Acquisition

On April 2, 2017, the Company, through its wholly owned subsidiary Cowen CV Acquisition LLC, entered into a securities purchase agreement with, among others, Convergex Holdings LLC to acquire all the outstanding interests in Convergex Group, LLC ("Convergex Group") (subsequently renamed to Cowen Execution Holdco LLC), a provider of agency based execution services and trading technology to middle market institutional investors and broker-dealers. Convergex Group's operations were primarily conducted through two U.S. Securities Exchange Commission ("SEC") registered broker-dealers, Convergex Execution Solutions LLC (subsequently renamed to Cowen Execution Services LLC) ("Cowen Execution") and Westminster Research Associates LLC ("Westminster") and also Convergex Limited (subsequently renamed to Cowen Execution Services Limited) ("Cowen Execution Ltd"), which is based in the United Kingdom and regulated by the Financial Conduct Authority ("FCA"). The purchase price was paid approximately 50% in cash and 50% in Cowen Inc. Class A common stock.

The acquisition was 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, results of operations for Convergex Group are included in the accompanying consolidated statements of operations since the date of acquisition, and the assets acquired and liabilities assumed were recorded at their fair value as of the acquisition date. Subsequent to the acquisition, the operations of Convergex Group were integrated within the Company's existing businesses.

The acquisition was consummated effective as of June 1, 2017. The adjusted aggregate estimated purchase price was $98.0 million, which was determined based on closing date tangible book value of Convergex Group, less certain closing adjustments. Based on the closing date purchase price allocation, the fair value of the net identifiable assets acquired and liabilities assumed of $109.6 million exceeded the estimated purchase price of $98.0 million. As a result, the Company recognized a bargain purchase gain of $11.6 million during 2017 related to the acquisition. The bargain purchase gain was shown net of $4.7 million of associated tax in the accompanying consolidated statements of operations.

The table below summarizes the preliminary purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as of June 1, 2017:



	(dollars in thousands)
Cash and cash equivalents	$	30,562
Segregated cash	129,025
Securities owned, at fair value	3,417
Securities borrowed	258,321
Deposits from clearing organizations	52,596
Receivable from brokers	62,983
Receivable from customers	43,469
Fees receivable	36,232
Fixed assets, net	1,325
Intangible assets	10,270
Other assets	7,528
Securities sold, not yet purchased, at fair value	(71		)
Securities loaned	(286,359		)
Payable to brokers	(74,284		)
Payable to customers	(11,801		)
Commission management payable	(82,718		)
Compensation payable	(31,083		)
Notes payable and other debt	(857		)
Fees payable	(5,414		)
Accounts payable, accrued expenses and other liabilities	(33,570		)
Total identifiable net assets acquired and liabilities assumed	109,571
Goodwill/(Bargain purchase gain)	(11,609		)
Total estimated purchase price	$	97,962

The Company believes that all of the acquired receivables and contractual amounts receivable as reflected above in the allocation of the purchase price are recorded at fair value. See Note 22 for further information on legal matters relating to the acquisition.

As of the acquisition date, the estimated fair value of the Company's intangible assets, as acquired through the acquisition, was $10.3 million. The allocation of the intangible assets is shown within the following table.



	Estimated intangible assets acquired		Estimated average remaining useful lives
	(dollars in thousands)		(in years)
Intangible asset class
Trade name	$	760	0.6 - 2.6
Intellectual property	1,790		5
Customer relationships	7,720		9
Total intangible assets	$	10,270

Amortization expense for the year ended December 31, 2018 and 2017 was $1.3 million and $1.4 million, respectively, and is included in depreciation and amortization in the accompanying consolidated statements of operations. The estimated amortization expense related to these intangible assets in future periods is as follows:



	(dollars in thousands)
2019	$	1,239
2020	1,216
2021	1,216
2022	1,007
2023	858
Thereafter	2,073
	$	7,609

In addition to the purchase price consideration, for the year ended December 31, 2017, the Company has incurred acquisition related expenses of $6.0 million including financial advisory, legal and valuation services, which are included in professional, advisory and other fees in the consolidated statements of operations.

Subsequent to the acquisition, certain of Convergex Group's businesses were integrated within the investment bank businesses of the Company and therefore they are included within their respective line items in the accompanying consolidated statements of operations. The following table provides supplemental pro forma financial information for the year ended December 31, 2017, as if the acquisition were completed as of January 1, 2017. This unaudited supplemental pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company's financial results would have been had the acquisition been completed on January 1, 2017, nor does it purport to be indicative of any future results.



	Year Ended December 31, 2017
	(dollars in thousands, except per share data)
Revenues	$	733,744
Net income (loss) attributable to Cowen Inc. stockholders	(84,671		)

Net income (loss) per common share:
Basic	$	(2.75	)
Diluted	(2.75		)

In conjunction with the integration of the acquired businesses of Convergex Group, the Company evaluated the combined investment bank businesses and operations and, during 2017, incurred approximately $8.8 million of integration and restructuring costs which primarily related to exit and disposal costs, discontinuation of redundant technology services and severance costs. During the year ended December 31, 2018, the Company continued to integrate the businesses acquired through Convergex Group and consolidated certain similar businesses.