Fortive Corporation FTV has signed a definitive agreement to acquire Gordian from Warburg Pincus for $775 million in cash.
Gordian is a software company providing construction and facility cost data through a subscription-based model. It also offers related software, services and expertise to a wide range of industry verticals.
Its solutions aid in the management of construction project workflows and handle construction and maintenance requirements such as planning, designing, procurement, operations, construction, connecting owner and contractors.
Upon the conclusion of the deal, Fortive will be able to enhance its product offerings. Further, the deal will enable the company to foray into the highly growing global market of construction management software.
Per the latest report from Research and Markets, this particular market is expected to grow at a CAGR of 13.7% between 2017 and 2021. Reportedly, the current total addressable market size for construction software is $20 billion.
The latest move will aid the company in reaping benefits from this high growth potential market. Fortive anticipates a return of 10% from this investment within a span of five years.
Expanding Product Portfolio
This acquisition is in sync with the company’s strong focus toward expansion of its product portfolio.
Gordian’s solutions will expand Fortive’s field solutions portfolio that belongs to its Professional Instrumentation segment and already includes robust products like Fluke and Qualitrol. Further, these will complement the company’s Industrial Scientific division belonging to its Industrial Technologies segment.
Consequently, we note that Gordian’s products will strengthen both the segments of Fortive.
Notably, all of the above mentioned products performed well in the last reported quarter and are expected to continue driving Fortive’s performance across its segments and geographical regions.
Coming to the price performance, shares of Fortive have returned 6.1% on a year-to-date basis, against the industry’s decline of 4.5%.
Strategic Acquisitions– Key Catalyst
Fortive’s strategic acquisitions and partnerships have played an important role in shaping its growth trajectory over the past few years.
The Gordian acquisition which is expected to be completed in the third quarter, 2018, is likely to be accretive to earnings. It is expected to contribute $130 million to the total revenues of Fortive in 2018, which will aid top-line growth.
Recently, the company also made a binding offer to acquire Advanced Sterilization Products unit from Johnson & Johnson JNJ. This will help the company in entering the global infection control market.
Moroever, Fortive’s buyouts of Orpak, Industrial Scientific, eMaint and Landauer have been aiding its segmental and regional performance in every quarter since their completion.
We note that these deals will continue to help the company in gaining momentum in the market by serving better to its customers consequently aiding customer expansion.
Zacks Rank & Other Stocks to Consider
Currently, Fortive carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are TE Connectivity TEL and AMETEK AME. Both the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for TE Connectivity and AMETEK is pegged at 10.94% and 10%, respectively.
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