Veralto Acquires TraceGains

WALTHAM, Mass. — Veralto Corporation, a provider of water and product quality solutions, announced that it has acquired the holding company that owns TraceGains for a purchase price of $350 million (subject to customary post-closing adjustments).

TraceGains is a provider of cloud-based software solutions that enable connected data and digital workflow management to help consumer brands meet increasingly stringent compliance and reporting regulations for food and beverage safety and traceability. Its solutions enable consumer brands to track ingredient inputs, monitor supplier quality and develop new products with greater safety and increased velocity. 

TraceGains is complementary to the company's Product Quality and Innovation segment, specifically, its Esko-branded digital workflow solutions for packaging and label design. Synergies with Esko's global customer base, direct sales channel and the application of the Veralto Enterprise System represent key value creation levers the company believes will accelerate TraceGains' growth, expand its market presence and improve its operating efficiency. 

"We believe the transition to digital workflow solutions in the food and beverage industry is poised for strong growth over the next decade,” said Jennifer L. Honeycutt, Veralto's president and chief executive officer. “The acquisition of TraceGains, in combination with our Esko business, strategically expands our digital offering and provides us the opportunity to deliver greater value to consumer brands as they digitize critical workflows with connected data across new product development, compliance and packaging. TraceGains' purpose-built solutions, focused on increasing food safety, are complementary to our PQI product portfolio and squarely aligned with our purpose — safeguarding the world's most vital resources. And with a high level of recurring revenue, robust core sales growth and attractive gross margins, TraceGains strengthens the financial profile of our PQI segment. We are excited to welcome TraceGains associates to Veralto."

TraceGains Chief Executive Officer Gary Nowacki said, "We are proud of the networked ecosystem TraceGains has built for the food and beverage industry and the tremendous growth we have delivered. We believe joining Veralto and partnering with its Esko business creates a powerful combination of two brands with deep expertise in digital workstream solutions for consumer brands. Furthermore, it enhances TraceGains' ability to more rapidly expand industry use of our digital solutions that help customers increase transparency to ingredient inputs for food and beverage safety, speed up innovation of new recipes and significantly reduce time-to-market for new products."

In 2024, TraceGains is expected to deliver just over $30 million in sales, with more than 95% of sales on a recurring basis, and a gross margin of approximately 80%. Since the beginning of 2022, TraceGains' sales have grown at an average rate of greater than 20% on a year-over-year basis.

The acquisition was funded with cash on hand and is expected to deliver a double-digit return on invested capital, exceeding the company's weighted average cost of capital, in year six.

Veralto's management team will discuss this acquisition in more detail during its third quarter 2024 financial results conference call on Thursday, Oct. 24.