Acquisition

9 Months Ended

Feb. 29, 2024

Acquisition

Acquisition

Note 2 – Acquisitions

Acquisition of Triumph Group’s Product Support Business

On March 1, 2024, we completed the acquisition of Triumph Group, Inc.’s Product Support Business (the “Product Support Business”) for a purchase price of $725.0 million subject to customary post-closing adjustments for cash, working capital and indebtedness. The Product Support Business is a leading global provider of specialized maintenance, repair, and overhaul (“MRO”) capabilities for critical aircraft components in the commercial and defense markets, providing MRO services for structural components, engine and airframe accessories, interior refurbishment and wheels and brakes. The Product Support Business also designs proprietary designated engineering representative repairs and parts manufacturer approval parts.

The Product Support Business will be reported within our Repair & Engineering segment. The purchase price was paid at closing and was funded with debt financing. In connection with the acquisition, we secured commitments for a bridge financing facility (the “Bridge Facility”). No amounts were drawn under the Bridge Facility, which was terminated on March 1, 2024 upon securing permanent debt financing and closing the acquisition. We expensed $6.1 million within Interest expense for the fees associated with the Bridge Facility. Transaction costs associated with the acquisition of $9.4 million were expensed as incurred within Selling, general and administrative expenses in the three-month period ended February 29, 2024.

Acquisition of Trax USA Corp.

On March 20, 2023, we acquired the outstanding shares of Trax USA Corp. (“Trax”) for a purchase price of $120.0 million plus contingent consideration of up to $20.0 million based on Trax’s adjusted revenue in calendar years 2023 and 2024. Trax is a leading provider of aircraft MRO and fleet management software supporting a broad spectrum of maintenance activities for a diverse global customer base of airlines and MROs.

The purchase price was paid at closing except for $12.0 million which was placed on deposit with an escrow agent to secure potential indemnification obligations and fund post-closing adjustments for working capital and indebtedness. The post-closing adjustments for working capital and indebtedness were finalized in the three-month period ended November 30, 2023 resulting in a purchase price reduction of $1.8 million.

The contingent consideration is based on an adjusted revenue target and requires certain of the former owners’ continued employment through December 31, 2024, and is treated as compensation expense within Selling, general and administrative expenses. The adjusted revenue target is based on revenue recognized under U.S. GAAP adjusted for certain events related to deferred revenue, customer commitments, and other adjustments. We recognized compensation expense of $1.4 million and $4.2 million in the three- and nine-month periods ended February 29, 2024, respectively.

We accounted for the acquisition using the acquisition method and included the results of Trax’s operations in our consolidated financial statements from the effective date of the acquisition. Trax’s results are reported within our Integrated Solutions segment. The acquisition was funded using a combination of proceeds from our Revolving Credit Facility and cash on hand. Transaction costs associated with the acquisition of $5.1 million were expensed as incurred.

The final fair value of assets acquired and liabilities assumed is as follows:

Accounts receivable	$	8.8
Other assets		3.0
Intangible assets		61.7
Deferred revenue		(4.1)
Deferred tax liabilities		(15.1)
Other liabilities		(4.6)
Net assets acquired		49.7
Goodwill		63.8
Purchase price, net of cash acquired	$	113.5

Acquired amortizable intangible assets include customer relationships of $33.6 million and developed technology of $22.0 million which are being amortized over 12 years and 20 years, respectively. Intangible assets also include tradenames of $6.1 million which are indefinite-lived. The goodwill associated with the Trax acquisition is not deductible for tax purposes and is primarily attributable to the benefits we expect to derive from expected synergies including complimentary products and services, cross-selling opportunities and intangible assets that do not qualify for separate recognition, such as their assembled workforce.