ACQUISITIONS

12 Months Ended

Oct. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

ACQUISITIONS

ACQUISITIONS

Acquisition of Quality Uptime

Effective June 21, 2024, we acquired Quality Uptime Services, Inc. (“Quality Uptime”), an uninterrupted power supply system (“UPS”) installation and maintenance company providing customized preventive and emergency service programs for mission-critical data centers and other facilities, for a net cash purchase price of approximately $118.2 million (subject to customary working capital adjustments). The acquisition was accounted for under the acquisition method. Accordingly, the assets acquired and liabilities assumed were recognized on the date of acquisition at their estimated fair values, with the excess of the purchase price recorded as goodwill. The goodwill is amortizable over 15 years for income tax purposes. As of October 31, 2024, we recorded preliminary goodwill and intangibles of $80.6 million and $35.2 million, respectively. The total assets acquired, excluding goodwill and intangibles, and liabilities assumed amounted to $24.0 million and $21.6 million, respectively. The acquisition accounting is subject to change as we obtain additional information about the facts and circumstances that existed as of the acquisition date during the measurement period, not to exceed one year from the acquisition date. The final acquisition accounting may include changes to non-current assets, including intangible assets and working capital.

The Consolidated Statements of Comprehensive Income for the year ended October 31, 2024, include revenues attributable to Quality Uptime of $26.3 million. The operations of Quality Uptime are included in our Technical Solutions segment.

Acquisition of RavenVolt

On September 1, 2022, we completed the acquisition of all of the equity interests of RavenVolt, Inc. (“RavenVolt”), a nationwide provider of advanced turn-key microgrid systems utilized by diversified commercial and industrial customers, national retailers, utilities, and municipalities. RavenVolt’s operations are included within our Technical Solutions segment. The transaction met the definition of a business combination. We applied the acquisition method of accounting.

The purchase price for the acquisition was approximately $170.0 million in cash at closing (subject to customary working capital and net debt adjustments) plus the potential of post-closing contingent consideration of up to $280.0 million. The post closing contingent consideration would be payable in cash in calendar years 2024, 2025, and 2026 if RavenVolt’s earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the RavenVolt merger agreement, meets or exceeds certain defined targets. The defined EBITDA targets for calendar year 2023 were not achieved, and as a result, no contingent consideration payment was made in 2024. The maximum remaining contingent consideration that is payable in calendar years 2025 and 2026 is $75.0 million, and $130.0 million, respectively. If the EBITDA achieved for calendar years 2023 - 2025 cumulatively meets the defined EBITDA targets, the entire $280.0 million would be paid in calendar year 2026, minus any earn-out payments made in 2024 and 2025.

To estimate the fair value of the contingent consideration on the date of acquisition, we used the Real Options method. The key assumptions used in our valuation were: i) forecast of revenues and EBITDA margins; ii) the volatility associated with the EBITDA; iii) risk-adjusted discount rate applied to forecasted EBITDA; and (iv) the credit-adjusted discount rate related to the payment of the contingent consideration. A simulation of one million scenarios was performed with the assistance of a third-party valuation specialist, resulting in a fair value for the cumulative contingent consideration for calendar years 2023 through 2025 totaling $59.0 million.

At October 31, 2023, the estimate of the fair value of the contingent consideration was $13.4 million. Changes in results of operations and management’s forecasts during 2024 for calendar years 2024 and 2025 were primarily due to the timing of large microgrid systems’ and generators’ installation project performing better than anticipated, resulting in a total increase of fair value to $109.1 million at October 31, 2024, of which $75.0 million relates to the calendar year 2024 payment to be made in 2025. Given the relatively short period of time until the end of the earn-out period, there is a high level of confidence in the projections for calendar year 2024 that are the basis for the estimated contingent consideration payment. This change in the fair value is recognized within the “Selling, general and administrative expenses” of the Consolidated Statements of Comprehensive Income.