Acquisitions and Divestitures

Acquisitions

During the year ended December 31, 2015, the Company completed two acquisitions. On September 1, 2015, the Company completed its acquisition of all of the outstanding interests in Concept Capital Markets, LLC ("Concept") offering prime brokerage services and outsourced trading. On October 1, 2015 the Company completed its acquisition of all of the outstanding interests in Conifer Securities, LLC ("Conifer") representing the prime brokerage services division of Conifer Financial Services LLC. Following the acquisitions Concept was renamed Cowen Prime Services LLC ("Cowen Prime") and Conifer was renamed Cowen Prime Services Trading LLC ("Cowen Prime Trading"). Both are registered broker-dealers (members Financials Industry Regulatory Authority "FINRA" and SIPC).

The acquisitions were completed for a combination of cash of $42.3 million, unregistered shares of the Company's Class A common stock valued at $3.0 million and contingent consideration of $3.6 million in the aggregate. In accordance with the terms of their respective purchase agreements, the Company is required to pay to the sellers a portion of future net profits over the target revenues of the businesses over the period through December 31, 2020. The Company estimated the contingent consideration using both the income approach (discounted cash flow method) and market approach (option pricing method) which requires the Company to make estimates and assumptions regarding the future cash flows, profits volatility and share price. Changes in these estimates and assumptions could have a significant impact on the amount recognized. The undiscounted amount can range from zero to $7.2 million.

The acquisitions were accounted for under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). As such, the results of operations for Concept and Conifer are included in the accompanying consolidated statements of operations since the dates of the respective acquisitions and the assets acquired, liabilities assumed and the resulting goodwill were recorded at their fair values within their respective line items on the accompanying consolidated statement of financial condition (see Note 9).

The Company is currently in the process of finalizing the valuation for certain acquired assets of Concept and Conifer; therefore, the fair value measurements and goodwill as of December 31, 2015 are preliminary and subject to measurement period adjustments. The allocation of the purchase price to the net assets acquired will be finalized as necessary, up to one year after the acquisitions' respective closing dates, as the information becomes available. Both of the acquisitions were not deemed material individually but were material in the aggregate. The following table summarizes the aggregate preliminary purchase price allocation of net tangible and intangible assets acquired during the year ended December 31, 2015.



	(dollars in thousands)
Cash and cash equivalents	$	2,966
Receivable from brokers	5,327
Fixed assets	644
Fees receivable	983
Intangibles	19,900
Other assets	684
Payable to brokers	(153		)
Compensation payable	(1,667		)
Accounts payable, accrued expenses and other liabilities	(3,250		)
Total net assets acquired	$	25,434

The Company believes that all of the acquired receivables reflected above in the preliminary allocation of the purchase price are recorded at fair value and are expected to be collected in full. Goodwill, which primarily relates to expected synergies from integrating the operations of the acquirees into the Company, is fully deductible for tax purposes and has been assigned to the broker-dealer segment of the Company.

The Company recognized approximately $1.0 million of acquisition-related costs, including legal, accounting, and valuation services. These costs are included in professional, advisory and other fees in the accompanying consolidated statements of operations.

Included in the accompanying consolidated statements of operations for the period from September 1, 2015 through December 31, 2015 are revenues of $13.4 million and net income of $1.4 million (excluding corporate allocated expenses) related to the Concept and Conifer combined results of operations.

The following unaudited supplemental pro forma information presents consolidated financial results for the twelve month periods as if the acquisitions were completed as of January 1, 2014. This supplemental pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company's results would have been had the acquisitions been completed on January 1, 2014, nor does it purport to be indicative of any future results.



	For the years ended December 31,
	2015		2014
	(dollars in thousands, except per share data)
	(unaudited)
Revenues	$	496,543	$	473,192
Net income (loss) attributable to Cowen Group, Inc. common stockholders	40,613		167,238

Net income per common share:
Basic	$	0.37	$	1.45
Diluted	$	0.35	$	1.39

Divestitures

During the fourth quarter of 2014, the Company made a decision to wind down the operations of the securities lending business. The Company recorded impairment of goodwill in the amount of $2.3 million and impairment of unamortized intangibles of $0.9 million (See Note 9). The Company also wrote off the contingent liability due to the principals of the former entity of $2.1 million which is included in other revenues in the accompanying consolidated statements of operations. The Company also recognized certain expenses related to the termination of services. The Company considered the guidance for discontinued operations and determined that winding down the securities lending business does not represent a significant strategic shift in operations, therefore, the Company did not present it as discontinued operations.

On September 29, 2014, the Company entered into an agreement with Neuberger Berman to sell its interest in Orchard Square Partners (“OSP”), which manages a global long/short credit investment strategy and had approximately $420.8 million in client assets at December 31, 2014. The transaction closed on December 31, 2014 and therefore OSP was deconsolidated on that date. During the year ended December 31, 2014, the Company consolidated the results of operations. As of December 31, 2014, the total assets, liabilities and net assets attributable to the Company and non-controlling interest holders were not material. In accordance with the terms of the sale agreement all of the net assets of OSP as of December 31, 2014 were allocated to the Company and the non-controlling members of OSP in accordance with the respective ownership interests and were distributed soon thereafter. The total sale price was $4.5 million which is included in other revenues in the accompanying consolidated statements of operations. In addition, in accordance with the terms of the agreement, Neuberger Berman is also required to pay the Company a portion of future net revenues of the credit business if certain revenue targets are achieved through 2018.