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Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2022

All of the Company’s acquisitions of businesses have been accounted for under ASC 805, Business Combinations. Accordingly, the assets and liabilities 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 ABEL Pumps, L.P. and certain of its affiliates (“ABEL”), Airtech Group, Inc., US Valve Corporation and related entities (“Airtech”), Nexsight, LLC and its businesses Envirosight, WinCan, MyTana and Pipeline Renewal Technologies (“Nexsight”) and KZ CO. (“KZValve”) have been included in the Company’s Condensed Consolidated Financial Statements since the dates of acquisition on March 10, 2021, June 14, 2021, February 28, 2022 and May 2, 2022, respectively. The results of operations of Knight LLC (“Knight”) have been included in the Company’s Condensed Consolidated Financial Statements through the date of disposition on September 9, 2022. Supplemental pro forma information has not been provided as the acquisitions and divestiture did not have a material impact on the Company’s Condensed Consolidated Financial Statements individually or in the aggregate.

2022 Acquisitions

Nexsight

On February 28, 2022, the Company acquired Nexsight in a partial stock and asset acquisition. Nexsight complements and creates synergies with the Company’s existing iPEK and ADS business units that design and create sewer crawlers, inspection and monitoring systems and software applications that allow teams to identify, anticipate and correct wastewater system issues remotely. Headquartered in Randolph, New Jersey, Nexsight operates in the Company’s Water reporting unit within the Fluid

& Metering Technologies (“FMT”) segment. Nexsight was acquired for cash consideration of $112.5 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $56.2 million and $49.8 million, respectively. The goodwill is partially deductible for tax purposes.

The Company made a preliminary allocation of the purchase price for the Nexsight 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 integrate the newly acquired business, the Company 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:


	Total
Current assets, net of cash acquired	$	16.6
Property, plant and equipment	2.0
Goodwill	56.2
Intangible assets	49.8
Other noncurrent assets	4.4
Total assets acquired	129.0
Current liabilities	(11.2)
Deferred income taxes	(1.0)
Other noncurrent liabilities	(4.3)
Net assets acquired(1)	$	112.5

(1) During the third quarter of 2022, the Company obtained additional information about the assets and liabilities acquired that required a $2.2 million adjustment to reduce the purchase price of the Nexsight business.

Acquired intangible assets consist of trade names, customer relationships and software. 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:


	Total		Weighted Average Life
Trade names	$	13.5	15
Customer relationships	31.5		10
Software	4.8		5
Acquired intangible assets	$	49.8

KZValve

On May 2, 2022, the Company acquired KZValve in an asset acquisition. KZValve is a leading manufacturer of electric valves and controllers used primarily in agricultural applications. KZValve will augment and expand IDEX’s agricultural portfolio, complementing Banjo’s current fluid management solutions for these applications. Headquartered in Greenwood, Nebraska, KZValve operates in the Company’s Agriculture reporting unit within the FMT segment. KZValve was acquired for cash consideration of $120.1 million. The entire purchase was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $56.5 million and $52.0 million, respectively. The goodwill is deductible for tax purposes.

The Company made a preliminary allocation of the purchase price for the KZValve 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 integrate the newly acquired business, the Company 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:


	Total
Current assets, net of cash acquired	$	9.7
Property, plant and equipment	1.8
Goodwill	56.5
Intangible assets	52.0
Deferred income taxes	0.1
Other noncurrent assets	1.0
Total assets acquired	121.1
Current liabilities	(1.0)


Net assets acquired(1)	$	120.1

(1) During the third quarter of 2022, the Company obtained additional information about the assets and liabilities acquired that required a $0.1 million adjustment to reduce the purchase price of the KZValve business.

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:


	Total		Weighted Average Life
Trade names	$	7.5	15
Customer relationships	36.0		13
Unpatented technology	8.5		10
Acquired intangible assets	$	52.0

The Company incurred $2.7 million and $5.3 million of acquisition-related transaction costs during the three and nine months ended September 30, 2022, 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 recorded $0.1 million and $0.3 million of fair value inventory step-up charges associated with the completed 2022 acquisitions of Nexsight and KZValve, respectively, in Cost of sales during the nine months ended September 30, 2022.

2021 Acquisitions

ABEL

On March 10, 2021, the Company acquired the stock of ABEL. ABEL designs and manufactures highly engineered reciprocating positive displacement pumps for a variety of end markets, including mining, marine, power, water, wastewater and other general industries. Headquartered in Büchen, Germany, with sales and service locations in Madrid, Spain, and subsequent to the acquisition, with operations in Mansfield, Ohio, ABEL operates in the Company’s Pumps reporting unit

within the FMT segment. ABEL was acquired for cash consideration of $106.3 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $42.7 million and $46.0 million, respectively. The goodwill is not deductible for tax purposes.

The Company finalized the allocation of the purchase price for the ABEL 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:


	Total
Current assets, net of cash acquired	$	18.1
Property, plant and equipment	4.0
Goodwill	42.7
Intangible assets	46.0
Deferred income taxes	2.6
Other noncurrent assets	0.1
Total assets acquired	113.5
Current liabilities	(7.1)
Other noncurrent liabilities	(0.1)
Net assets acquired	$	106.3

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


	Total		Weighted Average Life
Trade names	$	9.0	15
Customer relationships	30.0		13
Unpatented technology	7.0		11
Acquired intangible assets	$	46.0

Airtech

On June 14, 2021, the Company acquired the stock of Airtech. Airtech designs and manufactures a wide range of highly-engineered pressure technology products, including vacuum pumps, regenerative blowers, compressor systems and valves for a variety of end markets, including alternative energy, food processing, medical, packaging and transportation. Headquartered in Rutherford, New Jersey, with primary manufacturing operations in Werneck, Germany and Shenzhen, China, Airtech operates in the Company’s Performance Pneumatic Technologies reporting unit within the Health & Science Technologies (“HST”) segment. Airtech was acquired for cash consideration of $471.0 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $268.5 million and $202.3 million, respectively. The goodwill is not deductible for tax purposes.

The Company finalized the allocation of the purchase price for the Airtech 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:


	Total
Current assets, net of cash acquired	$	45.3
Property, plant and equipment	4.8
Goodwill	268.5
Intangible assets	202.3
Other noncurrent assets	10.2
Total assets acquired	531.1
Current liabilities	(11.8)
Deferred income taxes	(39.9)
Other noncurrent liabilities	$	(8.4)
Net assets acquired	$	471.0

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


	Total		Weighted Average Life
Trade names	$	15.4	15
Customer relationships	162.9		13
Unpatented technology	24.0		11
Acquired intangible assets	$	202.3

The Company incurred $0.7 million and $4.4 million of acquisition-related costs during the three and nine months ended September 30, 2021, 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 recorded a $2.5 million fair value inventory step-up charge associated with the completed 2021 acquisition of ABEL in Cost of sales during the nine months ended September 30, 2021 and a $9.1 million fair value inventory step-up charge associated with the completed 2021 acquisition of Airtech in Cost of sales during the three and nine months ended September 30, 2021.

Divestitures

The Company periodically reviews its operations for businesses which may no longer be aligned with its strategic objectives and its focus on core businesses and customers. Any resulting gain or loss recognized due to divestitures is recorded within Gain on sale of business in the Condensed Consolidated Statements of Income.

On September 9, 2022, the Company completed the sale of Knight for proceeds of $49.4 million, net of cash remitted, resulting in a pre-tax gain on the sale of $34.8 million. Additionally, the Company recorded $5.5 million of income tax expense associated with this transaction as Provision for income taxes in the Condensed Consolidated Statements of Income during the three and nine months ended September 30, 2022. The results of Knight were reported within the FMT segment. The Company concluded that this divestiture did not meet the criteria for reporting the results of Knight as a discontinued operation.