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Tesla breaks down its $135 million acquisition of Grohmann Engineering in new filing

In a SEC filing in March, Tesla confirmed that it closed the acquisition of Grohmann Engineering for “approximately $150 million”, but the company didn’t explain how they came up with the number for the relatively small engineering firm in Germany.

In a new filing today, the company broke down the acquisition in details to explain the value of the company, which has now become ‘Tesla Advanced Automation Group’.

Tesla confirmed that the acquisition closed on January 3 for $109.5 million in cash:

“On January 3, 2017 we completed our acquisition of Grohmann Engineering GmbH (“Grohmann”), a company that specializes in the design, development, and sale of automated manufacturing systems, for $109.5 million in cash. We acquired Grohmann to improve the speed and efficiency of our manufacturing processes.”

On top of the cash payment, Tesla set up an incentive compensation arrangement for up to a maximum of $25.8 million of payments. It was supposed to be over 36 months, but for some reason, they paid out the entire $25.8 million incentive by the end of March 2017.

It brought the total cost of the acquisition to $135.3 million – significantly less than previously announced.

Here’s how Tesla valued the company (in thousands):

It means that Tesla paid a ~$66 million premium to acquire the engineering firm on top of their assets after liabilities.

The company justifies the premium due to “the expected synergies from potential monetization opportunities and from integrating Grohmann’s technology into their automotive business as well as the acquired talent.”

While Tesla started phasing out Grohmann’s work with any other client during the first quarter 2017 in order for the firm to focus on Model 3, they brought in some positive cash flow during the period.

Tesla disclosed that engineering service revenue from Grohmann brought in $22.4 million. After $14.9 million in cost, that’s $7.5 million of gross margin from Grohmann’s engineering services.

Those revenues should go down since in February, Tesla started dropping all of Grohmann’s existing clients in order to have all hands on deck for the Model 3 production lines.

The number one priority at Tesla Grohmann has been to ship the Model 3 inverter production lines that they designed for the company. Last we heard, they were scheduled to ship starting in late May – or just over a month before the scheduled start of Model 3 production in July.

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