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Business Combinations
 12 Months Ended
Dec. 31, 2023
Business Combinations [Abstract]  
Mergers, Acquisitions and Dispositions Disclosures [Text Block]
Acquisitions
Fiscal Year 2023
On May 2, 2023, the Company acquired 100% of MTA S.p.A (MTA) for $224.4 million, net of cash acquired, financed through commercial paper and cash on hand. MTA is a leading industrial process cooling technology business which brings complementary, high-performing solutions to the comprehensive Commercial HVAC product and services portfolios in the EMEA and Americas segments. Intangible assets associated with this acquisition totaled $93.3 million and primarily relate to customer relationships. The excess purchase price over the estimated fair value of net assets acquired was recognized as goodwill and totaled $112.8 million, inclusive of the impact of measurement period adjustments. The goodwill resulting from the acquisition is not deductible for tax purposes. The values assigned to individual assets acquired and liabilities assumed are based on management’s current best estimate and subject to change as certain matters are finalized. The primary areas that remain open are related to tax. The results of the acquisition are reported within the EMEA and Americas segments from the date of acquisition.
On May 12, 2023, the Company acquired 100% of Helmer Scientific Inc (Helmer), a precision temperature cooling company in the life sciences vertical within the Americas segment. The aggregate cash paid, net of cash acquired, totaled $266.4 million and was financed through commercial paper and cash on hand. Intangible assets associated with this acquisition totaled $95.7 million and primarily relate to customer relationships. The excess purchase price over the estimated fair value of net assets acquired was recognized as goodwill and totaled $130.0 million, inclusive of the impact of measurement period adjustments. For income tax purposes, the acquisition was treated as an asset purchase and the goodwill will be deductible for tax purposes. The values assigned to individual assets acquired and liabilities assumed are based on management’s current best estimate and subject to change as certain matters are finalized. The primary areas that remain open are related to tax. The results of the acquisition are reported within the Americas segment from the date of acquisition.
On November 2, 2023, the Company acquired 100% of Nuvolo, a global leader in modern, cloud-based enterprise asset management and connected workplace software and solutions. The results of the acquisition are reported within the Americas segment from the date of acquisition.
The Company paid $352.6 million in initial cash consideration, financed through cash on hand, and agreed to two additional contingent consideration arrangements. The first contingent consideration arrangement, payable of up to $90.0 million in cash, is based on the attainment of revenue targets from November 2, 2023 through April 2025. If the first contingent consideration targets are met, a second contingent consideration arrangement related to a specified customer contract is available to the sellers, with no maximum earnout, based on revenues attained from that specified customer contract through April 2025. The total purchase price for the acquisition was expected to be $442.9 million, comprised of the upfront cash consideration of $352.6 million paid on November 2, 2023 and the fair value of the contingent consideration arrangements at the acquisition-date of $90.3 million. See Note 9, "Fair Value Measurements" to the Consolidated Financial Statements for additional information regarding fair value of contingent consideration.
Intangible assets associated with the Nuvolo acquisition totaled $141.0 million and primarily relate to developed technology and customer relationships. The excess purchase price over the estimated fair value of net assets acquired was recognized as goodwill and totaled $317.6 million. The goodwill is primarily attributable to the fair value of market share and revenue growth from Nuvolo. The benefit of access to the workforce is an additional element of goodwill. The goodwill created in the acquisition is not deductible for tax purposes. The fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change during the measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed, and the related tax balances.
The preliminary amounts assigned to the major identifiable intangible asset classifications for the 2023 acquisitions were as follows:
In millionsWeighted-average useful life (in years) Fair value
Customer relationships13$189.9 
Developed technology
9107.1
Other633.0 
Total intangible assets$330.0 
The preliminary valuation of intangible assets was determined using an income approach methodology. The Company estimated a portion of the fair value of the customer relationships intangible assets using an excess earnings model and a portion using the with and without method. The Company estimated a portion of the fair value of the developed technology intangible asset using a relief from royalty approach and a portion using an excess earnings model. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include projected cash flows, including revenue growth rates and margins, customer attrition rates, royalty rates and discount rates attributable to each intangible asset.
The Company has not included pro forma financial information for the 2023 acquisitions as the impact was not significant.
Fiscal Year 2022
On October 31, 2022, the Company acquired 100% of AL-KO Air Technology (AL-KO) for $111.7 million, net of cash acquired, financed through cash on hand, and inclusive of the impact of measurement period adjustments. AL-KO designs, engineers, manufactures, sells, installs, and services air handling and extraction systems in commercial applications. Intangible assets associated with this acquisition totaled $49.4 million and primarily relate to customer relationships. The excess purchase price over the estimated fair value of net assets acquired was recognized as goodwill and totaled $48.5 million, inclusive of the impact of measurement period adjustments. The results of operations of AL-KO are reported within the EMEA and Asia Pacific segments from the date of acquisition.
On April 1, 2022, the Company acquired a Commercial HVAC independent dealer, reported within the Americas segment from the date of acquisition, to support the Company's ongoing strategy to expand its distribution network and service area. The aggregate cash paid, net of cash acquired, totaled $110.0 million and was financed through cash on hand. Intangible assets associated with this acquisition totaled $52.7 million and primarily relate to customer relationships. The excess purchase price over the estimated fair value of net assets acquired was recognized as goodwill and totaled $42.5 million.
The preliminary amounts assigned to the major identifiable intangible asset classifications for the 2022 acquisitions were as follows:
In millionsWeighted-average useful life (in years) Fair value
Customer relationships15$82.9 
Other619.2 
Total intangible assets$102.1 
The valuation of intangible assets was determined using an income approach methodology. The fair value of the customer relationship intangible assets were determined using the excess earnings method based on discounted projected net cash flows associated with the net earnings attributable to the acquired customer relationships. These projected cash flows are estimated over the remaining economic life of the intangible asset and are considered from a market participant perspective. Key assumptions used in estimating future cash flows included projected revenue growth rates and customer attrition rates. The projected future cash flows are discounted to present value using an appropriate discount rate.
The Company has not included pro forma financial information for the 2022 acquisitions as the impact was not significant.
Fiscal Year 2021
On October 15, 2021, the Company acquired 100% of Farrar Scientific's assets, including its patented ultra-low temperature control technologies, a development and assembly operation in Marietta, Ohio, and a specialized team of engineers, sales engineers, operators, and technicians. Farrar Scientific is a leader in ultra-low temperature control for biopharmaceutical and other life science applications. The results of Farrar Scientific are reported within the Americas segment from the date of acquisition.
The Company paid $251.2 million in initial cash consideration, financed through cash on hand, and agreed to contingent consideration of up to $115.0 million to be paid in 2025, tied to the attainment of key revenue targets during the period of January 1, 2022 through December 31, 2024. The purchase price for the acquisition was expected to be $349.9 million, comprised of the upfront cash consideration of $251.2 million paid on October 15, 2021 and the fair value of the earnout payment at the time of closing the acquisition of $98.7 million. See Note 9, "Fair Value Measurements" to the Consolidated Financial Statements for additional information regarding fair value of contingent consideration.
The aggregate purchase price has been allocated to the assets acquired and liabilities assumed based on the estimate of fair market value of such assets and liabilities at the date of acquisition. Intangible assets associated with the acquisition totaled $140.7 million and primarily relate to customer relationships. The excess purchase price over the estimated fair value of net assets acquired was recognized as goodwill and totaled $203.6 million.
The Company recorded intangible assets based on their estimated fair value, which consisted of the following:
In millionsWeighted-average useful life (in years) October 15, 2021
Customer relationships14$105.2 
Other635.5 
Total intangible assets$140.7 
The goodwill is primarily attributable to the fair value of market share and revenue growth from Farrar Scientific. The benefit of access to the workforce is an additional element of goodwill. For income tax purposes, the acquisition was an asset purchase and the goodwill will be deductible for tax purposes.
The Company has not included pro forma financial information for the 2021 acquisitions as the impact was not significant.
Divestitures
The Company has retained obligations from previously sold businesses that primarily include ongoing expenses for postretirement benefits, product liability, legal costs and asbestos-related activities of Aldrich. The components of Discontinued operations, net of tax for the years ended December 31 were as follows:
In millions202320222021
Pre-tax earnings (loss) from discontinued operations(34.7)(26.9)(39.3)
Tax benefit (expense)7.5 5.4 18.7 
Discontinued operations, net of tax$(27.2)$(21.5)$(20.6)
For the years ended December 31, 2023 and 2022, pre-tax earnings (loss) from discontinued operations included a charge of $20.2 million and $16.5 million, respectively, to support Aldrich's ongoing legal costs in accordance with the Company's Funding Agreement. For the year ended December 31, 2021, pre-tax earnings (loss) from discontinued operations included a charge of $14.0 million to increase the Company's Funding Agreement liability from asbestos-related activities of Aldrich as well as pension and post retirement obligations and environmental costs related to businesses formerly owned by the Company. Refer to Note 20, "Commitments and Contingencies," for more information regarding the deconsolidation and asbestos-related matters.
Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block] FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability is as follows:
•Level 1: Observable inputs such as quoted prices in active markets;
•Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
•Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.
Observable market data is required to be used in making fair value measurements when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2023:
In millionsFair ValueFair value measurements
Level 1Level 2Level 3
Assets:
Derivative instruments$4.1 $— $4.1 $— 
Liabilities:
Derivative instruments4.8 — 4.8 — 
Contingent consideration90.3 — — 90.3 
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2022:
In MillionsFair ValueFair value measurements
Level 1Level 2Level 3
Assets:
Derivative instruments$5.1 $— $5.1 $— 
Liabilities:
Derivative instruments11.9 — 11.9 — 
Contingent consideration49.3 — — 49.3 
Derivative instruments include forward foreign currency contracts and instruments related to non-functional currency balance sheet exposures and commodity swaps. The fair value of the foreign exchange derivatives are determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable.
The fair value of the commodity derivatives is valued under a market approach using published prices, where applicable, or dealer quotes.
On November 2, 2023, the Company acquired 100% of Nuvolo Technologies Corporation (Nuvolo). In connection with the acquisition, the Company agreed to two contingent consideration arrangements. The first contingent consideration arrangement, payable of up to $90.0 million in cash, is based on the attainment of key revenue targets from November 2, 2023 through April 2025. If the first contingent consideration targets are met, a second contingent consideration arrangement with no maximum earnout is available to the sellers based on revenues in excess of the initial targets attained from a specified customer contract through April 2025.
On October 15, 2021, the Company acquired 100% of Farrar Scientific Corporation's (Farrar Scientific) assets. In connection with the acquisition, the Company agreed to contingent consideration of up to $115.0 million to be paid in 2025, tied to the attainment of key financial targets during the period January 1, 2022 through December 31, 2024. This additional payment, to the extent earned, will be payable in cash.
Each quarter, the Company is required to remeasure the fair value of the liability as assumptions change and such non-cash adjustments are recorded in Selling and administrative expenses in the Consolidated Statements of Earnings. Contingent consideration related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The fair value of the contingent consideration is determined using the Monte Carlo simulation model based on revenue projections during the earnout period, implied revenue volatility and a risk adjusted discount rate.
The changes in the fair value of the Company's Level 3 liabilities during the years ended December 31, 2023 and 2022 are as follows:
In millions20232022
Balance at beginning of period$49.3 $96.2 
Fair value of contingent consideration recorded in connection with acquisitions90.3 — 
Change in fair value of contingent consideration(49.3)(46.9)
Balance at end of period$90.3 $49.3 
The following inputs and assumptions were used in the Monte Carlo simulation model of Nuvolo to estimate the fair value of the contingent consideration at December 31, 2023:
2023
Discount rate (risk adjusted)8.14% - 8.48%
Volatility 16.20 %
The following inputs and assumptions were used in the Monte Carlo simulation model of Farrar to estimate the fair value of the contingent consideration at December 31, 2023 and 2022:
20232022
Discount rate13.00 %12.00 %
Volatility 20.00 %20.00 %
Refer to Note 17, "Acquisitions and Divestitures" for more information regarding the contingent consideration.
The carrying values of cash and cash equivalents, accounts receivable and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. There have been no transfers between levels of the fair value hierarchy.
Certain assets are measured at fair value on a non-recurring basis. The Company's equity investments without a readily available fair value are accounted for using the measurement alternative and are measured at fair value when observable transactions of identical or similar securities occurs, or due to an impairment. When indicators of impairment exist or observable price changes of qualified transactions occur, the respective equity investment would be classified within Level 3 of the fair value hierarchy due to the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value that require management’s judgment. During the year ended December 31, 2023, the Company recorded an impairment of an equity investment of $52.2 million within Other income/(expense), net.