Acquisition

12 Months Ended

Dec. 31, 2022

Business Combinations [Abstract]

Acquisitions

Acquisition

Kelvin Re Limited

On June 1, 2022 (the "Kelvin Acquisition Date"), the Company completed its acquisition of Kelvin Re Limited (“Kelvin”) by acquiring all of the issued and outstanding ordinary shares in Kelvin from CS IRIS A Fund Limited (the "Kelvin Acquisition"). Kelvin is a general reinsurance company incorporated and domiciled in Guernsey whose principal activity was the provision of property and natural catastrophe reinsurance business. In December 2020, Kelvin ceased underwriting new business and has been operating as a run-off entity. Cowen acquired Kelvin to manage the outstanding reinsurance claims arising from its existing portfolio. (See Note 22).

In accordance with US GAAP and SEC Regulation S-X Rule 11-01(d), the Kelvin Acquisition is accounted for as an asset acquisition because the assets and liabilities of Kelvin do not meet the definition of a business, and accordingly the assets and liabilities acquired as part of the Kelvin Acquisition were measured based on their cost allocated to assets on a relative fair value basis, which included transaction costs of $1.6 million.

The aggregate purchase price of the Kelvin Acquisition after transaction costs is $221.0 million. The purchase price was paid in cash by Kelvin on behalf of Cowen. The results of Kelvin are integrated within the Company's insurance business as of the Kelvin Acquisition Date, which is reported in the Company’s Operating Company segment.

The table below summarizes the net tangible and intangible assets acquired and liabilities assumed as of June 1, 2022:

	(dollars in thousands)
Cash and cash equivalents	$	92,589
Cash collateral pledged	316,049
Premiums receivable from cedants	58,904
Claims recoverable from reinsurers	52,526
Insurance and reinsurance assets	111,430
Other assets	94
Premiums and other costs payable to reinsurers	(5,400)
Claims liabilities	(292,026)
Insurance and reinsurance liabilities	(297,426)
Accounts payable, accrued expenses and other liabilities	(1,711)
Total net assets acquired	$	221,025

Portico

On December 16, 2021 (the "Portico Acquisition Date"), the Company, through its indirect wholly owned subsidiary, Cowen PC Acquisition LLC, completed its previously announced acquisition (the "Portico Acquisition") of Portico Capital Advisors and certain assets and liabilities of its European operations (“Portico”). Portico was privately-held and was a leading mergers and acquisitions advisory firm focused on the verticalized software, data, and analytics sectors. The Portico Acquisition was completed for a combination of 75% cash and 25% stock. In the aggregate, the purchase price, specified assets acquired and liabilities assumed were not significant and the near-term impact to the Company and its consolidated results of operations and cash flows was not significant.

The Portico Acquisition was accounted for under the acquisition method of accounting in accordance with US GAAP. Accordingly, the Portico assets purchased and liabilities assumed were recorded on the Company's books at fair value as of the

Portico Acquisition Date, and Portico's post-acquisition results were included in the Company's consolidated financial statements. Additionally, following the acquisition, the business acquired is included in the Investment Bank reporting unit within the Operating Company segment.

The aggregate estimated purchase price of the Portico Acquisition was $112.0 million. On the Portico Acquisition Date the Company paid upfront consideration of $91.3 million subject to certain net working capital and other customary adjustments, with additional maximum contingent consideration of $58.0 million that will become payable dependent on the achievement of certain milestones by Portico in each of the first three years (four years if certain conditions are met) following the Portico Acquisition Date subject to a $19.3 million maximum in each year and a $58.0 million cumulative maximum, with the opportunity for additional consideration payable in each of the fourth and fifth years following the Portico Acquisition Date upon the achievement of certain additional milestones. The Company estimated the contingent consideration at $20.7 million using a Monte Carlo valuation model which requires the Company to make estimates and assumptions regarding the future cash flows and profits. The contingent consideration liability is included within accounts payable, accrued expenses and other liabilities on the consolidated statements of financial condition. Changes in these estimates and assumptions could have a significant impact on the amounts recognized. A portion of the preliminary purchase price was deposited into escrow, in the amount of $4.4 million, as a reserve for any future claims against the sellers of Portico. The upfront consideration and contingent consideration, consists of a combination of 75% cash and 25% shares of the Company's Class A common stock and the potential additional consideration payable in each of the fourth and fifth years following the Portico Acquisition Date would be paid in cash. Shares issued on the Portico Acquisition Date of 586,061 were valued based on the 20-trading day volume-weighted average price per share of $37.11 as of December 13, 2021. The fair value of the shares of Class A common stock issued was determined on the basis of the closing market price of the Company's shares on the Portico Acquisition Date. Any shares of Class A common stock issued in connection with any such contingent payments will be valued based on the 20-trading day volume-weighted average price per share as of the date that in two business days immediately prior to the date on which such shares are to be issued.

In addition, Portico and the Company have established a retention bonus pool, for Portico employees that remain employed at the end of each year there is a contingent payment which will be settled in a combination of 75% cash and 25% shares of the Company's Class A common stock based on Portico meeting certain economic performance hurdles. Part of the award is time based (60%) and part is performance and time based (40%). The time based portion of the award is accrued within compensation payable in the accompanying consolidated statements of financial condition utilizing a graded vesting attribution method over the three year vesting period. The total consideration payable under the time based portion of the award is $6 million in aggregate, and will not exceed $3.6 million in any annual period if all service conditions are met. The performance based portion of the award is accrued within compensation payable in the accompanying consolidated statements of financial condition based on a Monte Carlo simulation of the probability that the performance hurdles are met for each discrete year. Updates to the accrual will be made at each reporting period. The total consideration payable will not exceed $4 million if each of the economic performance hurdles are met. The Company is recognizing the retention bonus over each contingent payment period based upon the Company's revenue projections for Portico. The aggregate bonus pool has an aggregate maximum of $10.0 million over a four-year period.

The table below summarizes the purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as of December 16, 2021:

	(dollars in thousands)
Cash	$	5,089
Operating lease right-of-use assets	2,707
Fixed assets	8
Intangible assets	19,900
Other assets	514
Operating lease liabilities	(2,707)
Other liabilities	(401)
Total net identifiable assets acquired and liabilities assumed	25,110
Goodwill	86,921
Total estimated purchase price	$	112,031

As of the Portico Acquisition Date, the estimated fair value of the Company's intangible assets, as acquired through the Portico Acquisition, was $19.9 million and had a weighted average useful life of 3.02 years. 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	$	400	1
Customer relationships	13,400		4
Backlog	6,100		1
Total intangible assets	$	19,900

Amortization expense for the year ended December 31, 2022 and 2021 was $9.5 million and $0.4 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)
2023	$	3,376
2024	3,376
2025	3,235
2026	—
2027	—
Thereafter	—
	$	9,987

In addition to the purchase price consideration, for the year ended December 31, 2021, the Company had incurred acquisition-related expenses of $4.2 million, including financial advisory, legal and valuation services, which are included in professional, advisory and other fees in the accompanying consolidated statements of operations.

Malta Holdings

On February 26, 2021 (the "Malta Holdings Acquisition Date"), the Company, through its indirect wholly owned subsidiary, Cowen Malta Holdings Ltd. (“Malta Holdings”), completed the acquisition of all of the outstanding equity interest of Axeria Insurance Limited (the “Acquisition”), an insurance company organized under the laws of Malta whose principal business activity is to provide insurance coverage to third parties (see Note 22). Axeria Insurance Limited was renamed Cowen Insurance Company Ltd (“Cowen Insurance Co”) upon acquisition. The Acquisition was completed for a combination of cash and deferred consideration. In the aggregate, the purchase price, assets acquired, and liabilities assumed were not significant and near-term impact to the Company and its consolidated results of operations and cash flows was not significant.

The aggregate estimated purchase price of the Acquisition was $12.7 million. On the Malta Holdings Acquisition Date, the Company paid upfront consideration of $12.5 million, with additional deferred consideration of $0.2 million which was paid during the second quarter of 2021.

The Acquisition was accounted for under the acquisition method of accounting in accordance with US GAAP. As such, the results of operations of the business acquired is included in the accompanying consolidated statements of operations since the date of the Acquisition and the assets acquired, liabilities assumed recorded at their fair values within their respective line items on the accompanying consolidated statement of financial condition. The Company has recognized a bargain purchase gain of $5.2 million related to the Acquisition and is shown net of associated tax of $1.3 million in the consolidated statement of operations. The bargain purchase gain is primarily driven by the recognition of the customer relationships intangible asset and a contractual discount on the closing equity balance at the Malta Holdings Acquisition Date. Additionally, following the Acquisition, the business acquired is included in the Cowen Investment Management reporting unit within the Operating Company segment.

The table below summarizes the purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as of February 26, 2021:

	(dollars in thousands)
Cash	$	14,844
Securities owned, at fair value	1,571
Fixed assets	30
Intangible assets	4,794
Other assets	12,828
Compensation payable	(17)
Other liabilities	(16,099)
Total net identifiable assets acquired and liabilities assumed	17,951
Bargain purchase gain	(5,216)
Total estimated purchase price	$	12,735

As of the Malta Holdings Acquisition Date, the estimated fair value of the Company's intangible assets, which are primarily broker relationships, was $4.6 million and had a weighted average useful life of 10 years. The licenses of $0.2 million have indefinite life. Amortization expense for the years ended December 31, 2022 and 2021, was $0.4 million, respectively.

As of December 31, 2022, the estimated amortization expense related to these intangible assets in future periods is as follows:

	(dollars in thousands)
2023	466
2024	466
2025	466
2026	466
2027	466
Thereafter	1,693
	$	4,023

In addition to the purchase price consideration, for the year ended December 31, 2022, the Company had incurred acquisition-related expenses of $0.2 million, including financial advisory, legal and valuation services, which are included in professional, advisory and other fees in the accompanying consolidated statements of operations.

MHT

On October 1, 2020 (the "MHT Acquisition Date"), the Company, through its indirect wholly owned subsidiary, Cowen and Company, completed its previously announced acquisition (the "MHT Acquisition") of certain assets and liabilities of MHT Partners, LP (“MHT Partners”). MHT Partners was an investment bank, based primarily in Dallas and San Francisco, focused on representing innovative companies in growing markets. The Acquisition was completed for a combination of cash and contingent consideration. In the aggregate, the purchase price, specified assets acquired and liabilities assumed were not significant and near-term impact to the Company and its consolidated results of operations and cash flows was not significant.

The MHT Acquisition was accounted for under the acquisition method of accounting in accordance with US GAAP. As such, results of operations for the MHT Acquisition are included in the accompanying consolidated statements of operations since the Acquisition Date, 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 the MHT Acquisition were integrated within the Company's existing businesses. Additionally, following the acquisition, the business acquired from MHT Partners is included in the Investment Bank reporting unit within the Operating Company segment.

The aggregate estimated purchase price of the MHT Acquisition was $9.9 million. On the acquisition date, the Company paid an upfront consideration of $5.7 million, with additional contingent consideration to be paid after December 2023 valued based on a multiple of three-year average annual revenues of the acquired business less certain expenses. The Company estimated the fair value of the contingent consideration at $4.2 million using a combination of Monte Carlo and Discounted Cash Flow methods which require the Company to make estimates and assumptions regarding the future cash flows and profits. The contingent consideration liability is included within accounts payable, accrued expenses and other liabilities on the consolidated statements of financial condition. Changes in these estimates and assumptions could have a significant impact on the amounts

recognized. In addition, the Company has established deferred compensation for specified previous MHT Partners employees which will be settled in cash over a three-year period.

The table below summarizes the purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as of October 1, 2020:

	(dollars in thousands)
Fixed assets	$	101
Operating lease right-of-use assets	1,120
Intangible assets	1,224
Other assets	43
Compensation payable	(533)
Operating lease liabilities	(1,446)
Total net identifiable assets acquired and liabilities assumed	509
Goodwill	9,356
Total estimated purchase price	$	9,865

As of the MHT Acquisition Date, the estimated fair value of the Company's intangible assets, as acquired through the MHT Acquisition, was $1.2 million and had a weighted average useful life of 4.17 years . 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	$	131	3
Customer relationships	749		4
Non-compete agreements	344		5
Total intangible assets	$	1,224

Amortization expense for the year ended December 31, 2022, 2021 and 2020 was $0.3 million, $0.3 million, and $0.1 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)
2023	$	289
2024	209
2025	52
2026	—
2027	—
Thereafter	—
	$	550

In addition to the purchase price consideration, for the year ended December 31, 2020, the Company had incurred acquisition-related expenses of $0.8 million, including financial advisory, legal and valuation services, which are included in professional, advisory and other fees in the accompanying consolidated statements of operations.