On August 30, 2021, the Company acquired 100% of the outstanding shares of ATI Industrial Automation, Inc. (“ATI”), an Apex, North Carolina-based leading supplier of intelligent end-of-arm technology solutions to OEMs for advanced industrial and surgical robots for an initial cash purchase price of $169.2 million, net of cash acquired and estimated working capital adjustments, and $44.0 million estimated fair value of contingent consideration. The contingent consideration will be payable in 2022 based on a multiple of the standalone ATI Adjusted EBITDA, as defined in the purchase and sale agreement, for the fiscal year ended December 31, 2021. The initial cash purchase price was financed with borrowings under the Company’s revolving credit facility and cash available on hand. The Company expects that the addition of ATI will complement and add intelligent technology solutions to further expand the Company’s position in mission critical robotic applications within the Precision Motion reportable segment.

On August 31, 2021, the Company acquired 100% of the outstanding shares of Schneider Electric Motion USA, Inc. (“SEM”), a Marlborough, Connecticut-based manufacturer of integrated motion control solutions and electronic controls for automation equipment for a total purchase price of $114.7 million, net of cash acquired and working capital adjustments. The acquisition was financed with borrowings under the Company’s revolving credit facility. The Company expects that the addition of SEM will complement and expand the Company’s presence in life science applications and solutions for industrial automation applications within the Precision Motion reportable segment.

The acquisitions of ATI and SEM have been accounted for as business combinations. The purchase price for each acquisition is allocated based upon a valuation of the fair values of assets acquired and liabilities assumed. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition dates. The fair values of intangible assets were based on valuations using an income approach, specifically the multi-period excess earnings method for customer relationships and the relief-from-royalty method for developed technologies, trademarks and trade names. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including revenue growth rates, customer attrition rates, royalty rates, discount rates, technology obsolescence curves, and EBITDA margins. The excess of the purchase price over the fair values of tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill for each acquisition. The Company’s estimates and assumptions in determining the estimated fair values of certain assets and liabilities are subject to change within the measurement period (up to one year from the acquisition date) as a result of additional information obtained with regards to facts and circumstances that existed as of the acquisition date.

Based upon a preliminary valuation, the total purchase price, including measurement period adjustments, for ATI was allocated as follows (in thousands):

	Purchase Price
	Allocation
Cash	$	10,709
Accounts receivable		12,596
Inventories		18,151
Property, plant and equipment		4,618
Operating lease assets		11,263
Intangible assets		52,800
Goodwill		134,420
Other assets		229
Total assets acquired		244,786
Accounts payable		5,135
Current portion of operating lease liabilities		1,740
Operating lease liabilities		9,525
Other liabilities		4,452
Total liabilities assumed		20,852
Total assets acquired, net of liabilities assumed		223,934
Less: cash acquired		10,709
Less: contingent consideration		44,000
Initial purchase price, net of cash acquired	$	169,225

Subsequent to the preliminary valuation, additional information that existed as of the acquisition date became available that resulted in adjustments to certain inputs used for the determination of estimated fair value of the contingent consideration. These changes resulted in a $7.9 million decrease to the liability and a $0.4 million increase to identifiable intangible assets. Adjustments to the preliminary purchase price allocation resulted in a decrease to goodwill of $8.3 million. As of December 31, 2021, the working capital adjustments had not been finalized and were estimated to be a cash receipt of $0.8 million. The purchase price allocation is preliminary as the Company is in the process of collecting additional information for the valuation of inventories, other liabilities, contingent consideration and unrecognized tax benefits.

The fair value of intangible assets for ATI is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Developed technologies	$	19,800	15 years
Customer relationships		23,900	15 years
Trademarks and trade names		5,600	15 years
Backlog		3,500	1 year
Total	$	52,800

The purchase price allocation resulted in $52.8 million of identifiable intangible assets and $134.4 million of goodwill. Goodwill amounting to $134.4 million is expected to be deductible for U.S. income tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) ATI’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) ATI’s ability to grow the business through new product introductions; and (iii) cost improvements due to the integration of ATI’s operations into the Company’s existing infrastructure.

The operating results of ATI were included in the Company’s results of operations beginning on August 31, 2021. ATI contributed revenues of $34.0 million and a profit before income taxes of $3.4 million to the Company’s operating results for the year ended December 31, 2021. ATI’s profit before income taxes for the period from the acquisition date through December 31, 2021 included amortization of inventory fair value adjustments and amortization of purchased intangible assets of $3.5 million.

Based upon a preliminary valuation, the total purchase price for SEM was allocated as follows (in thousands):

	Purchase Price
	Allocation
Cash	$	3,881
Accounts receivable		4,240
Inventories		2,499
Property, plant and equipment		452
Intangible assets		54,570
Goodwill		68,291
Other assets		776
Total assets acquired		134,709
Accounts payable		1,325
Deferred tax liabilities		12,400
Other liabilities		2,420
Total liabilities assumed		16,145
Total assets acquired, net of liabilities assumed		118,564
Less: cash acquired		3,881
Total purchase price, net of cash acquired	$	114,683

The purchase price allocation is preliminary as the Company is in the process of collecting additional information for the valuation of other liabilities and unrecognized tax benefits.

The fair value of intangible assets for SEM is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Developed technologies	$	9,110	15 years
Customer relationships		41,740	20 years
Trademarks and trade names		370	4 years
Backlog		3,350	1 year
Total	$	54,570

The purchase price allocation resulted in $54.6 million of identifiable intangible assets and $68.3 million of goodwill. As the SEM acquisition was structured as a stock acquisition for income tax purposes, the goodwill is not expected to be deductible for income tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) SEM’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) SEM’s ability to grow the business through new product introductions; and (iii) cost improvements due to the integration of SEM’s operations into the Company’s existing infrastructure.

The operating results of SEM were included in the Company’s results of operations beginning on September 1, 2021. SEM contributed revenues of $9.1 million and a profit before income taxes of $0.3 million to the Company’s operating results for the year ended December 31, 2021. SEM’s profit before income taxes for the period from the acquisition date through December 31, 2021 included amortization of inventory fair value adjustments and amortization of purchased intangible assets of $1.8 million.

The pro forma information presented below includes the effects of business combination accounting resulting from the acquisitions of ATI and SEM, including amortization of inventory fair value adjustments, amortization of intangible assets, interest expense on borrowings in connection with the acquisitions, acquisition costs, and the related tax effects, assuming that the acquisitions had been consummated as of January 1, 2020. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisitions had taken place on January 1, 2020.

	Year Ended December 31,
	2021		2020
Revenue	$	783,011	$	682,626
Consolidated net income	$	52,420	$	33,376

On July 31, 2019, the Company acquired 100% of the outstanding shares of ARGES GmbH (“ARGES”), a Wackersdorf, Germany-based manufacturer of innovative laser scanning subsystems used in industrial materials processing and medical applications, for a total purchase price of €65.7 million ($73.2 million), including net working capital adjustments. The purchase price consists of €24.0 million ($26.7 million) cash paid at closing, 124 thousand Novanta common shares issued at closing (with a fair market value of €9.8 million, or $10.9 million, based on the closing market price of $87.58 per share on July 30, 2019), €7.1 million ($7.9 million) estimated fair value of contingent consideration and €24.8 million ($27.7 million) deferred cash consideration. The initial cash purchase price was financed with borrowings under the Company’s revolving credit facility. The contingent consideration would be payable annually based on actual revenue achievement against certain revenue targets from August 2019 through December 2026, with the first payment due in the first quarter of 2021. The undiscounted range of contingent consideration is zero to €10.0 million. In 2020, the Company paid €25.0 million to the former owner of ARGES for the deferred cash consideration and to settle working capital. The addition of ARGES complements and expands the Company’s existing portfolio of lasers and laser beam steering solutions capabilities within the Photonics reportable segment.

On June 5, 2019, the Company acquired 100% of the outstanding stock of Med X Change, Inc. (“Med X Change”), a Bradenton, Florida-based provider of medical grade, high definition and 4K video recording and documentation solutions to OEMs

in the medical market. The purchase price of $21.9 million, net of working capital adjustments, was financed with cash on hand and a $21.0 million borrowing under the Company’s revolving credit facility. The addition of Med X Change complements and broadens the range of technology capabilities within the Company’s Vision reportable segment by providing its medical OEM customers with more integrated operating room solutions.

On April 16, 2019, the Company acquired 100% of the outstanding stock of Ingenia-CAT, S.L. (“Ingenia”), a Barcelona, Spain-based provider of high-performance servo drives and control software to OEMs in the medical and advanced industrial markets, for a total purchase price of €14.3 million ($16.2 million), net of working capital adjustments. The purchase price consists of €8.5 million ($9.6 million) cash consideration and €5.8 million ($6.6 million) estimated fair value of contingent consideration. The initial cash purchase price was financed with cash on hand and borrowings under the Company’s revolving credit facility. The contingent consideration would be payable annually based on actual revenue achievement against certain revenue targets from April 2019 through March 2022, with the first payment due in the second quarter of 2020. The undiscounted range of contingent consideration is zero to €8.0 million. The Ingenia purchase and sale agreement required €0.8 million ($0.9 million) of the purchase price to be held back by the Company for indemnification of certain representations and warranties claims by the Company until the expiration of the holdback agreement in October 2020. The Company released the indemnification holdback in the fourth quarter of 2020. The addition of Ingenia enhances the Company’s strategic position in precision motion control industry by enabling it to offer a broader range of motion control technologies and integrated solutions. Ingenia is included in the Company’s Precision Motion reportable segment.

The acquisitions of ARGES, Med X Change and Ingenia have been accounted for as business combinations. Purchase price allocation is based upon a valuation of assets acquired and liabilities assumed. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition dates. The fair values of intangible assets were based on valuation techniques with estimates and assumptions developed by management. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including revenue growth rates, customer attrition rates, royalty rates, discount rates and projected future cash flows. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.

	Amount
Cash	$	3,159
Accounts receivable		1,430
Inventories		7,129
Property, plant and equipment		14,095
Intangible assets		24,713
Goodwill		42,951
Other assets		2,244
Total assets acquired		95,721
Accounts payable		2,598
Deferred tax liabilities		5,510
Other liabilities		14,462
Total liabilities assumed		22,570
Total assets acquired, net of liabilities assumed		73,151
Less: cash acquired		3,159
Total purchase price, net of cash acquired		69,992
Less: contingent consideration		7,870
Less: issuance of common shares		10,900
Less: deferred cash consideration		27,664
Initial cash purchase price, net of cash acquired	$	23,558

The fair value of intangible assets for ARGES is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Developed technologies	$	11,355	15 years
Customer relationships		11,800	15 years
Trademarks and trade names		1,225	10 years
Backlog		333	5 months
Total	$	24,713

Customer relationships and backlog for ARGES were valued using the multi-period excess earnings method. Developed technology and trademarks and trade names for ARGES were valued using the relief-from-royalty method.

The purchase price allocation resulted in $24.7 million of identifiable intangible assets and $43.0 million of goodwill. As the ARGES acquisition was an acquisition of outstanding common shares, none of the resulting goodwill is deductible for income tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) expected future benefits from advancing the Company’s photonic-based product roadmap through the addition of R&D capabilities from ARGES; (ii) ARGES’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (iii) ARGES’s ability to grow the business through new product introductions; and (iv) cost improvements due to the integration of ARGES’s operations into the Company’s existing infrastructure.

The operating results of ARGES were included in the Company’s results of operations beginning on July 31, 2019. ARGES contributed revenues of $4.9 million and a loss before income taxes of $3.5 million for the year ended December 31, 2019. Loss before income taxes for the year ended December 31, 2019 included amortization of inventory fair value adjustments and purchased intangible assets of $2.2 million.

The final purchase price allocation for Med X Change and Ingenia is as follows (in thousands):

	Amount
Cash	$	1,000
Accounts receivable		1,739
Inventories		2,372
Property, plant and equipment		496
Intangible assets		22,376
Goodwill		13,388
Other assets		601
Total assets acquired		41,972
Accounts payable		604
Deferred tax liabilities		2,399
Other liabilities		910
Total liabilities assumed		3,913
Total assets acquired, net of liabilities assumed		38,059
Less: cash acquired		1,000
Total purchase price, net of cash acquired		37,059
Less: contingent consideration		6,569
Less: purchase price holdback		905
Net cash used for acquisition of businesses	$	29,585

The fair value of intangible assets for Med X Change and Ingenia is comprised of the following (dollar amounts in thousands):

					Weighted Average
	Estimated Fair Value				Amortization
	Med X Change		Ingenia		Period
Developed technologies	$	1,800	$	9,272	10 years
Customer relationships		9,900		565	15 years
Trademarks and trade names		300		339	9 years
Backlog		200		—	7 months
Total	$	12,200	$	10,176

Customer relationships and backlog for both Med X Change and Ingenia were valued using the multi-period excess earnings method. Developed technology for Med X Change and Ingenia were valued using the relief from royalty and multi-period excess earnings methods, respectively. Trademarks and trade names for both Med X Change and Ingenia were valued using the relief-from-royalty method.

The Company recorded an aggregate fair value of $22.4 million of identifiable intangible assets from the Med X Change and Ingenia acquisitions. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized.

The Company recorded $13.4 million of goodwill from these acquisitions. Goodwill amounting to $6.2 million from the Med X Change acquisition is expected to be fully deductible for income tax purposes. Goodwill amounting to $7.2 million from the Ingenia acquisition is not expected to be deductible for income tax purposes. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) the ability of Med X Change and Ingenia to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) their ability to grow the businesses through new product introductions; and (iii) cost improvements due to the integration of Med X Change and Ingenia operations into the Company’s existing infrastructure.

The operating results of Med X Change and Ingenia were included in the Company’s results of operations beginning on the respective acquisition dates. These acquisitions contributed revenues of $7.9 million and an income before income taxes of $0.6 million for the year ended December 31, 2019. Income before income taxes for the year ended December 31, 2019 included amortization of inventory fair value adjustments and purchased intangible assets of $1.5 million.

The Company recognized acquisition costs of $5.0 million, zero and $1.6 million in the years ended December 31, 2021, 2020 and 2019, respectively, related to the acquisitions that occurred during these years. These costs consisted of finders’ fees, legal, valuation and other professional or consulting fees. These amounts were included in restructuring and acquisition related costs in the consolidated statements of operations.