Illinois Tool Works acquires Test & Simulation business of MTS Systems Corporation (MTS)

Illinois Tool Works acquired Test & Simulation business of MTS Systems Corporation (MTS) for $750 million (purchase price, subject to certain closing adjustments), a transaction completed in December 2021, structured as all cash. The deal was a carve-out.

Test & Simulation business of MTS Systems Corporation (MTS) operates in Test & Measurement and Electronics, had revenue of about operating revenue of $46 million for the one month ended December 31, 2021; guided to full-year 2022 revenue of $400 million-$450 million. The MTS Test & Simulation business is a leading global supplier of high-performance testing and simulation systems and is highly complementary to ITW's existing Test & Measurement and Electronics segment. ITW acquired the business from Amphenol Corporation on December 1, 2021; its operating results are reported within the Test & Measurement and Electronics segment.

ITW's strategy is to further expand the long-term organic growth potential of the company through the addition of selective high-quality acquisitions, such as the acquisition of the Test & Simulation business of MTS Systems Corporation (“MTS”) from Amphenol Corporation on December 1, 2021. The Company recorded goodwill of $371 million and intangible assets of $321 million on its initial purchase-price allocation.

Leading global supplier of high-performance testing and simulation systems; highly complementary to ITW's existing Instron / Test & Measurement and Electronics franchise, with significant margin-improvement potential from ITW's 80/20 methodology. Selective high-quality acquisitions such as MTS have significant margin improvement potential from the application of ITW's proprietary 80/20 front-to-back methodology; management expects roughly five to seven years to bring MTS to ITW-caliber margins and organic growth rates in line with the Instron business. Test & Measurement and Electronics segment (alongside Instron) Michael Larsen, SVP and CFO (Q4 2021 earnings call): “The MTS acquisition added 1.3% [to revenue growth]. ... Specific to MTS, guidance includes full-year revenue of $400 million-$450 million, the expectation that margins are dilutive at the enterprise level by approximately 50 basis points, and finally, consistent with what we've said before, EPS neutral. ... we're really excited about MTS because the business model has never been more powerful than it is today.”