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ACQUISITIONS
6 Months Ended
Jun. 30, 2013
ACQUISITIONS  
ACQUISITIONS

13. ACQUISITIONS

 

Prisma Capital Partners

 

On October 1, 2012, KKR acquired all of the equity interests of Prisma Capital Partners LP (“Prisma”). Prisma is a provider of customized hedge fund solutions mainly through the management of funds of hedge fund portfolios. The addition of Prisma provides KKR with a funds of hedge fund strategy and a greater presence in the hedge funds space, from which KKR can create and offer more liquid products for KKR’s fund investors.

 

Initial consideration transferred was $200.0 million in cash, and KKR may become obligated to make future additional payments (referred to hereafter as “contingent consideration”) to the sellers (certain of whom became employees of KKR) in years 2014 and 2017 based on the Prisma business achieving certain performance metrics when measured in such years. KKR has the right in its sole discretion to pay a portion of the contingent consideration, if any, in KKR & Co. L.P. common units rather than in cash. Changes in the fair value of the contingent consideration subsequent to the acquisition date are recognized within General, Administrative and Other in the condensed consolidated statements of operations.

 

As of June 30, 2013, the fair value of the contingent consideration was estimated to be $86.9 million and is recorded as a liability within Accounts Payable, Accrued Expenses and Other Liabilities on the condensed consolidated statements of financial condition. The fair value of the contingent consideration was derived using Level III inputs. This amount was determined based on the present value of a range of undiscounted cash flows of $0 to $155.0 million in each of 2014 and 2017, using a discount rate ranging from 2.1% to 3.1%, after applying probability, risk-weighting, and other adjustments that KKR has determined to be applicable.