NOTE 3. ACQUISITIONS

We continually evaluate potential acquisitions that either strategically fit with our existing portfolio or expand our portfolio into a new and attractive business area. We have completed a number of acquisitions that have been accounted for as purchases and have resulted in the recognition of goodwill in our financial statements. This goodwill arises because the purchase prices for these businesses reflect a number of factors including the future earnings and cash flow potential of these businesses, the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers, the competitive nature of the processes by which we acquired the businesses, the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses, and the complementary strategic fit and resulting synergies these businesses bring to existing operations.

We make an initial allocation of the purchase price at the date of acquisition based upon our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to 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. We are in the process of obtaining valuations of certain acquired assets and evaluating the tax impact in connection with certain acquisitions. We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.

The following briefly describes our acquisition activity for the three years ended December 31, 2017.

On October 19, 2017, by a merger of Fern Merger Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Fortive, into Landauer, Inc., a Delaware corporation (“Landauer”), we acquired all of the outstanding shares of common stock for $67.25 per share in cash, for a total purchase price of approximately $760 million, net of acquired cash (the “Landauer Acquisition”). Landauer is a leading global provider of subscription-based technical and analytical readers to determine occupational and environmental radiation exposure, as well as a leading domestic provider of outsourced medical physics services. Landauer is headquartered in Glenwood, Illinois, and is now part of the Professional Instrumentation segment. Landauer generated annual revenues of approximately $143 million in 2016. We financed the Landauer Acquisition with available cash and proceeds from the issuance of U.S. dollar and euro-denominated commercial paper. We preliminarily recorded approximately $514 million of goodwill related to the Landauer Acquisition.

In addition to the Landauer Acquisition, during 2017, we acquired all the outstanding shares of common stock of Industrial Scientific Corporation (“ISC”) on August 25, 2017 and the remaining 80% of Orpak Systems Limited (“Orpak”) on August 31, 2017, in which we previously had an ownership interest, for total consideration of $800 million in cash, net of cash acquired. The acquisition of the remaining 80% interest also resulted in the revaluation of our prior interest, and we recorded a gain from acquisition of $15.3 million. The businesses acquired complement existing units of both our segments. The aggregate annual sales of these businesses at the time of their respective acquisitions, in each case based on the company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $246 million. We preliminarily recorded an aggregate of $521 million of goodwill related to these acquisitions.

During 2016, we acquired three businesses for total consideration of $190 million in cash, net of cash acquired. The businesses acquired complement existing units of both our segments. The aggregate annual sales of these businesses at the time of their respective acquisitions, in each case based on the acquired company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $47 million. We recorded an aggregate of $113 million of goodwill related to these acquisitions.

During 2015, we acquired two businesses for total consideration of $37 million in cash, net of cash acquired. The businesses acquired complement existing units of both our segments. The aggregate annual sales of these businesses at the time of their respective acquisitions, in each case based on the acquired company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $18 million. We recorded an aggregate of $21 million of goodwill related to these acquisitions.

The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the years ended December 31 ($ in millions):



	2017			2016			2015
Accounts receivable	$	103.7		$	5.2		$	2.8
Inventories	37.3			2.2			3.1
Property, plant and equipment	137.1			0.6			1.0
Goodwill	1,035.2			113.2			21.2
Other intangible assets, primarily customer relationships, trade names and technology	587.8			82.7			13.0
Trade accounts payable	(18.7		)	(1.5		)	(0.9		)
Other assets and liabilities, net	(289.0		)	(12.3		)	(3.1		)
Previously held investment	(36.8		)	—			—
Net cash consideration	$	1,556.6		$	190.1		$	37.1

The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the individually significant acquisitions in 2017 discussed above, and all of the other 2017 acquisitions as a group ($ in millions):



	Landauer			Others			Total
Accounts receivable	$	31.2		$	72.5		$	103.7
Inventories	5.0			32.3			37.3
Property, plant and equipment	23.1			114.0			137.1
Goodwill	514.4			520.8			1,035.2
Other intangible assets, primarily customer relationships, trade names and technology	293.0			294.8			587.8
Trade accounts payable	(3.1		)	(15.6		)	(18.7		)
Other assets and liabilities, net	(106.9		)	(182.1		)	(289.0		)
Previously held investment	—			(36.8		)	(36.8		)
Net cash consideration	$	756.7		$	799.9		$	1,556.6

During 2017, related to these three acquisitions, we incurred approximately $19 million of pretax transaction-related costs, primarily banking fees, legal fees, amounts paid to other third-party advisers, and other change in control costs. These amounts are recorded in SG&A. We recorded certain adjustments to the preliminary purchase price allocations during 2017 resulting in a net decrease of $56 million to goodwill. Revenue and operating profit attributable to the acquisitions was immaterial for the year ended December 31, 2017.

Transaction-related costs and acquisition-related fair value adjustments were not material to earnings in 2016 or 2015.

Pro Forma Financial Information (Unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the 2017 and 2016 acquisitions as if they had occurred as of January 1, 2016. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time ($ in millions except per share amounts):



	2017		2016
Sales	$	6,928.2	$	6,636.8
Net earnings	$	1,022.2	$	845.4
Diluted net earnings per share	$	2.90	$	2.43