NOTE 9 – BUSINESS ACQUISITIONS

Essco: Effective August 5, 2025, the Company acquired 100% of the membership units of Essco Calibration Laboratory, LLC (“Essco”), a privately-held calibration services corporation located in the Boston Metro area that is ISO 17025 certified. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the Company’s geographic reach and the depth and breadth of the Company’s service capabilities.

The Essco goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. The goodwill and intangible assets related to the Essco acquisition have been allocated to the Service segment. Intangible assets related to the Essco acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful lives of up to 15 years and are deductible for tax purposes. Amortization of goodwill related to the Essco acquisition is deductible for income tax purposes.

The Essco Customer Base & Contracts intangible asset was calculated using the MPEEM (Multi-Period Excess Earnings Method) under the Income approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles.  The fair value was determined to be $34.0 million and was assigned a useful life of 15 years. The Essco Trademarks and Tradenames intangible asset was calculated using the Relief-From-Royalty Method, which is a variant of the income approach and the market approach, and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $2.7 million and was assigned a useful life of seven years. The weighted average useful life of acquired intangible assets acquired is 14 years.

The total purchase price for Essco is approximately $85.4 million, consisting of $82.8 million in cash paid at closing and $2.8 million in accrued liabilities related to certain post-closing adjustments and payments less $0.2 million working capital receivable. There was a measurement period adjustment in December 2025 related to working capital that resulted in a $0.2 million decrease in goodwill. Subsequent to March 28, 2026, the working capital settlement was received. As of March 28, 2026, $2.8 million remains unpaid and is reflected in accrued compensation and other current liabilities in the Consolidated Balance Sheets. The purchase was primarily financed by a draw on the Credit Agreement. See Note 3 - Long-Term Debt for more details.

The Company has preliminarily estimated fair values for the assets purchased and liabilities assumed as of the date of the acquisition. The amounts reported are considered preliminary as the Company is completing the valuations required to allocate the purchase price. The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value of Essco's assets and liabilities acquired on August 5, 2025 (in thousands):

Since the acquisition, Essco has contributed revenue of $14.9 million and operating income of $0.2 million, which includes the negative impact of amortization of the acquired intangible assets. 

Martin:  Effective December 10, 2024, the Company acquired a 100% membership interest in Martin Calibration, LLC, a Delaware limited liability calibration services company ("Martin"). Martin is ISO 17025 certified. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s service capabilities.

The Martin goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. The goodwill and intangible assets relating to the Martin acquisition have been allocated to the Service segment. Intangible assets related to the Martin acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to 14 years and are deductible for tax purposes. Amortization of goodwill related to the Martin acquisition is deductible for income tax purposes.  

The Martin Customer Base & Contracts intangible was calculated using the MPEEM (Multi-Period Excess Earnings Method) approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $32.0 million and was assigned a useful life of 14 years. The Martin Trademarks and Tradenames asset was calculated using the relief from royalty approach, which is a variant of the income approach, and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $3.2 million and was assigned a useful life of 11 years. The weighted average useful life of acquired intangible assets acquired is 14 years.

The total purchase price for Martin was $81.7 million, consisting of $71.9 million in cash and the issuance of common stock valued at $9.9 million, including $2.0 million placed in escrow for certain post-closing adjustments and claims against the sellers, if any. There was a measurement period adjustment related to working capital that resulted in a $0.1 million decrease in goodwill. The $2.0 million escrow was released to the sellers in December 2025.

The following is a summary of the final purchase price allocation, in the aggregate, to the fair value of Martin's assets and liabilities acquired on December 10, 2024 (in thousands):

Becnel:  Effective  April 15, 2024, the Company acquired Becnel Rental Tools, LLC, a Louisiana limited liability company ("Becnel"), pursuant to an Agreement and Plan of Merger (the “Becnel agreement”), by and among the Company, Becnel and the other parties thereto. Becnel is an ISO 9001:2015 certified provider of rental tools and services primarily utilized in the decommissioning and maintenance of oil wells. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s service and rental capabilities.

The Becnel goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. The goodwill and intangible assets relating to the Becnel acquisition have been allocated to both the Service and Distribution segment. Intangible assets related to the Becnel acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to eleven years and are deductible for tax purposes. Amortization of goodwill related to the Becnel acquisition is deductible for income tax purposes.

The Becnel Customer Base & Contracts intangible was calculated using the MPEEM approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $7.2 million and was assigned a useful life of 10 years. The Becnel Trademarks and Tradenames asset was calculated using the relief from royalty approach, which is a variant of the income approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $0.8 million and was assigned a useful life of 11 years. The weighted average useful life of acquired intangible assets acquired is 10 years.

The total purchase price for Becnel was $49.8 million consisting of up to $17.5 million in cash and the issuance of our common stock valued at $32.3 million.  Pursuant to the Becnel agreement, the Company held back approximately $2.5 million of the purchase price for certain potential post-closing adjustments.  This included $0.5 million withheld for ordinary post-closing adjustments and $2.0 million withheld that was subject to revenue target achievement. The $0.5 million holdback was paid to the sellers in April 2025.

Pursuant to the Becnel agreement, the purchase price was subject to reduction by $2.0 million if certain revenue targets were not met through April 15, 2026.  As of April 15, 2024, the estimated fair value of this contingent consideration, classified as Level 3 in the fair value hierarchy, was approximately $1.5 million.  50% of this contingent consideration was payable in cash and 50% of this contingent consideration was payable in 9,283 shares of Transcat common stock.  The cash portion of the contingent consideration was initially classified as a liability and recorded in other liabilities in the Consolidated Balance Sheets.  The stock portion of the contingent consideration was classified as equity and recorded in shareholders equity in the Consolidated Balance Sheets. The cash portion of the contingent consideration was remeasured quarterly. After reviewing the fiscal year 2026 forecast, the Company revalued the contingent consideration payout during the fourth quarter of fiscal year 2025 and recognized a non-cash gain of approximately $0.8 million, which left a contingent liability of zero as of March 29, 2025. The gain was recorded in general and administrative expenses in its Consolidated Statement of Income. As of March 28, 2026, the estimated fair value of the contingent consideration, classified as Level 3 in the fair value hierarchy, remained zero. Subsequent to year end, on April 15, 2026, the adjustment period expired and revenue targets were not met.

The following is a summary of the final purchase price allocation of Becnel's assets and liabilities acquired on April 15, 2024 (in thousands):

NEXA: In connection with the acquisition of NEXA, there were potential earn-out payments of up to $7.5 million over the four-year period following the closing of the transaction based upon NEXA achieving certain annual revenue and EBITDA goals. 

During fiscal year 2024, the Company entered into an Amendment to the Share Purchase Agreement with NEXA (the “First Amendment”). Pursuant to the First Amendment, the potential earn-out payments would have been up to $7.1 million for the Earn-Out years of calendar year 2023, 2024 and 2025 based upon NEXA achieving certain EBITDA goals. If achieved, the earn-out payments would be made in shares of common stock unless certain criteria was met for cash payment. In fiscal year 2025, the Company entered into an Amendment to the Share Purchase Agreement with NEXA (the “Second Amendment”). Pursuant to the Second Amendment, the Company agreed to pay approximately $0.5 million for the Earn-Out year of calendar year 2023 and removed the entitlement for any future earn-out payments. This payment was made during fiscal year 2025. 

The results of acquired businesses are included in Transcat’s consolidated operating results as of the dates the businesses were acquired. The following unaudited pro forma information presents the Company’s results of operations as if the acquisitions of Essco had occurred at the beginning of fiscal year 2025. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred at the beginning of the period presented or what the Company’s operating results will be in future periods.

Certain of the Company’s acquisition agreements include provisions for contingent consideration and other holdback amounts. The Company accrues for contingent consideration and holdback provisions based on their estimated fair value at the date of acquisition and at subsequent remeasurement periods, as applicable.  As of March 28, 2026, no contingent consideration and $2.2 million of other holdback amounts were unpaid and are reflected in accrued compensation and other current liabilities on the Consolidated Balance Sheets. As of March 29, 2025, no contingent consideration and $2.8 million of other holdback amounts were unpaid and reflected in current liabilities on the Consolidated Balance Sheets and $1.6 million of other holdback amounts unpaid were reflected in other liabilities in the Consolidated Balance Sheets. $2.7 million of holdback amounts were paid in fiscal year 2026 and 2025, respectively. During fiscal year 2024, $0.8 million of holdback amounts were paid.

During fiscal years 2026, 2025 and 2024, acquisition costs of $0.7 million, $1.3 million and $1.2 million, respectively, were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income.