Goodwill and Intangibles

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill

In accordance with US GAAP, the Company tests goodwill for impairment on an annual basis or at an interim period if events or changed circumstances would more likely than not reduce the fair value of a reporting unit below its carrying amount. Under US GAAP, the Company first assesses the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amounts as a basis for determining if it is necessary to perform the two-step approach. Periodically estimating the fair value of a reporting unit requires significant judgment and often involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge.

As a result of the Company's transactions in prior years, goodwill of $30.2 million was recognized. This goodwill was recorded within the Alternative Investment Management segment.

As a result of the Cowen and Ramius transactions in November 2009, the Company recognized additional goodwill of $7.2 million during the year ended December 31, 2009. This goodwill is recorded within the broker-dealer segment.

Based on a valuation performed by an independent valuation firm in order to test the goodwill for impairment as of December 31, 2010, it has been determined that no impairment loss would need to be recognized for the year ended December 31, 2010. The testing was performed using market multiples and discounted cash flow analysis.

For the year ended December 31, 2011, the Company engaged an independent valuation specialist to assist with the goodwill impairment analysis. The independent valuation specialist employed industry standard tools and methodology which incorporated both market and income approach. Based on the results of the impairment analysis as of December 31, 2011, it had been determined that no impairment loss would need to be recognized relating to the goodwill recorded within the Alternative Investment Management segment.

However, the Company recognized an impairment charge for the entire amount of goodwill related to the broker-dealer segment amounting to $7.2 million. This was primarily due to the effects of global and macro economic conditions that prevailed throughout the year. Specifically, the adverse investment climate coupled with the European Debt crises, resulted in declining trading volumes and increased volatility. These developments negatively affected the Company's revenues in particular the broker-dealer segment and caused the per share price to decline below a tangible book value.

As a result of the two acquisitions during the period ending December 31, 2012, (see Note 2) the Company recognized goodwill in the amount of $8.5 million. The goodwill primarily relates to the expected synergies from the acquisitions and has been assigned to the broker-dealer segment of the Company.

For the year ended December 31, 2012, the Company assessed the qualitative factors to determine whether it is more likely than not that the fair value of the reporting units are less than their respective carrying amounts. Based on the results of the qualitative assessment, the Company determined that the two-step goodwill impairment test is not necessary and no impairment charge would need to be recognized for the year ended December 31, 2012.

The following table presents the changes in the Company's goodwill balance, by segment, for the years ended December 31, 2012 and 2011:



	December 31, 2012									December 31, 2011
	Alternative Investment Management			Broker- Dealer			Total			Alternative Investment Management			Broker- Dealer			Total
	(dollars in thousands)
Beginning balance:
Goodwill	$	30,228		$	7,151		$	37,379		$	30,228		$	7,151		$	37,379
Accumulated impairment charges	(10,200		)	(7,151		)	(17,351		)	(10,200		)	—			(10,200		)
Net	20,028			—			20,028			20,028			7,151			27,179
Activity:
Recognized goodwill	—			8,517			8,517			—			—			—
Goodwill impairment charges	—			—			—			—			(7,151		)	(7,151		)

Ending balance:
Goodwill	30,228			15,668			45,896			30,228			7,151			37,379
Accumulated impairment charges	(10,200		)	(7,151		)	(17,351		)	(10,200		)	(7,151		)	(17,351		)
Net	$	20,028		$	8,517		$	28,545		$	20,028		$	—		$	20,028

Intangible assets

Information for the Company's intangible assets that are subject to amortization is presented below as of December 31, 2012 and 2011. The Company recognized trade name, customer relationships, and customer contracts in connection with the transactions in prior years. As a result of the two acquisitions during the period ending December 31, 2012 (see Note 2) the Company recognized intangible assets in the amount of $9.9 million. These intangibles include trade name, customer relationship, intellectual properties and non-compete agreements with weighted average useful lives of 7.8 years.



		December 31, 2012							December 31, 2011
	Amortization Period	Gross Carrying Amount		Accumulated Amortization (1)			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization (1)			Net Carrying Amount
	(in years)	(in thousands)							(in thousands)
Investment contracts	5	$	3,900	$	(3,900	)	$	—	$	3,900	$	(3,900	)	$	—
Trade names	5 - 7.5	9,572		(7,190		)	2,382		9,400		(6,649		)	2,751
Customer relationships	4 - 10	11,974		(6,284		)	5,690		6,800		(4,916		)	1,884
Customer contracts	1.2	800		(800		)	—		800		(800		)	—
Non compete agreements and covenants with limiting conditions acquired	1 - 10	2,732		(2,576		)	156		2,530		(2,530		)	—
Intellectual property	3 - 10	6,951		(2,195		)	4,756		2,550		(1,425		)	1,125
		$	35,929	$	(22,945	)	$	12,984	$	25,980	$	(20,220	)	$	5,760

(1) Includes impairment charges related to intangible assets during the year ended December 31, 2011.

The Company tests intangible assets for impairment if events or circumstances suggest that the asset groups carrying value may not be fully recoverable. For the year ended December 31, 2012, no impairment charge for intangible assets was recognized.

Intangibles acquired upon acquisition of LaBranche in the second quarter of 2011 (See Note 2) are covenants to not compete, covenants with limiting conditions and intellectual property of $5.1 million. These intangibles were assessed for impairment when the Company discontinued the operations of the LaBranche subsidiaries (See Note 4) and an impairment charge of $2.9 million (in addition to the $1.0 million of amortization recorded during the year) was recognized as the Company will no longer derive future benefits from these intangibles. This amount was recorded in net income (loss) from discontinued operations, net of tax in the accompanying consolidated statements of operations for the year ended December 31, 2011.

The Company recorded an impairment charge of $5.2 million related to the trade name and customer relationships acquired, during the Cowen and Ramius transaction in November 2009, which is attributable to the broker-dealer segment. The impairment charge recognized is primarily attributable to the lower customer trading volumes and is recorded in depreciation and amortization expense within the accompanying consolidated statements of operations for the year ended December 31, 2011. The Company used the discounted cash flow approach to determine the future benefits expected to be derived from the trade name and customer relationships.

Amortization expense related to intangible assets was $2.7 million, $8.1 million (including impairment charges of $5.2 million relating to the broker-dealer segment) and $3.6 million for the years ended December 31, 2012, 2011 and 2010, respectively, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations. All of the Company's intangible assets have finite lives.

The estimated future amortization expense for the Company's intangible assets as of December 31, 2012 is as follows:



	(dollars in thousands)
2013	$	3,195
2014	2,114
2015	1,860
2016	1,645
2017	940
Thereafter	3,230
	$	12,984

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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