EtQ Acquisition: Key Details, Impact, and What Comes Next

Hexagon's acquisition of ETQ marks a significant move in the industrial software sector. By integrating ETQ's SaaS-based Quality Management System with Hexagon's existing capabilities, the acquisition aims to enhance product quality and operational efficiency. This strategic alignment is expected to drive advancements in smart manufacturing and digital transformation, benefiting a wide range of industries.

What Is EtQ?

Founded in 1995, ETQ offers the cloud-native quality management software ETQ Reliance®. This agile platform includes over 40 applications such as Document Control, Training Management, and Audit Management. ETQ stands out with its adaptability to unique business environments, comprehensive application suite, and customer-centric approach. The software provides industry-specific solutions, ensuring relevance and effectiveness, and has demonstrated significant ROI and cost savings for its users.

Who Acquired EtQ?

Hexagon is a global leader in sensor and software technologies, specializing in capturing and digitizing physical reality to improve real-world processes. Key products include reality capture, creation, immersion, and activation technologies, as well as digital twin and AI applications. Hexagon holds a significant market position, influencing industries such as aerospace, agriculture, automotive, healthcare, and mining. The company is recognized for its innovative solutions that enhance safety, productivity, and sustainability.

When Was EtQ Acquired?

Hexagon completed the acquisition of ETQ on April 1, 2022. This acquisition occurred during a period marked by significant industry trends, including the increasing adoption of SaaS-based solutions and a strong emphasis on digital transformation and Industry 4.0. The timing aligns with a broader trend of consolidation in the industrial software market, where companies are integrating various processes to create more efficient and interconnected technology ecosystems.

Why Was EtQ Acquired?

• Market Expansion: The acquisition of ETQ allows Hexagon to expand its market presence in the SaaS-based QMS, EHS, and compliance management software sectors. ETQ's expected revenue and growth rates indicate a significant market opportunity. Additionally, Hexagon's global reach and multi-national customer base will fuel compelling business expansion opportunities for ETQ.
• Technology Integration: ETQ's advanced data management capabilities, driven by machine learning and artificial intelligence, will be integrated with Hexagon's metrology systems. This integration aims to enhance quality data capture and create a more autonomous and efficient quality management system. The combined technologies will bridge the data gap between product quality control (QC) and in-process quality assurance (QA).
• Competitive Advantage: The acquisition positions Hexagon to build the world's leading quality stack from shop floor to top floor, leveraging ETQ's SaaS-based QMS platform. This strategic move is expected to improve Hexagon's ability to offer comprehensive quality management solutions, thereby strengthening its competitive edge in the market. The integration aims to improve product quality, reduce waste, speed up new product introduction cycles, and minimize risks.

Acquisition Terms

• Acquisition Price: The total purchase price was 1,200 million USD on a cash and debt-free basis.
• Payment Method: The cash consideration was fully financed via existing and new debt facilities.
• Key Conditions or Agreements:
  • Completion of the transaction was subject to regulatory approvals and other customary closing conditions, which have now been obtained.
  • ETQ will be consolidated as of April 1, 2022, and will operate within Hexagon’s Manufacturing Intelligence division.
  • Surplus values in the purchase price allocation (PPA) are estimated to be 250 million EUR and will be amortized over 13 years, beginning in the second quarter of 2022.
  • A deferred revenue adjustment of 5 million EUR will impact the income statement over the next three quarters, beginning in the second quarter of 2022.

Impact on EtQ

The acquisition of ETQ by Hexagon has led to notable changes in operations and management. ETQ is now integrated into Hexagon’s Manufacturing Intelligence division, aligning its quality management systems with Hexagon’s digital reality solutions. This consolidation aims to enhance operational efficiency and drive digital transformation initiatives. While specific management changes have not been detailed, the structural shift signifies a strategic move to leverage combined capabilities for improved product quality and reduced waste.

ETQ’s product offerings have also evolved, with a stronger focus on integrating quality data across supply chains. This integration is expected to enhance communication and collaboration, reduce defects, and speed up new product introduction cycles. Employee reactions have not been explicitly documented, but customer feedback has been positive, highlighting the immediate value derived from the integrated solutions. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smooth and efficient transition.