Atmus Filtration's Koch Acquisition: A Strategic Move to Dominate Industrial Air Filtration and Boost EBITDA

The acquisition of Koch Filter Corporation by Atmus Filtration Technologies Inc. (NYSE: ATMU) marks a pivotal moment in the industrial air filtration sector, positioning the combined entity to capitalize on high-growth markets while delivering measurable EBITDA accretion. Announced on November 24, 2025, the $450 million cash deal-subject to customary adjustments-targets Koch's $156 million in 2025 revenue and its expertise in HVAC, data center, and power generation filtration solutions. This analysis evaluates the strategic and financial rationale behind the acquisition, its implications for EBITDA margins, and the broader market dynamics that could drive long-term value creation.

Strategic Rationale: Expanding into High-Growth Markets

Koch Filter's portfolio of air filtration technologies complements Atmus's existing offerings, enabling the company to expand into industrial and commercial HVAC, a segment projected to grow as energy efficiency and indoor air quality standards tighten. The acquisition also accelerates Atmus's entry into the data center market, where demand for advanced filtration systems is surging due to the sector's rapid expansion and stringent cooling requirements. By integrating Koch's capabilities, Atmus gains access to a customer base that includes critical infrastructure operators, a move that aligns with broader trends in decarbonization and digital infrastructure investment.

Financially, the deal is structured to maximize value. The $450 million purchase price reflects a 13.9x multiple of Koch's 2025 Adjusted EBITDA, but after accounting for tax benefits and cost synergies, the net transaction value drops to $395 million, or a 10.9x multiple. This adjustment underscores Atmus's confidence in operational efficiencies, including supply chain optimization and shared services, which are expected to enhance margins post-merger.

EBITDA Accretion and Operational Synergies

Atmus's Q3 2025 results provide a strong foundation for the acquisition. The company reported net sales of $448 million and Adjusted EBITDA of $92 million, with full-year guidance raised to $1,720–$1,745 million in revenue and a 19.5–20.0% Adjusted EBITDA margin. These figures highlight Atmus's ability to leverage scale and operational discipline, traits that will be critical in achieving the projected high-single-digit returns on invested capital by 2028.

The acquisition is expected to be accretive to Atmus's Adjusted EPS and EBITDA margin in 2026, driven by Koch's revenue contribution and cost synergies. With Koch's 2025 EBITDA margin likely in the mid-teens (based on the 10.9x multiple post-synergies), the combined entity's margin expansion potential is significant. Atmus's Q3 EBITDA margin of 20.5% (calculated from $92 million EBITDA on $448 million sales) suggests room for further optimization, particularly as Koch's operations integrate into Atmus's existing infrastructure as reported in Q3 results.

Funding and Risk Considerations

The transaction will be funded through a mix of cash reserves and borrowings under Atmus's credit facility, preserving financial flexibility. While leverage increases, Atmus's robust cash flow generation-$92 million in Q3 Adjusted EBITDA alone-provides a buffer against interest rate risks. The acquisition's accretive timeline (2026) also aligns with Atmus's existing growth trajectory, minimizing disruption to its core business.

Critics may question the 13.9x EBITDA multiple, but the post-synergy 10.9x multiple and projected ROIC justify the premium. Koch's entry into data centers and power generation, sectors with higher-margin potential, further strengthens the case for long-term value creation.

Conclusion: A Win for Shareholders and the Industry

Atmus's acquisition of Koch Filter is a calculated move to dominate industrial air filtration markets while enhancing EBITDA margins through scale and innovation. With a clear path to accretion, a disciplined capital structure, and alignment with macroeconomic trends, the deal positions Atmus to outperform peers in a sector poised for sustained growth. For investors, the transaction represents a compelling blend of strategic vision and financial prudence.