v3.26.3
Acquisitions and Equity Method Investments
 12 Months Ended
Jul. 31, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Acquisitions and Equity Method Investments
Note 2. Acquisitions and Equity Method Investments
Acquisitions
On May 4, 2026, the Company acquired 100% of Filtration Group’s Facet Filtration business (Facet), consisting of Facet (Oklahoma) LLC and Facet Netherlands B.V., in an all-cash transaction valued at $820.0 million, for cash consideration of $830.2 million. As part of this transaction, the Company issued $820.0 million of new debt, increasing total long-term debt outstanding for the Company to approximately $1.3 billion as of July 31, 2026, and remained in compliance with all applicable financial covenants. The new debt incurred in the fourth quarter of fiscal 2026 was at a rate of 4.65%. The new debt bears interest at a variable rate based on Term SOFR plus a spread that is based on the Company’s Leverage Ratio as defined by the agreements.
Facet offers fuel and fluid filtration solutions for mission-critical applications primarily in aerospace and defense, as well as power generation, strengthening the Company’s position in durable end markets. Headquartered in Tulsa, Oklahoma, Facet has approximately 250 employees across the U.S. and Europe with key manufacturing locations in Oklahoma and Spain. The Company accounted for the acquisition under the acquisition method of accounting for business combinations.
The Company allocates the purchase price of acquired businesses to the estimated fair values of the assets acquired and liabilities assumed, as well as any contingent consideration, where applicable, as of the date of acquisition. The fair values of the long-lived assets acquired, primarily intangible assets, are determined using calculations which can be complex and require significant judgment. Estimates include many factors such as the nature of the acquired company’s business, its historical financial position and results, technology obsolescence, customer retention rates, discount rates, royalty rates and expected future performance. Independent valuation specialists are used to assist in determining certain fair value calculations.
The Company estimates the fair value of acquired customer relationships using the multi-period excess earnings method. This approach is typically applied when cash flows are not directly generated by the asset, but rather, by an operating group which includes the particular asset. Fair value is estimated as the present value of the benefits anticipated from ownership of the asset, in excess of the economic returns required on the investment in contributory assets which are necessary to realize those benefits. The intangible asset’s estimated earnings are determined as the residual earnings after quantifying estimated economic returns from contributory assets. Assumptions used in these calculations include same-customer revenue growth rates, discount rate, estimated earnings and customer attrition rate.
The Company assigned the fair values to the net assets acquired resulting in $587.4 million for goodwill and $225.6 million for intangible assets, the amortization of which is not deductible for tax purposes, resulting in a deferred tax liability of $18.2 million and a deferred tax asset of $0.4 million. The purchase price allocation for this acquisition is preliminary. Any measurement period adjustments identified during the one-year period following the acquisition date will be recorded retrospectively to the acquisition date. The Company will disclose the nature and amount of any measurement-period adjustments recognized in subsequent periods. Net sales of Facet were included in the Consolidated Statements of Earnings for the three months ended July 31, 2026.
Purchase Price Summary
The purchase consideration was preliminarily allocated to assets acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition. The components of the Facet acquisition, net of cash acquired, as of the acquisition date were as follows (in millions):
2026
Assets Acquired:
Cash$7.6 
Accounts receivable, net18.1 
Inventories, net15.8 
Property, plant and equipment, net6.3 
Goodwill587.4 
Intangible assets:
Trademarks19.1
Customer relationships191.3 
Other intangible assets15.2 
Total intangible assets225.6 
Deferred tax asset0.4 
Other assets6.8 
       Total assets acquired868.0 
Liabilities Assumed:
Accounts payable6.4 
Deferred revenue6.2 
Deferred tax liability18.2 
Other liabilities7.0 
  Total liabilities assumed37.8 
       Net assets acquired$830.2 
Total purchase price$830.2 
Cash acquired(7.6)
Total acquisition, net of cash acquired$822.6 
The Company recorded intangible assets with an aggregate fair value of $225.6 million, consisting of customer relationships totaling $191.3 million with a 13 year useful life, trademarks totaling $19.1 million with a 10 year useful life and other intangibles totaling $15.2 million with useful lives ranging from 15 months to 10 years. In total, the acquired intangible assets had a weighted-average amortization period of 12.2 years.
The excess of the purchase consideration over the fair values of net tangible and identifiable assets acquired was recorded as goodwill in the Industrial Solutions segment. The Company believes the goodwill balance associated with the business combination is primarily attributed to the benefit of access to durable, growing end markets and recurring, regulated replacement part sales with accretive margins. The goodwill is not deductible for tax purposes.
Acquisition-related costs, recorded as general and administrative expenses, associated with the Facet acquisition were $8.6 million during the fiscal year ended July 31, 2026.
The post-closing operating results of Facet have been included in our consolidated financial statements. For the period from May 4, 2026 through July 31, 2026, the Company’s Consolidated Statements of Earnings include Facet revenue of $30.3 million and earnings before taxes of $0.1 million, including $8.9 million of amortization expense, for the year ended July 31, 2026. Pro forma information is not presented for the Facet acquisition because the effects of the acquisition are not material to the Company’s consolidated financial statements.
There were no other material acquisitions in fiscal 2026 and no material acquisitions in fiscal 2025.
Equity Method Investments
In fiscal 2025, the Company acquired a 49% non-controlling stake in Medica, headquartered in Medolla, Italy, for cash consideration of approximately €62.1 million, or $67.9 million and capitalized transaction costs of approximately €5.1 million, or $5.8 million. Medica is a leader in hollow fiber membrane filtration technology for medical applications and water purification. The Company has the option to acquire the remaining 51% stake in fiscal 2030. The investment is accounted for under the equity method of accounting. The earnings from the investment were not material for the year ended July 31, 2026 or July 31, 2025, respectively.