Business Combinations

6 Months Ended

Mar. 04, 2023

Business Combination and Asset Acquisition [Abstract]

In January 2023, the Company acquired certain assets and assumed certain liabilities of Buckeye Industrial Supply Co. (“Buckeye”), an Ohio-based metalworking distributor, and Tru-Edge Grinding, Inc. (“Tru-Edge”), an Ohio-based custom tool manufacturer, for aggregate consideration of $22,740, which includes cash paid of $20,500, the fair value of contingent consideration to be paid out of $2,294, and a post-closing working capital adjustment in the amount of $54 received from the sellers that is subject to finalization. Total cash consideration funded by the Company came from available cash resources. The fair value of the contingent consideration to be paid out represents the present value of the $3,500 contingent consideration as of the acquisition date based on a probability-weighted fair value measurement.

Buckeye primarily serves the metalworking needs of large manufacturers. MSC Industrial plans to build on Buckeye’s technical, high-touch relationships and value-added services by offering customers access to its extensive product portfolio to support customers’ full metalworking and MRO needs. Tru-Edge brings new capabilities to MSC Industrial, including the design and manufacture of parts from scratch with a strong focus in the automotive and medical markets. The Company expects to drive revenue growth in its existing Midwest manufacturing customer base by leveraging the services provided by Tru-Edge. The Company believes the technical expertise and value-added services provided by Tru-Edge will support its effort to drive cost savings for its customers.

This acquisition was accounted for as a single business acquisition pursuant to ASC Topic 805, “Business Combinations” (“ASC Topic 805”). As required by ASC Topic 805, the Company allocated the consideration to assets and

liabilities based on their estimated fair value at the acquisition date. The Company’s purchase accounting as of March 4, 2023 is preliminary primarily due to the pending final valuation and an expected working capital adjustment to the purchase price.

The following table summarizes the amounts of identified assets acquired and liabilities assumed based on the estimated fair value at the acquisition date:


Inventories	$	1,019
Accounts receivable	2,745
Prepaid expenses and other current assets	27
Identifiable intangibles	10,600
Goodwill	8,177
Property, plant and equipment	1,291
Total assets acquired	$	23,859
Accounts payable	1,090
Accrued liabilities	29
Total liabilities assumed	$	1,119
Total purchase price consideration	$	22,740

Acquired identifiable intangible assets with a fair value of $10,600 consisted of customer relationships of $9,500 with a useful life of 10 years and trade names of $1,100 with useful lives of five years and 20 years for Buckeye and Tru-Edge, respectively. The goodwill amount of $8,177 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The primary items that generated the goodwill were the premiums paid by the Company for the right to control the business acquired and the benefit from adding a highly complementary provider of metalworking tools and supplies, as well as the design and manufacturing of parts. This goodwill will not be amortized and will be included in the Company’s periodic test for impairment at least annually. The goodwill is deductible for income tax purposes.

The amount of combined revenue and income before provision for income taxes from Buckeye and Tru-Edge included in the Company’s unaudited Condensed Consolidated Statements of Income for the thirteen- and twenty-six-week periods ended March 4, 2023 was $4,540 and $201, respectively. In addition, for the thirteen- and twenty-six-week periods ended March 4, 2023, the Company incurred non-recurring transaction and integration costs relating to the acquisition totaling $244 and $341, respectively, which are included in Operating expenses in the Company’s unaudited Condensed Consolidated Statements of Income.