Goodwill and Intangible Assets

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 reporting unit.

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 reporting unit.

As a result of the two acquisitions during the period ended 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 reporting unit of the Company.

As a result of the Company's acquisition of Dahlman, during the first quarter of 2013, the Company recognized goodwill in the amount of $8.7 million within the broker dealer reporting unit (See Note 2).

For the year ended December, 31, 2013, for alternative investment reporting unit, the Company assessed the qualitative factors ("Step 0") to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This assessment serves as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. For the broker dealer reporting unit, the Company elected to bypass Step 0 and perform Step 1 of the goodwill impairment analysis, which includes determining whether the carrying amount of a reporting unit, including goodwill, exceeds its estimated fair value.

A significant amount of judgment is required in performing goodwill impairment analysis. When using the qualitative approach, the Company considered macroeconomic factors such as industry and market conditions, and reporting unit-specific events, actual financial performance versus expectations and management's future business expectations. For reporting units for which the Company performed the step 1, the Company estimated the fair value primarily using an income approach based on a discounted cash flow model. The cash flow projections used in the discounted cash flow model included management's best estimate of future growth and margins. The discount rates used to determine the fair value estimates were developed based on the capital asset pricing model using market-based inputs as well as an assessment of the inherent risk in projected future cash flows.

The Company believes that the fair value of broker-dealer reporting unit exceeded their respective carrying amounts as of December 31, 2013.

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 reporting unit.

However, the Company recognized an impairment charge for the entire amount of goodwill related to the broker-dealer reporting unit 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 reporting unit and caused the per share price to decline below a tangible book value.

The following table presents the changes in the Company's goodwill balance, by reporting unit for the years ended December 31, 2013 and 2012:



	Alternative Investment			Broker- Dealer			Total
	(dollars in thousands)
Beginning balance - December 31, 2011
Goodwill	$	30,228		$	7,151		$	37,379
Accumulated impairment charges	(10,200		)	(7,151		)	(17,351		)
Net	20,028			—			20,028

Activity: 2012
Recognized goodwill	—			8,517			8,517
Goodwill impairment charges	—			—			—

Ending balance: December 31, 2012
Goodwill	30,228			15,668			45,896
Accumulated impairment charges	(10,200		)	(7,151		)	(17,351		)
Net	20,028			8,517			28,545

Activity: 2013
Recognized goodwill	—			8,695			8,695
Goodwill impairment charges	—			—			—

Ending balance: December 31, 2013
Goodwill	30,228			24,363			54,591
Accumulated impairment charges	(10,200		)	(7,151		)	(17,351		)
Net	$	20,028		$	17,212		$	37,240

Intangible assets

Information for the Company's intangible assets that are subject to amortization is presented below as of December 31, 2013 and 2012. The Company recognized trade name, customer relationships, and customer contracts in connection with the transactions in prior years. As a result of the acquisition of Dahlman Rose during the period ending December 31, 2013 (see Note 2) the Company recognized intangible assets in the amount of $2.8 million. These intangibles include trade name and customer relationships with weighted average useful lives of 4.7 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 8.5 years.



		December 31, 2013							December 31, 2012
	Amortization Period	Gross Carrying Amount		Accumulated Amortization			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	9,612		(7,747		)	1,865		9,572		(7,190		)	2,382
Customer relationships	4 - 10	14,744		(8,375		)	6,369		11,974		(6,284		)	5,690
Customer contracts	1.2	800		(800		)	—		800		(800		)	—
Non compete agreements and covenants with limiting conditions acquired	1 - 10	2,697		(2,583		)	114		2,732		(2,576		)	156
Intellectual property	3 - 10	6,951		(3,205		)	3,746		6,951		(2,195		)	4,756
		$	38,704	$	(26,610	)	$	12,094	$	35,929	$	(22,945	)	$	12,984

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 years ended December 31, 2013 and 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 reporting unit. 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 $3.7 million, $2.7 million and $8.1 million (including impairment charges of $5.2 million relating to the broker-dealer reporting unit) for the years ended December 31, 2013, 2012 and 2011, 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, 2013 is as follows:



	(dollars in thousands)
2014	$	2,737
2015	2,483
2016	2,144
2017	1,411
2018	849
Thereafter	2,470
	$	12,094