Fortive to Snap up ServiceChannel for $1.2B

Fortive Corporation (FTV) inked a deal with Bayard Capital and Accel Partners to acquire ServiceChannel in an all-cash transaction worth $1.2 billion.

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Fortive is a diversified industrial technology company providing services to various organizations across attractive end markets. Shares of the company have gained 25% over the past year.

Founded in 1999, ServiceChannel is a leading SaaS-based company that provides multi-site maintenance service solutions and has an integrated service-provider network serving over 500 enterprise customers in more than 70 countries.

ServiceChannel is expected to report revenues of $125 million in 2021, with recurring revenues of $117 million. Its long-term revenue growth rate is forecast to be in the mid-teens.

The acquisition will complement Fortive’s Facility and Asset Lifecycle workflow solutions, as well as Accruent and Gordian. (See FTV stock charts on TipRanks)

Upon completion, the deal is expected to be accretive to Fortive’s revenues by 50 bps. Moreover, Fortive expects to achieve a target return on invested capital (ROIC) of 10% in the next five years.

Fortive’s CEO James A. Lico commented, “This transaction is another great example of how we continue to use disciplined capital deployment to accelerate our long-term strategy across our segments. ServiceChannel fits extremely well alongside Accruent and Gordian, broadening our offering of software-enabled solutions for the Facility and Asset Lifecycle workflow.”

He further added, “The Company’s high-growth SaaS platform, leading contractor network, rich data assets, and existing global footprint will add significantly to the long-term growth and profitability of IOS.”

Fortive intends to utilize available cash on the balance sheet to fund the transaction.

The acquisition is expected to close in the third quarter of 2021, subject to mandatory regulatory approvals.

Fortive Q2 2021 Preliminary Results

In addition, Fortive announced its preliminary results for the second quarter of 2021. The company expects total revenue growth of 25%, with core revenue growth of 20%.

The company remains confident that its expected adjusted operating profit margin will beat earlier estimated guidance. The company is expected to report its Q2 results on July 29, 2021.

Following the acquisition news, Wolfe Research analyst Nigel Coe upgraded Fortive to Buy from Hold with a price target of $84 (19.2% upside potential).

Overall, the stock has a Moderate Buy consensus rating based on 7 Buys and 5 Holds. The average Fortive price target of $80.55 implies 14.3% upside potential from current levels.