 2013 Observations and Results

24

As illustrated below, of the deals that allocated PC to trademarks and trade names, 120 deals (59%) allocated 5% or less.

Distribution of PC Allocated to Trademarks and Trade Names

2013 Study

Customer-Related Intangible Assets 2013 Observations and Results

25

In the 2013 Study, 259 transactions (61%) allocated PC to customer-related intangibles.

The median allocation of PC to customer-related intangibles was 11%, while the mean was 17%.

Summary of PC Allocated to Customer-Related Intangible Assets

2013 Study

$ in millions Count PC Customer-Related Assets, % of PC Goodwill, % of PCCustomer-

Related Assets All % Median Mean Low High Median Mean Low High Median Mean

All Industries 259 422 61% $63 $731 0% 95% 11% 17% 0% 83% 41% 40%

Aerospace, Defense & Government 6 6 100% 314 549 1% 36% 11% 13% 14% 71% 33% 36%

Consumer, Food & Retail 48 71 68% 114 1,291 0% 62% 13% 15% 0% 66% 27% 29%

Energy 7 12 58% 89 834 4% 57% 26% 28% 1% 58% 29% 28%

Financial Institutions 10 55 18% 90 5,037 0% 90% 16% 30% 1% 57% 20% 26%

Healthcare 42 80 53% 57 566 1% 58% 7% 12% 12% 82% 50% 48%

Industrials 48 62 77% 57 373 0% 95% 18% 22% 5% 75% 43% 41%


Technology 81 111 73% 41 228 0% 66% 9% 13% -7% 83% 53% 47%

Telecom 5 7 71% 52 64 20% 10% 28% 39% 17% 49% 32% 33%

Customer-Related Intangible Assets (cont.) 2013 Observations and Results

26

As illustrated below, of the deals that allocated PC to customer-related intangibles, 133 deals (51%) allocated 10% or greater.

Distribution of PC Allocated to Customer-Related Intangible Assets 2013 Study

Goodwill 2013 Observations and Results

27

Distribution of PC Allocated to Goodwill 2013 Study

In the 2013 Study, 383 transactions (91%) allocated PC to goodwill, with five of them recording a gain on bargain purchase.

The industry segmentation of the 33 transactions with zero goodwill is as follows: Financial Institutions, eight; Industrials, six; Healthcare, six; CFR, four; Technology, three; Energy, two; Telecom, two; and ISM, two.

The median allocation of PC to goodwill was 36%, while the mean was 38%.

As illustrated below, 249 deals (59%) allocated 25% or greater of PC to goodwill.

Appendices

Appendices 2012 Summary Results

Developed Technology 2012 Summary Results

30

In the 2012 Study, 201 transactions (39%) allocated PC to developed technology.

The median allocation of PC to developed technology was 14%, while the mean was 20%.

The following are observations for PC allocated to developed technology:

The Technology industry comprises the greatest number of observations (105 with a median of 15%), down from last year of 130 observations with a median of 14%.

The Healthcare industry’s PC allocated to developed technology remained unchanged at 25% in 2012 from 2011.

Summary of PC Allocated to Developed Technology 2012 Study

$ in millions Count PC Developed Technology, % of PC Goodwill, % of PC

Developed All % Median Mean Low High Median Mean Low High Median Mean

All Industries 201 511 39% $45 $591 0% 99% 14% 20% 0% 92% 43% 44%


Consumer, Food & Retail 12 67 18% 98 290 1% 41% 8% 14% 15% 52% 40% 36%

Energy 1 28 4% 31 31 29% 29% 29% 29% 11% 11% 11% 11%


Healthcare 35 75 47% 61 1,120 1% 83% 25% 29% 1% 82% 40% 41%

Industrials 27 99 27% 42 598 1% 99% 7% 15% 0% 80% 38% 39%

Infrastructure Services & Materials 5 12 42% 196 1,913 0% 27% 8% 10% 24% 43% 29% 32%

Media, Sports & Entertainment 1 4 25% 4 4 27% 27% 27% 27% 31% 31% 31% 31%

Technology 105 153 69% 39 428 1% 86% 15% 19% 5% 92% 49% 49%

Telecom 3 8 38% 81 89 5% 10% 8% 8% 10% 70% 62% 47%

Developed Technology (cont.) 2012 Summary Results

31

As illustrated below, the percentage of PC allocated to developed technology was widely distributed across the intervals. Of the deals that allocated PC to developed technology, 53% of deals attributed 15% or less.

Distribution of PC Allocated to Developed Technology 2012 Study

In-Process Research & Development 2012 Summary Results

32

In the 2012 Study, 48 transactions (9%) allocated PC to IPR&D.

The median allocation of PC to IPR&D was 7%, while the mean was 22%.

Summary of PC Allocated to IPR&D

2012 Study

$ in millions Count PC IPR&D, % of PC Goodwill, % of PC

IPR&D All % Median Mean Low High Median Mean Low High Median Mean

All Industries 48 511 9% $107 $1,520 0% 100% 7% 22% 1% 80% 37% 36%



Energy 1 28 4% 16 16 60% 60% 60% 60% 27% 27% 27% 27%

Financial Institutions 0 56 0% NA NA NA NA NA NA NA NA NA NA

Healthcare 21 75 28% 172 2,439 0% 100% 28% 36% 1% 80% 31% 33%

Industrials 1 99 1% 70 70 3% 3% 3% 3% 35% 35% 35% 35%

Infrastructure Services & Materials 0 12 0% NA NA NA NA NA NA NA NA NA NA

Media, Sports & Entertainment 0 4 0% NA NA NA NA NA NA NA NA NA NA

Technology 23 153 15% 82 933 1% 73% 2% 10% 5% 73% 41% 36%

Telecom 1 8 13% 165 165 1% 1% 1% 1% 70% 70% 70% 70%

In-Process Research & Development (cont.) 2012 Summary Results

33

As illustrated below, of the deals that allocated PC to IPR&D, 30 deals (63%) allocated 15% or less, while 15 deals (31%) allocated more than 25%.

Distribution of PC Allocated to IPR&D 2012 Study

Trademarks and Trade Names 2012 Summary Results

34

In the 2012 Study, 207 transactions (41%) allocated PC to trademarks and trade names.

The median allocation of PC to trademarks and trade names was 3%, while the mean was 8%.

Summary of PC Allocated to Trademarks and Trade Names

2012 Study $ in millions Count PC Trademarks and Trade Names, % of PC Goodwill, % of PC

Trademarks and Trade

Names All % Median Mean Low High Median Mean Low High Median Mean

All Industries 207 511 41% $82 $1,095 0% 94% 3% 8% 2% 87% 40% 39%

Aerospace, Defense & Government 3 9 33% $272 $10,068 0% 5% 0% 2% 38% 55% 45% 46%


Energy 9 28 32% 1,141 3,727 0% 5% 1% 2% 11% 45% 28% 29%


Healthcare 26 75 35% 63 2,939 1% 94% 3% 9% 3% 82% 41% 41%

Industrials 42 99 42% 63 745 0% 30% 4% 8% 2% 87% 33% 36%


Media, Sports & Entertainment 1 4 25% 4 4 5% 5% 5% 5% 0% 0% NA NA

Technology 65 153 42% 59 333 0% 15% 2% 3% 2% 82% 50% 46%

Telecom 6 8 75% 26 151 0% 15% 2% 4% 6% 62% 27% 30%

Trademarks and Trade Names (cont.) 2012 Summary Results

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As illustrated below, of the deals that allocated PC to trademarks and trade names, 127 deals (61%) allocated 5% or less.

Distribution of PC Allocated to Trademarks and Trade Names

2012 Study

Customer-Related Intangible Assets 2012 Summary Results

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In the 2012 Study, 270 transactions (53%) allocated PC to customer-related intangibles.

The median allocation of PC to customer-related intangibles was 14%, while the mean was 17%.

Summary of PC Allocated to Customer-Related Intangible Assets

2012 Study $ in millions Count PC Customer-Related Assets, % of PC Goodwill, % of PC

Customer-Related Assets All % Median Mean Low High Median Mean Low High Median Mean

All Industries 270 511 53% $56 $1,097 0% 83% 14% 17% 1% 87% 40% 41%

Aerospace, Defense & Government 6 9 67% 191 5,083 14% 48% 19% 24% NA NA NA NA


Energy 14 28 50% 1,084 2,828 1% 66% 14% 20% 11% 45% 27% 27%

Financial Institutions 13 56 23% 126 2,923 0% 59% 14% 17% 1% 60% 33% 30%

Healthcare 30 75 40% 56 2,951 1% 83% 14% 21% 10% 84% 42% 44%

Industrials 58 99 59% 53 507 1% 71% 16% 20% 2% 87% 39% 40%


Media, Sports & Entertainment 2 4 50% 24 24 25% 30% 27% 27% 64% 64% 64% 64%

Technology 105 153 69% 48 497 0% 55% 12% 15% 2% 87% 48% 46%

Telecom 8 8 100% 55 157 0% 15% 19% 20% 6% 70% 27% 32%

Customer-Related Intangible Assets (cont.) 2012 Summary Results

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As illustrated below, of the deals that allocated PC to customer-related intangibles, 167 deals (62%) allocated 10% or greater.

Distribution of PC Allocated to Customer-Related Intangible Assets 2012 Study

Goodwill 2012 Summary Results

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Distribution of PC Allocated to Goodwill 2012 Study

In the 2012 Study, 485 transactions (95%) allocated PC to goodwill, with three of them recording negative goodwill.

The industry segmentation of the 26 transactions with zero goodwill is as follows: Energy, seven; CFR, four; Healthcare, four; Industrials, four; Financial Institutions, two; ISM, two; Technology, two; and MSE, one.

The median and mean allocation of PC to goodwill was 39% for both.

As illustrated below, 266 of all deals (52%) allocated 35% or greater of PC to goodwill.

Appendices Annual Comparison

Industry Summary Annual Comparison

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Median PC Allocated to Intangible Assets and Goodwill Annual Comparison Summary: 2011 - 2013

2013 2012 2011 2013 2012 2011

All Industries 31% 30% 31% 35% 39% 43%

Aerospace, Defense & Government 20% 17% 31% 33% 45% 44%

Business Services NA NA 15% NA NA 35%

Consumer, Food & Retail 34% 30% 38% 27% 32% 32%

Energy 31% 19% 12% 30% 28% 26%

Financial Institutions 2% 1% 13% 5% 6% 27%

Healthcare 43% 40% 36% 36% 42% 41%

Industrials 36% 27% 24% 42% 36% 36%

Infrastructure Services & Materials 21% 22% 28% 21% 28% 25%

Media, Sports & Entertainment NA 34% 27% NA 64% 73%

Real Estate, Lodging & Leisure NA NA 100% NA NA NA

Technology 33% 35% 34% 55% 49% 50%

Telecom 49% 30% 30% 23% 27% 24%

Transportation & Logistics NA NA NA NA NA NA

Intangible Assets, % of PC Goodwill, % of PC

Median Results

Developed Technology Annual Comparison

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Median PC Allocated to Developed Technology Annual Comparison Summary: 2011 - 2013

Developed Technology, % of PC

2013 2012 2011 2013 2012 2011

All Industries 15% 14% 13% 45% 43% 47%

Aerospace, Defense & Government 2% NA 9% 29% NA 47%



Energy 62% 29% 4% 32% 11% 44%


Healthcare 19% 25% 17% 36% 40% 41%

Industrials 8% 7% 6% 50% 38% 39%




Technology 33% 35% 14% 55% 49% 52%

Telecom 49% 30% 10% 33% 62% 25%


Median Results

Goodwill, % of PC

In-Process Research & Development Annual Comparison

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Median PC Allocated to IPR&D Annual Comparison Summary: 2011 - 2013

2013 2012 2011 2013 2012 2011

All Industries 15% 7% 5% 31% 37% 45%

Aerospace, Defense & Government NA NA 25% NA NA 17%


Consumer, Food & Retail 5% 13% NA 36% 52% NA

Energy NA 60% NA NA 27% NA

Financial Institutions NA NA NA NA NA NA

Healthcare 44% 28% 11% 31% 31% 32%

Industrials 9% 3% 2% 65% 35% 39%

Infrastructure Services & Materials NA NA 5% NA NA 25%

Media, Sports & Entertainment NA NA NA NA NA NA

Real Estate, Lodging & Leisure NA NA NA NA NA NA

Technology 7% 2% 4% 31% 41% 51%

Telecom NA 1% 2% NA 70% 26%


Median Results

IPR&D, % of PC Goodwill, % of PC

Trademarks and Trade Names Annual Comparison

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Median PC Allocated to Trademarks and Trade Names Annual Comparison Summary: 2011 - 2013

2013 2012 2011 2013 2012 2011

All Industries 3% 3% 3% 38% 40% 44%

Aerospace, Defense & Government 3% NA 2% 33% 45% 44%



Energy 1% 1% 2% 32% 28% 33%

Financial Institutions NA 2% 2% 7% 33% 27%

Healthcare 3% 3% 2% 45% 41% 43%

Industrials 7% 4% 6% 42% 33% 37%


Media, Sports & Entertainment NA 5% 2% NA NA 78%


Technology 1% 2% 2% 54% 50% 50%

Telecom 1% 2% 1% 43% 27% 29%


Median Results

Trademarks, % of PC Goodwill, % of PC

Customer-Related Intangible Assets Annual Comparison

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Median PC Allocated to Customer-Related Intangible Assets Annual Comparison Summary: 2011 - 2013

Customer-Related Assets, % of PC

2013 2012 2011 2013 2012 2011

All Industries 11% 14% 16% 41% 40% 44%

Aerospace, Defense & Government 11% 19% 15% 33% 45% 44%


Consumer, Food & Retail 13% 11% 19% NA NA 31%

Energy 26% 14% 11% 29% 27% 41%


Healthcare 7% 14% 14% 50% 42% 44%

Industrials 18% 16% 16% 43% 39% 36%



Real Estate, Lodging & Leisure NA NA NA NA NA NA

Technology 9% 12% 16% 53% 48% 49%

Telecom 28% 19% 23% 32% 27% 24%


Median Results

Goodwill, % of PC

About Houlihan Lokey

About Houlihan Lokey About Houlihan Lokey

46

Houlihan Lokey is an international investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation. The firm serves corporations, institutions, and governments worldwide with offices in the United States, Europe, and Asia. Independent advice and intellectual rigor are hallmarks of our commitment to client success across our advisory services. Houlihan Lokey is ranked as the No. 1 M&A advisor for U.S. transactions under $3 billion, the No. 1 global restructuring advisor, and the No. 1 M&A fairness opinion advisor for U.S. transactions over the past 10 years, according to Thomson Reuters.

TRANSACTION ADVISORY SERVICES

Our Transaction Advisory Services are designed to provide our clients with independent advice, due diligence analyses and valuation services starting at the earliest stages of a transaction through the purchase accounting valuation analysis and ongoing impairment testing of the acquisition. Our tax and financial reporting valuation services extend to the areas of tax, equity-based compensation and tangible assets. While many of our professionals have been members of the world’s most recognized accounting firms, we are able to provide Transaction Advisory Services without the conflicts facing most other providers. Our services include:

• Financial and tax due diligence

• Purchase price allocation

• Impairment of goodwill and other assets

• Valuations for tax purposes

• Real estate and other tangible asset valuations

• Equity-based compensation

• Fresh-start accounting

For more information, visit www.HL.com.

http://www.hl.com/

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Disclaimers

Disclaimers Disclaimers

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© 2014 Houlihan Lokey. All rights reserved. This material may not be reproduced in any format by any means or redistributed without the prior written consent of Houlihan Lokey. Houlihan Lokey is a trade name for Houlihan Lokey, Inc. and its subsidiaries and affiliates which include: Houlihan Lokey Capital, Inc., a California corporation, a registered broker-dealer and SIPC member firm, which provides investment banking, capital markets, private placement, merger, acquisition and divestiture services; Houlihan Lokey Financial Advisors, Inc., a California corporation, which provides financial advisory, fairness opinion, solvency opinion, valuation opinion, restructuring advisory and portfolio management services; and Houlihan Lokey (Europe) Limited, a company incorporated in England which is authorized and regulated by the U.K. Financial Conduct Authority and Houlihan Lokey (China) Limited, a company incorporated in Hong Kong SAR which is licensed in Hong Kong by the Securities and Futures Commission to conduct Type 1, 4 and 6 regulated activities to professional investors only, which provide investment banking, restructuring advisory, merger, acquisition and divestiture services, valuation opinion and private placement services and which may direct this communication within the European Economic Area and Hong Kong, respectively, to intended recipients including professional investors, high-net-worth companies or other institutional investors. Houlihan Lokey gathers its data from sources it considers reliable; however, it does not guarantee the accuracy or completeness of the information provided within this presentation. The material presented reflects information known to the authors at the time this presentation was written, and this information is subject to change. Houlihan Lokey makes no representations or warranties, expressed or implied, regarding the accuracy of this material. The views expressed in this material accurately reflect the personal views of the authors regarding the subject securities and issuers and do not necessarily coincide with those of Houlihan Lokey. Officers, directors and partners in the Houlihan Lokey group of companies may have positions in the securities of the companies discussed. This presentation does not constitute advice or a recommendation, offer or solicitation with respect to the securities of any company discussed herein, is not intended to provide information upon which to base an investment decision, and should not be construed as such. Houlihan Lokey or its affiliates may from time to time provide investment banking or related services to these companies. Like all Houlihan Lokey employees, the authors of this presentation receive compensation that is affected by overall firm profitability.

2011 Purchase Price Allocation Study - Houlihan Lokey · 2014-10-23 · 2013 Purchase Price...

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