Cognex buys DVT for $115 million
Natick, MA; Duluth, GA—Cognex Corp. reports that it has acquired all outstanding shares of privately held DVT Corp. for approximately $115 million.
Natick, MA; Duluth, GA— Cognex Corp. reports that it has acquired all outstanding shares of privately held DVT Corp. for approximately $115 million. This price tag includes $104 million in cash at closing and a final payment of up to an additional $11 million in cash to be paid at the end of a one-year escrow period.
Cognex adds it plans to maintain operations at DVT's present facility in Georgia, and continue selling and supporting DVT's vision products through its existing third-party distribution channel. DVT manufactures vision sensors, which it sells mostly to the machine vision industry’s plant-floor sector. The company's main product line, Legend, is used in many applications for inspection and quality control.
'This is the largest acquisition that Cognex has ever completed in terms of price and revenue, and, most importantly, in terms of the positive impact that it will likely have on our company,' says Dr. Robert Shillman, Cognex’s chairman and CEO. 'In recent years, Cognex has been very successful in expanding its product line by adding low-cost and easy-to-use vision products. Our In-Sight business has grown to over $60 million in just five years, and Checker, our newest entry into the presence-sensing market, is gaining traction.
“However, reaching the thousands of prospects for these products in factories around the world requires a large third-party sales and distribution channel to supplement our own direct end-user sales force. During 2004, Cognex started to build a third-party distribution channel, and prior to this acquisition we had signed over 40 distributors, mostly in North America. With the acquisition of DVT, Cognex immediately gains a worldwide network of more than 150 additional industrial distributors, all fully trained in selling and supporting machine vision products.'
Following its acquisition, Cognex expects an increase in its annual revenue of approximately $15-20 million during fiscal year 2005. The acquisition is expected to be neutral to earnings in 2005, and accretive, even including acquisition charges, in fiscal year 2006. Due to the late timing of the transaction, Cognex expects the acquisition to have minimal impact on its second-quarter results.
At the firm’s recent Analysts Day 2005 event, Shillman emphasized that any acquisition would have to take care to preserve Cognex’s corporate tenets and culture, which he says is the source of the company’s success. “Executives may change, but our culture must endure,” he said, adding that companies that grow too quickly can dilute values that caused the success. He also stressed developing knowledge unavailable elsewhere to ensure 70-75% gross margins and more than 20% net income margins.
Cognex’s executives at the event emphasized many cultural points during the meeting, including “Don’t do what you’re told. Do what’s right.” “No one gets bonuses unless everyone gets bonuses.” “Customer first, excellence, perseverance, enthusiasm, creativity, pride, integrity, recognition, sharing, and fun.” This last point is emphasized by a “Work hard. Play hard” sign in the company’s driveway. The executives also touted the need for a distribution channel, especially with development of lower-cost products, such as Checker.
Cognex manufactures machine vision systems, which it describes as “computers that can see.' The firm has shipped more than 225,000 machine vision systems worth more than $1.7 billion since it was founded in 1981. The company’s Natick-based Modular Vision Systems division specializes in machine vision systems used to automate manufacturing of discrete items and for assuring their quality. Cognex's Surface Inspection Systems division in Alameda, CA, specializes in machine vision systems that are used for inspecting the surfaces of products manufactured in a continuous fashion, such as metal, paper, and plastic.