Acquisitions

Description and financial effect of acquisitions

In June 2017, Gates purchased 100% of GTF Engineering and Services UK Limited, the owner of the majority of the net assets of Techflow Flexibles, for $36.7 million. Techflow Flexibles is a fully integrated engineering, manufacturing and commercial operation based in the United Kingdom that specializes in high-pressure flexible hoses.

On October 2, 2017, Gates completed the acquisition of Atlas Hydraulics for $74.0 million, net of cash acquired. Atlas Hydraulics is a fully-integrated product engineering, manufacturing, and commercial business headquartered in Ontario, Canada. With locations in Canada, the U.S. and Mexico, the company specializes in the design, manufacture, and supply of hydraulic tube and hose assemblies.

Gates incurred aggregate costs related directly to these acquisitions of $3.0 million, all of which are included in the transaction-related costs line in the statement of operations.

The following is the record of the fair value of net assets acquired and liabilities assumed:



(dollars in millions)	Techflow Flexibles		Atlas Hydraulics
Assets acquired
Accounts receivable	$	1.7	$	10.3
Inventories	4.2		21.2
Prepaid expenses and other receivables	1.7		0.5
Taxes receivable	—		2.7
Property, plant and equipment	13.0		24.5
Intangible assets	3.8		23.0
Total assets	24.4		82.2

Liabilities assumed
Accounts payable	2.6		5.5
Accrued expenses	4.8		2.4
Other current liabilities	0.3		10.5
Taxes payable	1.9		—
Deferred income taxes	0.6		11.6
Total liabilities	10.2		30.0
Net assets acquired	$	14.2	$	52.2

Goodwill has been recognized as follows:



(dollars in millions)	Techflow Flexibles			Atlas Hydraulics
Consideration, net of cash acquired	$	36.7		$	74.0
Net assets acquired	(14.2		)	(52.2		)
Goodwill	$	22.5		$	21.8

The goodwill of $22.5 million arising from the acquisition of Techflow Flexibles relates largely to the expected enhancement to Gates’ ability to make and supply long-length and large-diameter hoses, primarily for the oil & gas exploration and production industries. None of the goodwill recognized is expected to be deductible for income tax purposes.

The goodwill of $21.8 million arising from the acquisition of Atlas Hydraulics relates primarily to the expansion of Gates’ presence in industrial markets through increased manufacturing capacity and geographic reach. None of the goodwill recognized is expected to be deductible for income tax purposes.

Pro forma information has not been presented for these acquisitions due to their size relative to Gates.