The impacts of a $1.3 billion cash purchase on WAT's balance sheet

When investigating WAT's balance sheet, something stood out: amidst slow and steady-ish growth, the company made a massive acquisition.

It was easy to spot on Flank because their book value more than doubled in a year.

I checked out WAT's cash flow on Flank and found big swings in 2023, to say the least.

It didn't take long to discover the reason for these anomalies in the annual report: in May 2023, WAT completed the acquisition of Wyatt Technology, LLC for $1.3 billion in cash, financed through cash on the balance sheet and borrowing from its "revolving credit facility" (I had to lookup that term but it's basically a flexible financing arrangement between a lender and borrower).

Wyatt makes light scattering detectors and consists of three subsidiary companies in France, Germany, and the UK.

This is the front page of Wyatt's website. Hmm okay, I know about 50% of those words.

Anyway, the company's 2023 and 2024 results included income from the newly-acquired Wyatt, but operating income still dropped from:

• $873 million in 2022

• to $818 million in 2023

• before rising slightly to $826 million in 2024

The company blamed 2023's drop on "severance costs associated with the workforce reductions" (firing people is expensive, apparently), "additional expenses" from the Wyatt acquisition, and "the negative effect of foreign currency translation."

In 2024, those severance costs dropped off the balance sheet but the company still faced headwinds from "higher annual incentive compensation" along with foreign currency translation costs and a full year of amortization associated with the Wyatt acquisition.

As always, it's fun to look behind the numbers with the help of Flank - definitely like seeing through the matrix (albeit at my very beginner level).