Salesforce.com 2013 Annual Report Download - page 90

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The fair value of the stock options assumed by the Company was determined using the Black-Scholes
option pricing model and the share conversion ratio of 0.05 was applied to convert Model Metrics options to the
Company’s options.
The Company had a $0.8 million, or approximately six percent, noncontrolling equity investment in Model
Metrics prior to the acquisition. The acquisition date fair value of the Company’s previous equity interest was
$3.8 million and was included in the measurement of the consideration transferred. The Company recognized a
gain of $3.0 million as a result of remeasuring its prior equity interest in Model Metrics held before the business
combination. The gain was recognized in other expense on the consolidated statement of operations.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the
date of acquisition:
(in thousands)
Net tangible assets .................................. $ 6,556
Deferred tax asset ................................... 636
Customer relationships ............................... 3,050
Goodwill .......................................... 56,502
Net assets acquired .................................. $66,744
Customer relationships represent the fair values of the underlying relationships and agreements with Model
Metrics customers. The Company determined the useful life of the customer relationships to be less than one
year. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill. The goodwill balance is primarily attributable to the assembled workforce
and expected synergies when integrating Model Metrics with the Company’s professional services group. The
goodwill balance is not deductible for tax purposes. The fair values assigned to tangible and identifiable
intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions.
During fiscal 2013 the Company finalized its assessment of fair value of the assets and liabilities assumed at
acquisition date.
The Company assumed unvested options with a fair value of $2.1 million on the day of the acquisition. Of
the total consideration, $1.5 million was allocated to the purchase consideration and $0.6 million was allocated to
future services that are expensed over the remaining service periods on a straight-line basis.
Other Fiscal 2012 Business Combinations
On February 1, 2011 the Company acquired the stock of Manymoon Corporation (“Manymoon”) for
$13.6 million in cash. The Company accounted for this transaction as a business combination. In allocating the
purchase consideration based on fair values, the Company recorded $4.7 million of acquired intangible assets
with useful lives of one to three years, $10.5 million of goodwill, and $1.6 million of deferred tax liabilities. The
goodwill balance is not deductible for tax purposes. This transaction was not material to the Company.
Additionally, during fiscal 2012, the Company acquired two additional companies for $21.2 million in cash
and has included the financial results of these companies in its consolidated financial statements from the date of
each respective acquisition. These transactions, individually and in aggregate, were not material to the Company.
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net
tangible and intangible assets acquired. Goodwill amounts are not amortized, but rather tested for impairment at
least annually during the fourth quarter.
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