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This chapter is covered by the Auditors' Report.

C26 Business Combinations

Acquisitions and divestments

Acquisitions

2008 2007 2006
Intangible assets –209 11,627 15,648
Property, plant and equipment – 325 1,257
Goodwill –882 16,917 163
Other assets 887 4,266 4,422
Provisions, including
post-employment benefits 		– –127 –812
Other liabilities 278 –6,227 –2,689
Purchase of minority holdings – 45 89
Cash and cash equivalents – 2,387 1,781
Total purchase price 74 29,213 19,859
Less:
Cash and cash equivalents – 2,387 1,781
Consideration payable – 534 –
Cash flow effect 74 26,292 18,078

In 2008, Ericsson made acquisitions with a cash flow effect amounting to SEK 74 million (SEK 26,292 million in 2007).

The preliminary purchase price allocations made in 2007 related to acquired businesses were finalized in 2008 with the following effects:

  • Redback: An increase in deferred tax assets of SEK 593 million, goodwill decreased correspondingly.
  • Tandberg: Decreased intangible assets by SEK 209 million, increased goodwill by SEK 71 million and increased deferred tax assets by SEK 138 million.
  • Entrisphere (included in Other): An increase in deferred tax assets of SEK 130 million, goodwill decreased correspondingly.

In addition goodwill decreased by SEK 260 million, regarding Entrisphere, since the additional consideration never was materialized.

redback business (2007)
Net assets acquired Book value Fair value adjustments Fair value
Intangible assets
Intellectual property rights – 3,272 3,272
Brands – 609 609
Customer relationships – 1,575 1,575
Goodwill – 9,354 9,354
Other assets and liabilities
Inventory 96 – 96
Property, plant and equipment 153 – 153
Other assets 2,625 – 2,625
Other liabilities –768 –2,122 –2,890
Total purchase price 14,794
Less:
Cash and cash equivalents 952 – 952
Consideration payable – 275 275
Cash flow effect 13,567
The determination of purchase price allocation and fair values of assets acquired and liabilities assumed is based on preliminary appraisal; therefore, these values may be subject to minor adjustments.

tandberg business (2007)
Net assets acquired Book value Fair value adjustments Fair value
Intangible assets
Intellectual property rights – 2,712 2,712
Brands – 276 276
Customer relationships – 1,486 1,486
Goodwill – 5,442 5,442
Other assets and liabilities
Inventory 227 – 227
Property, plant and equipment 124 – 124
Other assets 1,938 – 1,938
Post-employment benefits –62 – –62
Other liabilities –924 –1,432 –2,356
Total purchase price 9,787
Less:
Cash and cash equivalents 742 – 742
Cash flow effect 9,045
The determination of purchase price allocation and fair values of assets acquired and liabilities assumed is based on preliminary appraisal; therefore, these values may be subject to minor adjustments.

LHS BUSINESS (2007)
Net assets acquired Book value Fair value adjustments Fair value
Intangible assets
Intellectual property rights – 367 367
Brands – 43 43
Customer relationships – 777 777
Goodwill – 1,293 1,293
Other assets and liabilities
Property, plant and equipment 32 – 32
Other assets 866 – 866
Minority interest –82 – –82
Other liabilities –252 –380 –632
Total purchase price 2,664
Less:
Cash and cash equivalents 249 – 249
Cash flow effect 2,415
The determination of purchase price allocation and fair values of assets acquired and liabilities assumed is based on preliminary appraisal; therefore, these values may be subject to minor adjustments.

Divestments

Net assets disposed of 2008 2007 2006
Property, plant and equipment 3 13 253
Other assets 1,005 498 2,946
Provisions, including post-employment benefits – –19 –89
Other liabilities –456 –234 –2,079
552 258 1,031
Gains from divestments 296 280 2,945
Less:
Cash and cash equivalents 194 454 890
Cash flow effect 654 84 3,0861)
1) The amount mainly relates to the sale of the Defense business.

In 2008, Ericsson made divestments with a cash flow effect amounting to SEK 654 million (SEK 84 million in 2007), primarily:

  • Enterprise: As per May 1, 2008, the PBX solutions business was sold to Aastra Technologies. Sales in 2007 amounted to approximately SEK 3.0 billion.

enterprise business
Net assets disposed of 2008
Property, plant and equipment 3
Other assets 783
Other liabilities –300
486
Gains from divestments 151
Less:
Cash and cash equivalents –
Cash flow effect 637

Acquisitions 2006–2008
Company Description Date
Mobeon Swedish company. Acquisition of shares. Mar 31, 2008
HyC Spanish company with around 110 employees that specializes in design and systems integration of IPTV networks. Dec 30, 2007
LHS German provider of post-paid billing and customer care systems for wireless, wireline, and IP telecom markets. Purchase price SEK 2.7 billion. Oct 1, 2007
Drutt Swedish company, with around 85 employees, that develops Mobile Service Delivery Platform which enables mobile operators to mobilize and charge for any content to any device, over any delivery channel. June 28, 2007
Tandberg Television Norwegian global supplier of products for digital TV solutions, including IPTV, HDTV, video on demand, advertising on demand and interactive TV applications. Purchase price SEK 9.8 billion. May 1, 2007
Mobeon Swedish business, with around 130 employees that develops IP messaging software technology. Mar 15, 2007
Entrisphere US-based company, with around 140 employees, that develops gigabit passive optical network (GPON) technology for fixed broadband access, i.e. FTTx. Feb 12, 2007
Redback Networks US supplier of multi-service routing platform for broadband services such as VoIP, IPTV and Video On-Demand. Purchase price SEK 14.8 billion. Jan 23, 2007
Distocraft Oy Assets of Finnish company specialized in software development and with around 40 employees that develop mobile network performance management systems. Aug 31, 2006
Netwise Swedish-based supplier of software for presence management, team collaboration, integration of mobile phones, IP telephony and multimedia for enterprise. Aug 11, 2006
Marconi assets Certain assets related to broadband access, optical and radio transmission, data networks and service layer were acquired from UK-based Marconi. Purchase price SEK 19.4 billion. Jan 23, 2006

DIVESTMENTS 2006–2008
Company Description Date
Enterprise PBX solutions business. Cash flow effect SEK 0.6 billion. May 1, 2008
Ericsson Microwave Systems Swedish provider of radar, command and control systems for defense applications. Cash flow effect SEK 3.1 billion. Sept 1, 2006