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Novanta has been under contract to acquire ATI Industrial Automation for $172 million in cash. And it turns out the deal is a win-win for most ATI employees, not just the co-founders and higher-ups.
In 2012, ATI established an Employee Stock Ownership Plan (ESOP). An ESOP is a federally-qualified ERISA benefit plan that makes employees owners in the company. Founded in 1989 in North Carolina, ATI has become a global company with over 350-plus employees worldwide. More than 300 of those are based in North Carolina.
All U.S.-based ATI employees that put in a minimum of 1,000 hours of work in the calendar year (six months for a full-time employee) earn shares in the ATI ESOP. The more time you have worked at ATI, the more shares you own. Non-U.S. employees are not qualified for the ESOP since the program is a U.S. federal plan.
“An ESOP is a fantastic tool for employees to have ownership,” said ATI co-founder and CEO Bob Little. “I only wish the program benefited everyone outside of the U.S.”
After the acquisition is complete, the ESOP shares will be traded to Novanta for cash, which is a publicly-traded company. ESOP owners will have their shares cashed out and transferred into a ERISA retirement account. After the acquisition closes, the employees will gain performance stock units in Novanta —so employee ownership continues.
ESOP’s role in ATI’s sale
Little said ATI wasn’t looking to be acquired. However, when an organization with an ESOP receives an unsolicited offer to be acquired, and that offer is fair, the company has to review the offer. “You can’t just throw the offer in the trash,” he said. “There needs to be a reason to throw it away.”
ATI received a valid, unsolicited offer in 2019. That offer, Little said, wasn’t from Novanta. But the offer caused ATI to open its eyes and understand that companies wanted to acquire it.
“We must have talked to 20-plus companies that were interested in potentially buying us,” Little said. “Being an ESOP, we wanted to make sure that people get the best value and we talk to the right companies, if there’s an acquisition. Most of the offers were unsolicited – they heard through the grapevine that ATI could be acquired.”
“When Novanta came to ATI to examine our capability, I was very excited,” said Little. “I was extremely impressed with Novanta’s technology, and since ATI is known for their robotic technology, I saw a clear fit.”
What the future holds for ATI
Novanta’s cost of acquiring ATI could increase if ATI hits certain financial benchmarks.
“The acquisition price was not too high or too low. It was on the mark,” Little said. “It’s amazing the ups and downs the robotics market has gone through in the last few years. Is the robot market growing or shrinking? We have a forecast of our growth, and it’s pretty substantial over the next several years. I’m focused not on what ATI can do in the next five years, but what the entire industry can do in the next five years.”
One thing ATI certainly has working in its favor is that it’s not tied to one particular robot or application. “We go where robots go. That is why we have products all over the world and in automotive plants, aerospace facilities, 3D machines, and on Mars. They all have robots.”
“If the robot market isn’t growing, it’s tough for us to grow. But when it is growing, it’s easy for us to grow,” Little said. “I’ve been studying this market for a long time. We reached the bottom of the barrel in 2020, and the robot market has been growing astronomically over the last year. I expect this to continue, not without some dips, but overall the robot market will climb at a really nice rate.
“We know the reason why. Automation has become so much more important in the horrifying labor pool that we’re in. We can’t get enough workers, and it’s only going to get worse because of the enormous pressure to make things locally. When you make it local, you need to use the local workforce. And if you can’t hire the local workforce, you need to automate. Expect very strong robot sales in the next several years.”
Little said ATI will maintain its name, branding, facilities and strategy going forward.
“We are flush with two great companies,” he said. “Nothing changes our goals here and what we want to accomplish. We’re still pushing our strategy. That’s why Novanta bought us. You’ll see new product development that Novanta can help with. You’ll see improvements, but our core values customers love us for will not change.”