v3.26.1
Mergers and Acquisitions
 3 Months Ended
Mar. 31, 2026
Business Combination [Abstract]  
Mergers and Acquisitions

NOTE 3. MERGERS AND ACQUISITIONS

Our acquisition of businesses consisted of the transactions described below during the three months ended March 31, 2026 and the twelve months ended December 31, 2025. Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income represent expenditures directly associated with the closing and integration activities of the Merger and acquisitions completed, and include (i) legal, accounting, and advisory fees to complete the Merger and acquisitions and (ii) costs to integrate acquired businesses into our existing operations, including move, severance, and other integration costs (collectively, “acquisition and integration costs”).

SCF Machining Corporation

On February 7, 2025, we acquired SCF in exchange for $17.7 million in cash consideration, subject to post-closing adjustments. SCF is a Canadian-domiciled entity and parent company to SCF Machining Corporation Vietnam Company Limited, a Vietnam-based company that was established to grow our low-cost country supply chain by establishing an exclusive manufacturing vendor to provide Innovex with high quality, low price machined goods. The acquisition qualifies as a business combination and was accounted for using the acquisition method of accounting.

Final Purchase Price Allocation

In accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management. The table below presents the final purchase price allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of February 7, 2025. Goodwill is primarily attributable to the anticipated cost reductions and supply chain flexibility expected from the integration of SCF. Based on the current tax treatment, goodwill is not expected to be deductible for income tax purposes.

(in thousands)

 

 

Final Purchase Price Allocation

 

Cash and restricted cash

 

 

$

308

 

Inventories

 

 

 

758

 

Prepaid expenses and other current assets

 

 

 

722

 

Property and equipment

 

 

 

1,305

 

Right-of-use assets – operating

 

 

 

892

 

Other long-term assets

 

 

 

269

 

Total assets

 

 

 

4,254

 

Accounts payable

 

 

 

671

 

Accrued expenses

 

 

 

372

 

Operating lease liabilities - current

 

 

 

374

 

Operating lease liabilities - noncurrent

 

 

 

518

 

Total liabilities

 

 

 

1,935

 

Net assets acquired

 

 

 

2,319

 

Goodwill

 

 

 

15,402

 

Total purchase consideration

 

 

$

17,721

 

We incurred transaction costs of $0.2 million in connection with the acquisition. The costs were expensed as incurred and recognized in Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income.

Citadel Casing Solutions, LLC

On May 30, 2025, we acquired Citadel for $69.7 million in cash consideration, subject to post-closing adjustments. We believe this acquisition enhances our product portfolio and allows us to leverage Citadel's industrial platform. The acquisition qualifies as a business combination and is accounted for using the acquisition method of accounting. The purchase price includes $3.0 million that was retained by the Company for purposes of funding any post-closing expenses and liabilities identified after the close of the transaction, if necessary. As of March 31, 2026, we have disbursed the entirety of the retained $3.0 million based on post-closing expenses identified.

Preliminary Purchase Price Allocation

In accordance with ASC 805, identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. We expect to finalize these amounts as soon as possible but no later than one year from May 30, 2025, the closing date of the acquisition.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of May 30, 2025. Goodwill represents the future economic benefits arising from other assets acquired that cannot be individually identified and separately recognized. Based on the current tax treatment, goodwill is expected to be deductible for income tax purposes over a 15-year period.

(in thousands)

Preliminary Purchase Price Allocation

 

 

Measurement Period Adjustment

 

 

Preliminary Purchase Price Allocation
(as Adjusted)

 

Cash and restricted cash

$

3,408

 

 

$

—

 

 

$

3,408

 

Trade receivables

 

13,059

 

 

 

—

 

 

 

13,059

 

Inventories (1)

 

13,238

 

 

 

(1,273

)

 

 

11,965

 

Prepaid expenses and other current assets

 

483

 

 

 

—

 

 

 

483

 

Property and equipment

 

8,576

 

 

 

—

 

 

 

8,576

 

Right-of-use assets – operating

 

1,193

 

 

 

—

 

 

 

1,193

 

Other long-term assets

 

51

 

 

 

—

 

 

 

51

 

Intangibles

 

23,800

 

 

 

—

 

 

 

23,800

 

Total assets

 

63,808

 

 

 

(1,273

)

 

 

62,535

 

Accounts payable

 

6,111

 

 

 

—

 

 

 

6,111

 

Accrued expenses

 

1,539

 

 

 

—

 

 

 

1,539

 

Operating lease liabilities - current

 

552

 

 

 

—

 

 

 

552

 

Other current liabilities

 

143

 

 

 

—

 

 

 

143

 

Current portion of long-term debt and finance lease obligations

 

762

 

 

 

—

 

 

 

762

 

Operating lease liabilities - noncurrent

 

641

 

 

 

—

 

 

 

641

 

Long-term debt and finance lease obligations

 

2,623

 

 

 

—

 

 

 

2,623

 

Total liabilities

 

12,371

 

 

 

—

 

 

 

12,371

 

Net assets acquired

 

51,437

 

 

 

(1,273

)

 

 

50,164

 

Goodwill

 

18,226

 

 

 

1,273

 

 

 

19,499

 

Total purchase consideration

$

69,663

 

 

$

—

 

 

$

69,663

 

(1) Measurement period adjustment recognized related to updated estimated fair value for acquired inventories.

We incurred transaction costs of $1.2 million in connection with the acquisition. The costs have been expensed as incurred and recognized in Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income.

The table below represents the detail of the intangible assets acquired and the respective amortization periods (amounts in thousands):

Intangible Type

Weighted Average Amortization
Period

 

 

Value

 

Customer relationships

 

10.0 Years

 

 

$

14,100

 

Trade names

 

5.0 Years

 

 

 

2,100

 

Technology, patents, and other

 

10.0 Years

 

 

 

7,600

 

Total intangibles acquired

9.6 Years

 

 

$

23,800

 

The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either using the relief-from royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The assumptions used to derive these values include significant judgments relating to baseline revenue and revenue growth rates, EBITDA margins, contributory asset charges, customer attrition rate, and discount rate. The estimated useful lives are based on our historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.