Salesforce.com 2013 Annual Report Download - page 83

4. Business Combinations
Rypple
On February 1, 2012, the Company acquired for cash the outstanding stock of 2Catalyze, Inc., (“Rypple”), a
provider of social performance management applications. The Company acquired Rypple to, among other things,
enable customers to engage and align their employees and teams with a social performance management
solution, extending the employee social network to reach every employee. The Company has included the
financial results of Rypple in the consolidated financial statements from the date of acquisition, which have not
been material to date. The acquisition date fair value of the consideration transferred for Rypple was
approximately $50.6 million, which consisted of the following:
Fair value of consideration transferred (in thousands)
Cash ..................................................... $50,166
Fair value of stock options assumed ............................ 470
Total ..................................................... $50,636
The fair value of the stock options assumed by the Company was determined using the Black-Scholes
option pricing model. The share conversion ratio of 0.011 was applied to convert Rypple options to the
Company’s options.
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 .......................................... $ 758
Deferred tax liability ........................................ (1,671)
Intangible assets ............................................ 5,970
Goodwill .................................................. 45,579
Net assets acquired .......................................... $50,636
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed are based on management’s estimates and assumptions. The estimated fair
values of current and noncurrent income taxes payable and deferred taxes may be subject to change as additional
information is received and certain tax returns are finalized. Thus the provisional measurements of fair value set
forth above are subject to change. The Company expects to finalize the valuation as soon as practicable, but not
later than one-year from the acquisition date.
The following table sets forth the components of identifiable intangible assets acquired and their estimated
useful lives as of the date of acquisition:
(in thousands) Fair value Useful Life
Developed technology ............................ $4,970 3 years
Customer relationships ............................ 1,000 1 year
Total intangible assets subject to amortization ..... $5,970
Developed technology represents the estimated fair value of Rypple’s social performance management
technology. Customer relationships represent the fair values of the underlying relationships and agreements with
Rypple customers. The goodwill balance is primarily attributed to the assembled workforce and expanded market
opportunities when integrating Rypple’s social performance management technology with the Company’s other
offerings. The goodwill balance is deductible for U.S. income tax purposes.
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