Acquisitions

6 Months Ended

Mar. 02, 2024

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

SMRT Asset Acquisition

In December 2023, the Company acquired certain intellectual property assets from Schmitz Manufacturing Research & Technology LLC (“SMRT”), a leading company in mechanical, aerospace and manufacturing engineering. The acquired assets relate to SMRT’s technology assets for the United States manufacturing industry. With this investment, the Company intends to enhance its ability to create and advance technology for the United States machining industry to strengthen its market leadership in metalworking.

This acquisition was accounted for as an asset acquisition, as the fair value of the gross assets acquired is concentrated in the value of the SMRT intellectual property intangible assets. The total cost of the acquisition was $2,894, inclusive of approximately $145 of transaction-related costs and $1,200 of deferred consideration payable to the sellers, in accordance with the asset purchase agreement. The Company allocated the total cost of the acquisition to intellectual property intangible assets and assigned the assets a useful life of five years.

Acquisition of KAR

In January 2024, the Company acquired 100% of the outstanding shares of privately held KAR Industrial Inc. (“KAR”), a Canada-based metalworking distributor, for aggregate consideration of $8,903, which includes cash paid of $8,303, subject to certain post-closing adjustments, and contingent consideration to be paid out of $747, which had a present value of $600 as of the acquisition date based on a Monte Carlo Simulation approach. Total cash consideration funded by the Company came from available cash resources.

KAR specializes in measuring and cutting tools, machine tool accessories and other manufacturing-related supplies across Canada’s industrial landscape. The Company expects to capitalize on KAR’s metalworking expertise, knowledge of the Canadian market and value-added services by offering KAR’s customers access to the full breadth of MSC Industrial’s product portfolio, including E-commerce capabilities.

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 2, 2024 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 their estimated fair value at the acquisition date:

Cash	$	129
Inventories	3,130
Accounts receivable	1,987
Prepaid expenses and other current assets	115
Identifiable intangibles	971
Goodwill	3,885
Property, plant and equipment	45
Total assets acquired	$	10,262
Accounts payable	1,196
Accrued liabilities	163
Total liabilities assumed	$	1,359
Total purchase price consideration	$	8,903

Acquired identifiable intangible assets with a fair value of $971 consisted of customer relationships of $747 with useful lives of 10 years and trade names of $224 with useful lives of five years. The goodwill amount of $3,885 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. 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 of expanding the Company’s metalworking footprint within the Canadian market. This goodwill will not be amortized and will be included in the Company’s periodic test for impairment at least annually. The goodwill is non-deductible for income tax purposes.

The amount of combined revenue and income before provision for income taxes from KAR included in the unaudited Condensed Consolidated Statements of Income for the thirteen- and twenty-six-week periods ended March 2, 2024 was $2,476 and $99, respectively. In addition, for the thirteen- and twenty-six-week periods ended March 2, 2024, the Company incurred non-recurring transaction and integration costs relating to the acquisition totaling $465, which are included in Operating expenses in the unaudited Condensed Consolidated Statements of Income.

Acquisitions

Acquisitions

SMRT Asset Acquisition

In December 2023, the Company acquired certain intellectual property assets from Schmitz Manufacturing Research & Technology LLC (“SMRT”), a leading company in mechanical, aerospace and manufacturing engineering. The acquired assets relate to SMRT’s technology assets for the United States manufacturing industry. With this investment, the Company intends to enhance its ability to create and advance technology for the United States machining industry to strengthen its market leadership in metalworking.

This acquisition was accounted for as an asset acquisition, as the fair value of the gross assets acquired is concentrated in the value of the SMRT intellectual property intangible assets. The total cost of the acquisition was $2,894, inclusive of approximately $145 of transaction-related costs and $1,200 of deferred consideration payable to the sellers, in accordance with the asset purchase agreement. The Company allocated the total cost of the acquisition to intellectual property intangible assets and assigned the assets a useful life of five years.

Acquisition of KAR

In January 2024, the Company acquired 100% of the outstanding shares of privately held KAR Industrial Inc. (“KAR”), a Canada-based metalworking distributor, for aggregate consideration of $8,903, which includes cash paid of $8,303, subject to certain post-closing adjustments, and contingent consideration to be paid out of $747, which had a present value of $600 as of the acquisition date based on a Monte Carlo Simulation approach. Total cash consideration funded by the Company came from available cash resources.

KAR specializes in measuring and cutting tools, machine tool accessories and other manufacturing-related supplies across Canada’s industrial landscape. The Company expects to capitalize on KAR’s metalworking expertise, knowledge of the Canadian market and value-added services by offering KAR’s customers access to the full breadth of MSC Industrial’s product portfolio, including E-commerce capabilities.

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 2, 2024 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 their estimated fair value at the acquisition date:

Cash	$	129
Inventories	3,130
Accounts receivable	1,987
Prepaid expenses and other current assets	115
Identifiable intangibles	971
Goodwill	3,885
Property, plant and equipment	45
Total assets acquired	$	10,262
Accounts payable	1,196
Accrued liabilities	163
Total liabilities assumed	$	1,359
Total purchase price consideration	$	8,903

Acquired identifiable intangible assets with a fair value of $971 consisted of customer relationships of $747 with useful lives of 10 years and trade names of $224 with useful lives of five years. The goodwill amount of $3,885 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. 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 of expanding the Company’s metalworking footprint within the Canadian market. This goodwill will not be amortized and will be included in the Company’s periodic test for impairment at least annually. The goodwill is non-deductible for income tax purposes.

The amount of combined revenue and income before provision for income taxes from KAR included in the unaudited Condensed Consolidated Statements of Income for the thirteen- and twenty-six-week periods ended March 2, 2024 was $2,476 and $99, respectively. In addition, for the thirteen- and twenty-six-week periods ended March 2, 2024, the Company incurred non-recurring transaction and integration costs relating to the acquisition totaling $465, which are included in Operating expenses in the unaudited Condensed Consolidated Statements of Income.