Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2021

3. Acquisitions and Divestitures

The following business combination and divestiture activity took place during the year ended December 31, 2021:

Nook Industries Acquisition

On December 31, 2021, the Company acquired all of the issued and outstanding equity interests of Nook Industries, LLC ("Nook"), a leader in the U.S. engineered linear motion industry. The acquisition expands the Company's current portfolio of linear product offerings. The acquisition is being accounted for as a business combination using the acquisition method of accounting and the results have been consolidated into the Company's Automation & Specialty ("A&S") segment.

The aggregate purchase price of approximately $138.5 million, inclusive of certain post-closing adjustments but subject to others, consisted of $125.2 million of cash transferred, net of $5.1 million of cash acquired, and a noncontingent purchase price holdback of $8.2 million. The purchase price holdback was recorded in accruals and other current liabilities at December 31, 2021 and was released in January 2022. The Company borrowed $130.0 million under its Revolving Credit Facility to finance the transaction.

The fair value of all the acquired identifiable assets and liabilities summarized below are based on preliminary valuations and are subject to change as the Company obtains additional information during the acquisition measurement period. The purchase price allocation as of the acquisition date is as follows:


	At Acquisition Date
Total cash consideration	$	130.3
Purchase price holdback		8.2
Fair value of consideration transferred		138.5

Recognized identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		5.1
Receivables		3.7
Inventory		10.8
Prepaids and other current assets		0.4
Property, plant and equipment		12.8
Deferred tax asset		0.9
Other non-current assets		5.0
Intangibles		55.1
Accounts payable		(2.9	)
Accrued payroll		(0.7	)
Accrued expenses and other current liabilities		(2.7	)
Other long term liability		(4.6	)
Total identifiable net assets acquired		82.9
Goodwill	$	55.6

The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill, which is deductible for income tax purposes in the United States. The goodwill in this acquisition is attributable to the Company’s expectation to achieve synergies, such as the ability to cross-sell product, and the ability to optimize the cost structure.


Intangible assets acquired consist of:
Customer relationships	$	54.0
Trade name		1.1
Total intangible assets	$	55.1

Customer relationships and trade name are subject to amortization, and will be recognized on a straight-line basis over the estimated useful lives of 18 years and 4 years, respectively, which represents the anticipated period over which the Company estimates it will benefit from the acquired assets.

The following table sets forth the unaudited pro forma results of operations of the Company for the years ended December 31, 2021 and December 31, 2020 as if the Company had acquired Nook on January 1, 2020. The pro forma information contains the actual operating results of the Company and the Nook business, adjusted to include the pro forma impact of (i) additional depreciation expense as a result of estimated depreciation based on the fair value of fixed assets; (ii) additional expense as a result of the estimated amortization of identifiable intangible assets; (iii) additional interest expense associated with the borrowings used to finance the acquisition and (iv) inventory fair value adjustment. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition occurred at the beginning of the period or that may be obtained in the future.


	Pro forma (unaudited)
	Years Ended December 31,
	2021		2020
Total revenues	$	1,940.6	$	1,764.1
Net income (loss)		31.0		(30.0	)
Basic earnings per share	$	0.48	$	(0.46	)
Diluted earnings per share	$	0.47	$	(0.46	)

JVS Divestiture

In the fourth quarter of 2021, we committed to a plan to sell our JVS business within our Automation & Specialty reporting segment in an effort to exit the heavy-duty trucks and transportation industry. On February 8, 2022, we entered into a purchase and sale agreement with Cummins Inc (the "Buyer"). The sale, which is expected to be completed in 2022, is subject to antitrust and regulatory approval requirements, as well as other customary closing conditions. The Company determined the criteria to be classified as held for sale were met and the assets and liabilities were presented as held for sale in the Consolidated Balance Sheets and measured at the lower of carrying value or fair value less cost to sell until the transaction is completed. The Company determined that the disposal group classified as held for sale does not meet the criteria for classification as discontinued operations as the disposal is not considered a strategic shift that has a major effect on the Company’s operations and financial results. The JVS business is not a significant disposal based on its quantitative and qualitative evaluation.

Before measuring the fair value less costs to sell of the disposal group as a whole, the Company first reviewed individual assets and liabilities to determine if any fair value adjustments were required and concluded no individual asset impairments were required. Then, based on the purchase and sale agreement entered into by the Company and the Buyer, the Company determined the fair value of the disposal group to be equal to the selling price, less costs to sell. Based on this review, the Company recorded a non-cash goodwill impairment charge of $60.0 million as the sale was considered to be a triggering event to evaluate goodwill impairment for the JVS reporting unit. Additionally, the Company recorded an asset held for sale impairment charge of $82.4 million, for a total impairment charge of $142.4 million in 2021.

The assets and liabilities of the JVS business classified as held for sale at December 31, 2021 were as follows:


	December 31,2021
Assets
Current Assets
Trade receivables	$	11.3
Inventories		16.3
Prepaid expenses and other current assets		2.3
Property, plant and equipment, net		64.6
Goodwill		—
Intangible assets, net		364.5
Other assets		0.7
Impairment on carrying value (1)		(82.4	)
Total assets held for sale	$	377.3

Liabilities
Current Liabilities
Accounts payable	$	20.8
Other current liabilities		9.8
Deferred tax liabilities		22.3
Other liabilities		0.1
Total liabilities held for sale	$	53.0
(1) Includes the effect of approximately $10.8 million of favorable cumulative foreign currency translation adjustment and accumulated other post retirement benefit obligation gains.

The following business combination activity took place during the year ended December 31, 2018:

Automation & Specialty Acquisition

On October 1, 2018, the Company and Fortive Corporation (“Fortive”) consummated the combination (the “Fortive Transaction”) of Altra with four operating companies from Fortive’s Automation & Specialty platform (the “A&S Business”), and as a result, the consolidated financial statements reflect the A&S Business’s results of operations from October 1, 2018 onward.

The A&S Business, consisting of four key brands, Kollmorgen, Portescap, Thomson and Jacobs Vehicle Systems, designs, manufactures, markets and sells electromechanical and electronic motion control products, including standard and custom motors, drives and controls; linear motion systems, ball screws, linear bearings, clutches/brakes, linear actuators and mechanical components; and through Jacobs Vehicle Systems, supplemental braking systems for commercial vehicles.

As of December 31, 2019, the allocation of the purchase price of the A&S Business was complete. The Company recorded $29.5 million of purchase price adjustments and certain measurement period adjustments for the year to date period ended December

31, 2019 resulting in an increase to goodwill in the amount of $47.5 million. The purchase price allocation below includes such adjustments.


	At Acquisition Date			Measurement Period Adjustments			At Acquisition Date (As Adjusted)
Consideration transferred:
Total cash consideration	$	1,003.4		$	—		$	1,003.4
Total equity consideration		1,458.7			—			1,458.7
A&S acquisition purchase price adjustment		—			29.5			29.5
Fair value of consideration transferred	$	2,462.1		$	29.5		$	2,491.6

Recognized identifiable assets acquired and liabilities assumed:
Cash: less cash on A&S balance sheet at 10/1/2018		54.1			(0.6	)		53.5
Receivables		129.7			(0.8	)		128.9
Inventory		89.1			(3.8	)		85.3
Prepaids and other current assets		6.9			(0.2	)		6.7
Property, plant and equipment		178.3			(1.3	)		177.0
Intangibles		1,454.0			—			1,454.0
Other non-current assets		7.9			(0.4	)		7.5
Accounts payable		(98.9	)		0.8			(98.1	)
Accrued payroll		(15.2	)		0.5			(14.7	)
Accrued expenses and other current liabilities		(33.7	)		(0.4	)		(34.1	)
Pension liability and other post employment benefits		(12.0	)		(0.3	)		(12.3	)
Deferred tax liability		(355.7	)		(11.2	)		(366.9	)
Other long term liability		(2.6	)		(0.3	)		(2.9	)
Senior unsecured notes assumed		(400.0	)		—			(400.0	)
Total identifiable net assets assumed		1,001.9			(18.0	)		983.9
Goodwill	$	1,460.2		$	47.5		$	1,507.7

The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill, which is not deductible for income tax purposes in the United States. The goodwill in this acquisition is attributable to the Company’s expectation to achieve synergies, such as facility consolidations, global procurement efficiencies, the ability to cross-sell product, and the ability to penetrate certain geographic areas.


Intangible assets acquired consist of:
Customer relationships	$	1,025.0
Trade names and trademarks		209.0
Technology		204.0
In-process research and development ("IPR&D")		16.0
Total intangible assets	$	1,454.0

Customer relationships and technology are subject to amortization, and will be recognized on a straight-line basis over the estimated useful lives of 22 – 29 years and 7-10 years, respectively, which represents the anticipated period over which the Company estimates it will benefit from the acquired assets. The tradenames and trademarks are considered to have an indefinite life and will not be amortized.

The major acquired technology IPR&D relates to the next generation of valvetrain technologies at the JVS business, which focus on improving engine brake performance, improving fuel efficiency and meeting future worldwide emissions regulations. The IPR&D projects are not currently amortized and will be reviewed for impairment at least annually and amortization will commence when the assets are placed into service. There was no evidence of impairment to IPR&D as of December 31, 2020. As of December 31, 2021, the acquired IPR&D was reclassified as held for sale in connection with the plan to sell the JVS business.