Acquisitions and Divestitures

12 Months Ended

Sep. 30, 2021

Acquisitions support the Company’s strategy of delivering a broad solutions portfolio with robust technology across multiple geographies and end markets. The Company continues to evaluate potential strategic acquisitions of businesses, assets and product lines and believes that capex-like, tuck-in acquisitions present a key opportunity within its overall growth strategy.

2021 Acquisitions

On April 1, 2021, the Company acquired the assets of Water Consulting Specialists, Inc. (“WCSI”) for $12,025 cash paid at closing. In addition, the Company recorded a liability of $761 at closing associated with an earn-out related to the WCSI acquisition, which was subsequently revalued to $150 and is included in Accrued expenses and other liabilities on the Consolidated Balance Sheets. During the year ended September 30, 2021, the Company received cash of $21 from the seller as a result of net working capital adjustments. WCSI is a leader in the design, manufacturing, and service of industrial high-purity water treatment systems. The acquisition strengthens the Company’s portfolio of high-purity water treatment systems and provides the opportunity to further expand its digitally enabled solutions and services in key industrial markets. WCSI is a part of the Integrated Solutions and Services segment. During the year ended September 30, 2021, the Company incurred approximately $83 in acquisition costs, which are included in General and administrative expense on the Consolidated Statements of Operations.

The Company has not finalized the valuations of the acquired assets, assumed liabilities, and identifiable intangible assets, including goodwill. The preliminary opening balance sheet for WCSI is summarized as follows:


Current assets	$	1,813
Property, plant, and equipment	221
Goodwill	4,340
Intangible assets, net	7,336
Other non-current assets	86
Total assets acquired	13,796
Liabilities assumed	(1,792)
Net assets acquired	$	12,004

On December 17, 2020, the Company acquired the industrial water business of Ultrapure & Industrial Services, LLC (“Ultrapure”) for $8,743 cash paid at closing. On April 1, 2021, the Company paid an additional $290 as a result of net working capital adjustments. Ultrapure, based out of Texas, provides customers across multiple end markets with a variety of water treatment products and services, including service deionization, reverse osmosis, UV, and ozonation. Ultrapure will strengthen the Company’s service capabilities in the Houston and Dallas markets and is a part of the Integrated Solutions and Services segment. During the year ended September 30, 2021, the Company incurred approximately $230 in acquisition costs, which are included in General and administrative expense on the Consolidated Statements of Operations.

The opening balance sheet for Ultrapure is summarized as follows:


Current assets	$	2,366
Property, plant, and equipment	963
Goodwill	2,836
Intangible assets, net	3,751
Other non-current assets	21
Total assets acquired	9,937
Liabilities assumed	(904)
Net assets acquired	$	9,033

2021 Divestitures

On March 1, 2021, the Company completed the divestiture of the Lange containment system, geomembrane and geosynthetic liner product line (the “Lange Product Line”) for $897 in cash at closing. The Lange Product Line was a part of the Integrated Solutions and Services segment. During the year ended September 30, 2021, the Company recognized a loss of $193 on the divestiture.

2020 Acquisitions

On September 3, 2020, the Company acquired the assets of privately held Aquapure Technologies of Cincinnati (“Aquapure”), a Hamilton, Ohio based water service and equipment company. Aquapure serves the commercial and light industrial markets and provides customers with a variety of water treatment products and services, including deionization, reverse osmosis, softeners, and filtration systems. Aquapure is part of the Integrated Solutions and Services segment.

On October 1, 2019, the Company acquired a 60% investment position in San Diego-based Frontier Water Systems, LLC (“Frontier”) for a purchase price of $10,885, which is net of working capital adjustments. Frontier is a pioneer in the development of patented, engineered equipment packages for high-rate treatment and removal of selenium, nitrate, and other metals from complex water systems. During the year September 30, 2020, the Company incurred approximately $591 in acquisition costs, which are included in General and administrative expenses. Frontier is part of the Integrated Solutions and Services segment.

The Company entered into an agreement to acquire the remaining 40% interest in Frontier on or prior to March 30, 2024. This agreement (a) gives holders of the remaining 40% interest in Frontier (the “Minority Owners”) the right to sell to Evoqua up to approximately 10% of the outstanding equity in Frontier at a predetermined price, which right may be exercised by the Minority Owners between January 1, 2021 and February 28, 2021 (the “Option”), and (b) obligates the Company to purchase and the Minority Owners to sell all of the Minority Owners’ remaining interest in Frontier at the fair market value at the time of sale on or prior to March 30, 2024 (the “Purchase Right”). The Purchase Right may be exercised early by the Minority Owners. The agreement to purchase the remaining interest was determined to be financing due to the mandatory Purchase Right, as per ASC Topic 480, Distinguishing Liabilities From Equity, and as such, the Company recognized a liability for the remaining 40% interest.

The value of the Option was determined to be $506 using a Black Scholes model, and was included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

The value of the Purchase Right was determined to be $6,661 and was included within Other non‑current liabilities on the Consolidated Balance Sheets, based upon the enterprise value of Frontier upon the acquisition date as per ASC Topic 480, Distinguishing Liabilities From Equity. Pursuant to ASC Topic 480, the Company determined that this should be recorded as a liability and should be recognized at the fair value at the time of inception, adjusted for any consideration or unstated rights or privileges. The liability will be subsequently measured at an amount that would be paid on the reporting date with any change in value from the previous reporting date recognized as interest cost. Refer to Note 6, “Fair Value Measurements” for a discussion of subsequent measurement of the Option and Purchase Right.

The opening balance sheet for Frontier is summarized as follows:


Current assets	$	3,186
Property, plant, and equipment	2,963
Goodwill	1,798
Intangible assets	11,571
Total assets acquired	$	19,518
Liabilities related to Option and Purchase Right	(7,167)
Other liabilities assumed	(1,466)
Net assets acquired	$	10,885

2020 Divestitures

On December 31, 2019, the Company completed the previously-announced sale of the Memcor product line to DuPont de Nemours, Inc. (“DuPont”). The aggregate purchase price paid by DuPont in the Transaction was $110,000 in cash, subject to certain adjustments. Following adjustments for cash and net working capital, gross proceeds paid by DuPont were $131,011. During the year September 30, 2020, the Company recognized a $57,700 net pre-tax benefit on the sale of the Memcor product line, net of $8,300 of discretionary compensation payments to employees in connection with the transaction and $2,100 in transaction costs incurred. The Company utilized $100,000 of the proceeds from the transaction to repay a portion of the Company’s First Lien Term Loans in January 2020.