Goodwill

12 Months Ended

Dec. 31, 2020

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 a quantitative impairment test. 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.

Change in segments

During the second quarter of 2019, the Company realigned its business segments to Op Co and Asset Co (See Note 1). Prior to the reorganization, the Investment Management segment was also a reporting unit for purposes of measuring and reporting goodwill. The goodwill that was previously attributable to the Investment Management reporting unit was reallocated to the CIM reporting unit within the Op Co segment and the Asset Co reporting unit based on the relative fair value of the respective portions that became attributable to those reporting units. The Asset Co segment is also a reporting unit for purposes of measuring and reporting goodwill.

Based on the change in segments and restructuring of reporting units, the Company determined that it was necessary to perform a quantitative impairment test which involved estimates of future cash flows, discount rates, economic forecast and other assumptions which are then used in the market approach (earnings and / or transactions multiples) and / or income approach (discounted cash flow method).

Based on the results of the impairment analysis, the Company recognized a goodwill impairment, net of tax, during the second quarter of 2019, in the amount of $4.1 million within the Asset Co reporting unit.

Annual goodwill impairment test

During the third quarter of 2021, the Company changed the date of its annual goodwill impairment test from December 31 to July 1. The Company believes the change in goodwill impairment date does not result in a material change in the method of applying the accounting principle. This change provides the Company additional time to complete the annual impairment test of goodwill in advance of our year end reporting. This change does not result in a delay, acceleration, or avoidance of an impairment charge. This change has been applied prospectively as retrospective application is deemed impracticable due to the inability to objectively determine the assumptions and significant estimates used in earlier periods without the benefit of hindsight.

The Company performed its annual impairment test at July 1, 2021 through a quantitative impairment test which involved estimates of future cash flows, discount rates, economic forecast and other assumptions which are then used in the market approach (earnings and / or transactions multiples) and / or income approach (discounted cash flow method). Based on the results of the annual impairment analysis at July 1, 2021, the Company did not recognize a goodwill impairment relating to any of the Company's reporting units.

The following table presents the changes in the Company's goodwill balance, by reporting unit for the periods ended December 31, 2021 and 2020:


	Investment Management		Investment Bank		Cowen Investment Management		Asset Co		Total
	(dollars in thousands)
Beginning balance - December 31, 2019
Goodwill	$	—	$	132,487	$	22,705	$	6,321	161,513
Accumulated impairment charges	—		(9,485)		(7,979)		(6,321)		(23,785)
Net	—		123,002		14,726		—		137,728

Activity: 2020
Recognized goodwill (See note 3)	—		9,356		—		—		9,356



Goodwill impairment charges	—		—		—		—		—

Beginning balance: December 31, 2020
Goodwill	—		141,843		22,705		—		164,548
Accumulated impairment charges	—		(9,485)		(7,979)		—		(17,464)
Net	—		132,358		14,726		—		147,084

Activity: 2021
Recognized goodwill (See note 3)	—		86,921		—		—		86,921
Goodwill impairment charges	—		—		—		—		—

Ending balance: December 31, 2021
Goodwill	—		228,764		22,705		—		251,469
Accumulated impairment charges	—		(9,485)		(7,979)		—		(17,464)
Net	$	—	$	219,279	$	14,726	$	—	$	234,005

In connection with the Portico transaction (see Note 3), in December 2021, the Company recognized goodwill of $86.9 million and intangible assets (including customer relationships, trade name, and backlog) with an estimated fair value of $19.9 million which are included within intangible assets in the consolidated statements of financial condition with the expected useful lives ranging from 1 to 4 years with a weighted average useful life of 3.02 years. Amortization expense related to intangibles from the Portico Acquisition for the year ended December 31, 2021 is $0.4 million. Goodwill, the excess of the purchase price over the fair value of net assets, primarily relates to expected synergies from combining operations and has been assigned to the Op Co segment of the Company. Tax deductible goodwill will differ from goodwill recognized by the Company in an amount equal to the difference between actual contingent consideration and estimated contingent consideration (see Note 3).

In connection with the MHT transaction (see Note 3), in October 2020, the Company recognized goodwill of $9.4 million and intangible assets (including customer relationships, trade name, and non-compete) with an estimated fair value of $1.2 million which are included within intangible assets, net in the consolidated statements of financial condition with the expected useful lives

ranging from 3 to 5 years with a weighted average useful life of 4.17. Amortization expense related to intangibles from the MHT acquisition for the year ended December 31, 2021 totaled $0.3 million. Goodwill primarily relates to expected synergies from combining the acquired operations with our operations and has been assigned to the Op Co segment of the Company. Tax deductible goodwill will differ from goodwill recognized by the Company in an amount equal to the difference between actual contingent consideration and estimated contingent consideration (see Note 3).

Intangible assets

Information for the Company's intangible assets that are subject to amortization is presented below as of December 31, 2021 and 2020.


		December 31, 2021						December 31, 2020
	Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)	(in thousands)						(in thousands)

Trade names	1 - 3	$	1,431	$	(970)	$	461	$	1,031	$	(611)	$	420
Customer relationships	4 - 14	57,634		(25,121)		32,513		52,040		(32,154)		19,886
Backlog	1	6,100		(254)		5,846		—		—		—
Non-compete agreements and covenants with limiting conditions acquired	5	344		(86)		258		344		(17)		327
Intellectual property	8	6,020		(1,061)		4,959		2,972		(328)		2,644
Acquired software	3 - 10	5,857		(5,727)		130		5,900		(4,774)		1,126
		$	77,386	$	(33,219)	$	44,167	$	62,287	$	(37,884)	$	24,403

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, 2021, no impairment charge for intangible assets was recognized. The Company recognized impairment charges of $2.4 million during the year ended December 31, 2020. The impairment charges primarily related the Company’s decision to limit the activities of its clearing business, resulting in a $1.9 million impairment of a) intangible assets relating to customer lists and b) capitalized internally developed software costs. The remaining impairment charges related to the impairment of intangible assets related to legacy capitalized software from the 2017 Convergex acquisition. These impairment charges are recorded in Other Expenses in the accompanying consolidated statements of operations.

Amortization expense related to intangible assets was $8.0 million, $13.0 million, and $13.1 million for the years ended December 31, 2021, 2020, and 2019 , 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 placed in service as of December 31, 2021 is as follows:


	(dollars in thousands)
2022	$	15,937
2023	7,762
2024	7,501
2025	6,337
2026	2,431
Thereafter	4,199
	$	44,167