Business Combinations

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

On October 1, 2021, the Company, along with a co-investor, completed a majority investment in Parnassus Investments (“Parnassus”), a leading independent ESG-dedicated fund manager. The Company’s provisional purchase price allocation was measured using a discounted cash flow analysis that included a projected growth rate of 2.9% for assets under management, discount rate of 17.5% for asset-based fees, a market participant tax rate of 25%, and discounts for lack of marketability of 20% for non-controlling interests. The associated provisional amounts may be revised upon completion of the final valuation. At this time, the Company does not expect material changes. The consideration paid (less net tangible assets acquired) will be deductible for U.S. tax purposes over a 15-year life.

In addition, on December 29, 2021, the Company completed a majority investment in Abacus Capital Group LLC (“Abacus”), a high-quality real estate investment firm focused on the U.S. multi-family sector. The Company’s provisional purchase price allocation was measured using a discounted cash flow analysis that included a projected growth rate of 8.2% for assets under management, discount rates of 13.7% and 30% for asset- and performance-based fees, respectively, a market participant tax rate of 25%, and discounts for lack of marketability of 30% for non-controlling interests. The associated provisional amounts may be revised upon completion of the final valuation. At this time, the Company does not expect material changes. The consideration paid (less net tangible assets acquired) will be deductible for U.S. tax purposes over a 15-year life.

The purchase price allocation for these investments is as follows:


	Total
Consideration paid(1)	$	462.6
Deferred payment obligations(2)	261.1
Contingent payment obligations(3)	23.7
Retained equity interests	247.0
Enterprise value	$	994.4
Acquired client relationships	$	957.0
Trade name	5.0
Lease contract	(0.8)
Tangible assets, net	2.7
Goodwill	30.5
	$	994.4

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(1)The Company funded $363.0 million.

(2)The Company’s portion of the deferred payment obligations is $211.6 million.

(3)The Company’s portion of the contingent payment obligations is $18.1 million.

The excess of the enterprise value over the separately identifiable net assets acquired was recorded as goodwill and allocated to our reporting unit.

Acquisition-related costs incurred in connection with these investments were $9.2 million for the year ended December 31, 2021. These costs were primarily related to professional fees and recorded in Selling, general and administrative expenses.

Unaudited pro forma financial results are set forth in the table below, assuming these investments occurred on January 1, 2020 and the Company’s structured partnership interests had been in effect for the entire period. These results include adjustments to intangible amortization, acquisition-related costs, accretion expense related to deferred and contingent payments, and interest expense related to assumed borrowings to complete the purchases. These results do not include the impact of gains or losses resulting from changes to expected payments related to the contingent payment obligations that did not occur, or the benefits that may be expected to result from these investments. These results are not necessarily indicative of the financial results had the investment been consummated at the beginning of the periods presented, nor are they necessarily indicative of the financial results expected in future periods.


	For the Years Ended December 31,
	2020 (Unaudited)		2021 (Unaudited)
Revenue	$	2,236.5	$	2,642.6
Net income (controlling interest)	226.6		610.3

The Company’s new investments in Parnassus and Abacus contributed $85.8 million and $16.2 million to the Company’s Revenue and Net income (controlling interest), respectively, during 2021.

In connection with these investments, as of December 31, 2021, the Company was obligated to make deferred payments and was contingently liable to make payments as follows:


							Earliest Payable
	Controlling Interest		Co-Investor		Total		2022		2023		2024		2025
Deferred payment obligations	$	215.2	$	49.8	$	265.0	$	200.0	$	21.7	$	43.3	$	—
Contingent payment obligations(1)	30.6		9.7		40.3		—		—		38.9		1.4

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(1)Fair value as of December 31, 2021. The Company is contingently liable to make maximum contingent payments of up to $110.0 million ($24.9 million attributable to the co-investor), of which $100.0 million and $10.0 million may become payable in 2024 and 2025, respectively.

Parnassus and Abacus are limited liability companies with structured interests that define how the Company will participate in Affiliate earnings, based upon a fixed percentage of revenue. The limited liability company agreements do not define a fixed percentage for the Company’s ownership of the equity of the Affiliates. These percentages would be subject to a separate future negotiation if the Affiliates were to be sold or liquidated.