
5.	Acquisitions and Divestitures

On September 4, 2018, we signed a definitive agreement to acquire Hefei Gaomei Cleaning Machines Co., Ltd. and Anhui Rongen Environmental Protection Technology Co., Ltd (collectively "Gaomei"), privately held designers and manufacturers of commercial cleaning solutions based in China. We expect the acquisition to be completed in the first quarter of 2019. The purchase price and net assets to be acquired are not significant to our consolidated financial statements.

During the third quarter of 2018, we sold our Waterstar business for $4,000 in cash. The resulting gain was approximately $1,000 and is reflected within Selling and Administrative Expense in operating profit in our Condensed Consolidated Statements of Operations.

On April 6, 2017, we acquired the outstanding capital stock of IP Cleaning S.p.A. and its subsidiaries ("IPC Group") for a purchase price of $353,769, net of cash acquired of $8,804. The primary seller was Ambienta SGR S.p.A., a European private equity fund. IPC Group, based in Italy, is a designer and manufacturer of innovative professional cleaning equipment, cleaning tools and supplies. The acquisition strengthens our presence and market share in Europe and allows us to better leverage our EMEA cost structure. We funded the acquisition of IPC Group, along with related fees, including refinancing of existing debt, with funds raised through borrowings under a senior secured credit facility in an aggregate principal amount of $420,000. Further details regarding our acquisition financing arrangements are discussed in Note 8.

The following table summarizes the final fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:



ASSETS
Receivables	$	39,984
Inventories	46,442
Other Current Assets	7,456
Assets Held for Sale	2,247
Property, Plant and Equipment	63,890
Intangible Assets Subject to Amortization:
Trade Name	26,753
Customer Lists	123,061
Technology	9,631
Other Assets	2,000
Total Identifiable Assets Acquired	321,464
LIABILITIES
Accounts Payable	32,227
Accrued Expenses	18,130
Deferred Income Taxes	56,950
Other Liabilities	10,964
Total Identifiable Liabilities Assumed	118,271
Net Identifiable Assets Acquired	203,193
Noncontrolling Interest	(1,896		)
Goodwill	152,472
Total Purchase Price, net of Cash Acquired	$	353,769

Based on the final fair value measurement of the assets acquired and liabilities assumed, we allocated $152,472 to goodwill for the expected synergies from combining IPC Group with our existing business. None of the goodwill is expected to be deductible for income tax purposes. In connection with the finalization of the fair value measurements in the first quarter of 2018, we recorded a measurement period adjustment, which increased goodwill by $4,627 with offsetting adjustments to various income tax assets and liabilities.

The final fair value of the acquired intangible assets is $159,445. The expected lives of the acquired amortizable intangible assets are approximately 15 years for customer lists, 10 years for trade names and 10 years for technology. Trade names are being amortized on a straight-line basis while the customer lists and technology are being amortized on an accelerated basis. We recorded amortization expense of $5,401 and $16,424 in Selling and Administrative Expense on our Condensed Consolidated Statements of Operations for these acquired intangible assets for the three and nine months ended September 30, 2018, respectively.

The following unaudited pro forma financial information presents the combined results of operations of Tennant Company as if the 2017 acquisition of the IPC Group had occurred as of January 1, 2016. The unaudited pro forma financial information is presented for informational purposes only. It is not necessarily indicative of what our consolidated results of operations actually would have been had the acquisition occurred at the beginning of fiscal 2016. No pro forma results are presented for the three or nine months ended September 30, 2018, as the results of the acquired company are included in the actual results.

Pro Forma Financial Information (Unaudited)

	Three Months Ended		Nine Months Ended
(In thousands, except per share data)	September 30		September 30
	2017		2017
Net Sales
Pro forma	$	261,921	$	777,832
As reported	261,921		723,771

Net Earnings (Loss) Attributable to Tennant Company
Pro forma	$	5,800	$	14,875
As reported	3,559		(2,989		)

Net Earnings (Loss) Attributable to Tennant Company per Share
Pro forma	$	0.32	$	0.84
As reported	0.20		(0.17		)

The unaudited pro forma financial information above gives effect to the following:


•	incremental depreciation and amortization expense related to the fair value of the property, plant and equipment and identified intangible assets;


•	exclusion of the purchase accounting impact of the inventory step-up related to the sale of acquired inventory;


•	incremental interest expense related to additional debt used to finance the acquisition;


•	exclusion of non-recurring acquisition-related transaction and financing costs; and


•	pro forma adjustments tax affected based on the jurisdiction where the costs were incurred.