Acquisitions

9 Months Ended

Jun. 30, 2020

Sensia joint venture

On October 1, 2019, we completed the formation of a joint venture, Sensia, a fully integrated digital oilfield automation solutions provider. Rockwell Automation owns 53% of Sensia and Schlumberger owns 47% of Sensia. As part of the transaction, we made $247.0 million of net cash payments to Schlumberger, which were funded by cash on hand. We control Sensia and, as of October 1, 2019, have consolidated Sensia in our financial results.

Rockwell Automation recorded assets acquired and liabilities assumed in connection with the formation of Sensia based on their estimated fair values as of the October 1, 2019, acquisition date. The preliminary purchase price allocation is as follows (in millions):



	Purchase Price Allocation
Accounts receivable	$	22.0
Inventory	61.1
Other current assets	1.2
Property, plant and equipment	9.3
Other assets	6.2
Goodwill	307.5
Intangible assets	254.1
Total assets acquired	661.4
Less: Liabilities assumed	(37.0		)
Less: Deferred income taxes	(2.7		)
Less: Noncontrolling interest portion	(293.8		)
Net assets acquired	$	327.9

	Purchase Consideration
Cash, net of cash acquired	$	247.0
Noncontrolling interest portion of Rockwell Automation's contributed business	26.6
Additional paid in capital adjustment	47.3
Other	7.0
Total purchase consideration, net of cash acquired	$	327.9

Intangible assets assigned include $254.1 million of customer relationships, technology, and trade names (approximately 11-year weighted average useful life). We assigned the full amount of goodwill and all other assets acquired to our Control Products & Solutions segment. The majority of the goodwill recorded is expected to be deductible for tax purposes. The assets were valued using an income approach, specifically the relief from royalty method and multi-period excess earnings method. The relief from royalty method calculates value based on hypothetical payments that would be saved by owning an asset rather than licensing it. The multi-period excess earnings method is the isolation of cash flows from a single intangible asset and measures fair value by discounting them to present value. These values are considered level 3 measurements under accounting principles generally accepted in the United States (U.S. GAAP) fair value hierarchy. Key assumptions used in the valuation of these intangible assets included: (1) a discount rate of 11%, (2) the estimated remaining life of technology and trademarks of from 5 to 15 years, and (3) the customer attrition rate ranging from 7.5% to 25%.

The fair value of the noncontrolling interest of the contributed business upon acquisition was $293.8 million. The consolidated value of Sensia is recorded at fair value for Schlumberger's contribution and at carrying value for Rockwell Automation's contribution.

The total incremental sales resulting from the Sensia joint venture included in our consolidated results for the three and nine months ended June 30, 2020, were approximately $37.8 million and $160.8 million, respectively.

Other acquisitions

In October 2019, we acquired MESTECH Services (MESTECH), a global provider of Manufacturing Execution Systems / Manufacturing Operations Management, digital solutions consulting, and systems integration services. We assigned the full amount of goodwill related to this acquisition to our Control Products & Solutions segment.

In January 2020, we acquired Avnet Data Security, LTD (Avnet), an Israel-based cybersecurity provider with over 20 years of experience providing cybersecurity services. We assigned the full amount of goodwill related to this acquisition to our Control Products & Solutions segment.

In April 2020, we acquired ASEM, S.p.A. (ASEM), a leading provider of digital automation technologies. We assigned the full amount of goodwill related to this acquisition to our Architecture & Software segment in the Consolidated Financial Statements.

In April 2020, we also acquired Kalypso, LP (Kalypso), a privately-held US-based software delivery and consulting firm specializing in the digital transformation of industrial companies with a strong client base in life sciences, consumer products and industrial high-tech. We assigned the full amount of goodwill related to this acquisition to our Control Products & Solutions segment.

Rockwell Automation recorded assets acquired and liabilities assumed in connection with these acquisitions based on their estimated fair values as of the respective acquisition dates. The preliminary aggregate purchase price allocation is as follows (in millions):



	Purchase Price Allocation
Accounts receivable	$	32.7
Inventory	9.6
Other current assets	1.1
Property, plant and equipment	6.0
Other assets	2.3
Goodwill	244.4
Intangible assets	76.5
Total assets acquired	372.6
Less: Liabilities assumed	(29.2		)
Less: Deferred income taxes	(14.4		)
Net assets acquired	$	329.0

	Purchase Consideration
Total purchase consideration, net of cash acquired	$	329.0

Intangible assets assigned include $76.5 million of customer relationships, technology, and trade names (approximately 10-year weighted average useful life). We assigned $161.3 million of goodwill to our Architecture & Software segment and $83.1 million of goodwill to our Control Products & Solutions segment. Approximately $68.9 million of the goodwill recorded is expected to be deductible for tax purposes. The purchase consideration includes $25.8 million of contingent consideration held in an escrow account and recorded in cash and cash equivalents in the Consolidated Balance Sheet.

The total sales included in our consolidated results from these four acquisitions for the three and nine months ended June 30, 2020, were approximately $15.5 million and $18.6 million, respectively.

The allocation of the purchase price to identifiable assets for all of the preceding acquisitions are based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but not to exceed 12 months following the acquisition date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined.

Pro forma consolidated sales for the three and nine months ended June 30, 2019, are approximately $1.8 billion and $5.2 billion, respectively, and the impact on earnings is not material. The preceding pro forma consolidated financial results of operations are as if all of the preceding acquisitions occurred on October 1, 2018. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the transaction occurred as of that time.

Acquisition-related costs recorded as expenses for all of the preceding acquisitions in the three and nine months ended June 30, 2020, were not material.