Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2020

Business Combinations and Dispositions [Abstract]

All of the Company’s acquisitions of businesses have been accounted for under Accounting Standards Codification (“ASC”) 805, Business Combinations. Accordingly, the accounts of the acquired companies, after adjustments to reflect the fair values assigned to assets and liabilities, have been included in the Company’s condensed consolidated financial statements from their respective dates of acquisition. The results of operations of the acquired companies have been included in the Company’s condensed consolidated results since the date of each acquisition.

The Company incurred acquisition-related transaction costs of $1.3 million and $0.6 million in the three months ended September 30, 2020 and 2019, respectively, and $3.1 million and $1.3 million in the nine months ended September 30, 2020 and 2019, respectively. These costs were recorded in Selling, general and administrative expenses and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed. The Company also incurred a $4.1 million fair value inventory step-up charge associated with the completed 2020 acquisition of Flow Management Devices, LLC (“Flow MD”) described below in the nine months ended September 30, 2020 and a $3.3 million fair value inventory step-up charge associated with the completed 2019 acquisition of Velcora Holding AB (“Velcora”) described below in the three and nine months ended September 30, 2019. These charges were recorded in Cost of sales.

2020 Acquisition

On February 28, 2020, the Company acquired the stock of Flow MD, a privately held provider of flow measurement systems that ensure custody transfer accuracy in the oil and gas industry. Flow MD engineers and manufactures small volume provers. Headquartered in Phoenix, AZ, with operations in Houston, TX and Pittsburgh, PA, Flow MD operates in our Energy group within the Fluid & Metering Technologies segment. Flow MD was acquired for cash consideration of $118.2 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $61.7 million and $53.0 million, respectively. The goodwill is deductible for tax purposes.

The Company made an initial allocation of the purchase price for the Flow MD acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy. As the Company continues to obtain additional information about these assets and liabilities, including intangible asset appraisals, inventory valuation and accrued expenses, and continues to learn more about the newly acquired business, we will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will continue to make required adjustments to the purchase price allocation prior to the completion of the measurement period.

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:


(In thousands)	Total
Current assets, net of cash acquired	$	32,980
Property, plant and equipment	4,230
Goodwill	61,739
Intangible assets	53,000
Other noncurrent assets	1,344
Total assets acquired	153,293
Current liabilities	(35,554)
Deferred income taxes	749
Other noncurrent liabilities	(329)
Net assets acquired(1)	$	118,159

(1) During the third quarter of 2020, the Company finalized the purchase price of the Flow MD business, resulting in a $2.7 million adjustment to the purchase price.

Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business.

The acquired intangible assets and weighted average amortization periods are as follows:


(In thousands, except weighted average life)	Total		Weighted Average Life
Trade names	$	6,000	15
Customer relationships	31,500		10
Unpatented technology	15,500		20
Acquired intangible assets	$	53,000

2019 Acquisition

On July 18, 2019, the Company acquired the stock of Velcora and its operating subsidiaries, Roplan and Steridose. Roplan is a global manufacturer of custom mechanical and shaft seals for a variety of end markets including food and beverage, marine, chemical, wastewater and water treatment. Steridose develops engineered hygienic mixers and valves for the global biopharmaceutical industry. Both companies are headquartered in Sweden but also have operations in China, the United Kingdom and the United States. Roplan and Steridose operate in our Health & Science Technologies segment. Velcora was acquired for cash consideration of $87.2 million and the assumption of $51.1 million of debt. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $86.6 million and $48.2 million, respectively. The goodwill is not deductible for tax purposes.

The Company finalized the allocation of the purchase price for the Velcora acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy.

The final allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:


(In thousands)	Total
Current assets, net of cash acquired	$	20,248
Property, plant and equipment	1,656
Goodwill	86,613
Intangible assets	48,183
Other noncurrent assets	788
Total assets acquired	157,488
Current liabilities	(7,630)
Long-term borrowings	(51,130)
Deferred income taxes	(11,094)
Other noncurrent liabilities	(454)
Net assets acquired	$	87,180

The acquired intangible assets and weighted average amortization periods are as follows:


(In thousands, except weighted average life)	Total		Weighted Average Life
Trade names	$	7,089	15
Customer relationships	34,677		12
Unpatented technology	6,417		9
Acquired intangible assets	$	48,183

On September 3, 2019, the Company settled the debt assumed in the Velcora acquisition and incurred a loss on early retirement of $0.7 million which was recorded in Other (income) expense - net in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019.