Acquisitions, Goodwill and Intangible Assets

12 Months Ended

Oct. 31, 2019

Acquisitions, Goodwill and Intangible Assets [Abstract]

Acquisitions, Goodwill and Intangible Assets

9.Acquisitions, Goodwill and Intangible Assets

Atlanta Capital Management Company, LLC (Atlanta Capital)

In fiscal 2017, the Company exercised a series of call options through which it purchased the remaining direct profit interests held by non-controlling interest holders of Atlanta Capital pursuant to the provisions of the original Atlanta Capital acquisition agreement, as amended, for $3.2 million, of which $0.7 million settled in the fourth quarter of fiscal 2017 and $2.5 million settled in the first quarter of fiscal 2018.

Atlanta Capital Plan

In fiscal 2019, 2018 and 2017, the Company exercised a series of call options through which it purchased $7.8 million, $8.2 million and $4.2 million, respectively, of indirect profit interests held by non-controlling interest holders of Atlanta Capital pursuant to the provisions of the Atlanta Capital Management Company, LLC Long-Term Equity Incentive Plan (Atlanta Capital Plan, as described further in Note 12). These transactions settled in each of the first quarters of fiscal 2020, 2019 and 2018, respectively.

Total indirect profit interests in Atlanta Capital held by non-controlling interest holders issued pursuant to the Atlanta Capital Plan were 8.2 percent and 9.8 percent at October 31, 2019 and 2018, respectively. Fair value of these interests reflects the unadjusted per unit equity value of Atlanta Capital determined utilizing an appraisal prepared by an independent valuation firm and approved by management as described further in Note 12. Vested profit interests are redeemable upon the exercise of limited in-service put rights held by the employee or call rights held by the Company. The call rights held by the Company entitle the Company to repurchase the profit units at the end of a ten-year call period and each year thereafter, and upon termination of employment. Execution of the puts and calls takes place upon availability of an appraisal to ensure the transactions take place at fair value. The estimated fair value of these interests was $25.2 million and $26.3 million at October 31, 2019 and 2018, respectively, and is included as a component of temporary equity on the Consolidated Balance Sheets.

Calvert Research and Management (Calvert)

In fiscal 2017, the Company, through its Calvert subsidiary, acquired substantially all of the assets of Calvert Investment Management, Inc. (Calvert Investments) for cash. The transaction was accounted for as an asset acquisition because substantially all of the fair value of the gross assets acquired was

concentrated in a single identifiable intangible asset related to contracts acquired to manage and distribute sponsored mutual funds (Calvert Funds). The Calvert Funds are a diversified family of mutual funds, encompassing actively and passively managed equity, fixed and floating-rate income, and multi-asset strategies managed in accordance with the Calvert Principles for Responsible Investment or other responsible investment criteria.

Parametric Portfolio Associates LLC (Parametric)

During fiscal 2019, the Company announced a strategic initiative to rebrand as Parametric the rules-based, systematic investment-grade fixed income strategies offered by its Eaton Vance Management affiliate, align internal reporting consistent with the revised branding, combine the technology and operating platforms supporting the individual separately managed account businesses of Parametric and Eaton Vance Management, and integrate the distribution teams serving Parametric and Eaton Vance Management clients and business partners in the registered investment advisor and multi-family office market. To support this initiative, in the fourth quarter of fiscal 2019 the Company accelerated the repurchase of capital and profit interests held by current and former employees of Parametric in a series of private transactions. Details of these accelerated repurchases, which totaled $73.5 million, are further described below. As of October 31, 2019, there were no profit or capital interests in Parametric held by non-controlling interest holders.

As of October 31, 2018, 5.1 percent of the profit interests and 0.8 percent of the capital interests in Parametric were held by non-controlling interest holders. The estimated fair value of these interests was $63.8 million at October 31, 2018, and is included as a component of temporary equity on the Consolidated Balance Sheet. Estimated fair value of these interests reflects the unadjusted per unit equity value of Parametric determined utilizing an appraisal prepared by an independent valuation firm and approved by management as described in Note 12.

Parametric Plan

In fiscal 2019, 2018 and 2017, the Company exercised a series of call options through which it purchased $0.6 million, $5.9 million and $5.7 million, respectively, of profit interests held by non-controlling interest holders of Parametric pursuant to the provisions of the Parametric Portfolio Associates LLC Long-Term Equity Plan (Parametric Plan, as described in Note 12). These transactions settled in each of the first quarters of fiscal 2020, 2019 and 2018, respectively.

In the fourth quarter of fiscal 2019, the Company accelerated the repurchase of the remaining outstanding profit interests granted under the Parametric Plan in a private transaction pursuant to a tender offer for $61.2 million. The interests were purchased at fair value, which was determined utilizing an appraisal of Parametric as described above. The transaction settled in the fourth quarter of fiscal 2019.

Parametric Risk Advisors

In November 2013, the non‐controlling interest holders of Parametric Risk Advisors entered into a Unit Acquisition Agreement with Parametric to exchange their remaining 20 percent ownership interests in Parametric Risk Advisors for additional ownership interests in Parametric Portfolio LP (Parametric LP), whose sole asset is ownership interests in Parametric. As a result of this exchange, Parametric Risk Advisors became a wholly‐owned subsidiary of Parametric. The Parametric LP ownership interests issued in the exchange represented a 0.8 percent profit interest and a 0.8 percent capital interest, and contained put and call features that became exercisable over a four‐year period starting in fiscal 2019. In the first quarter of fiscal 2019, the Company exercised a series of call options through which it purchased 0.2

percent profit interests and 0.2 percent capital interests for $4.0 million. The transaction settled in the first quarter of fiscal 2019.

In the fourth quarter of fiscal 2019, the Company accelerated the repurchase of the remaining 0.6 percent profit interests and 0.6 percent capital interests related to the Parametric Risk Advisors Unit Acquisition Agreement in a private transaction for $12.3 million. The interests were purchased at fair value, which was determined utilizing an appraisal of Parametric, as described above. The transaction settled in the fourth quarter of fiscal 2019.

Clifton

In December 2012, Parametric acquired Clifton. As part of the transaction, the Company issued 1.9 percent of the profit interests and 1.9 percent of the capital interests in Parametric LP to certain employees. In fiscal 2018 and 2017, the Company exercised a series of call options through which it repurchased the profit interests and capital interests in Parametric held by non-controlling interest holders related to the Clifton acquisition for $8.4 million and $6.9 million, respectively. These transactions settled in the first quarters of fiscal 2018 and 2017, respectively. In the fiscal 2018 transaction, the Company acquired the remaining 0.5 percent profit interests and 0.5 percent capital interests in Parametric relating to the Clifton acquisition.

Tax Advantaged Bond Strategies (TABS)

In fiscal 2009, the Company acquired the TABS business of M.D. Sass Investors Services for cash and future consideration. During the second quarter of fiscal 2017, the Company made a final contingent payment of $11.6 million to the selling group based upon prescribed multiples of TABS’s revenue for the twelve months ended December 31, 2016. The payment increased goodwill by $11.6 million, as the acquisition was completed prior to the change in accounting for contingent purchase price consideration.

Goodwill

The carrying amount of goodwill was $259.7 million at both October 31, 2019 and 2018. There were no changes in the carrying amount of goodwill during these periods. All acquired goodwill is deductible for tax purposes.

The Company completed its most recent goodwill impairment testing in the fourth quarter of fiscal 2019 and determined that there was no impairment in the carrying value of this asset. To evaluate the sensitivity of the goodwill impairment testing to the calculation of fair value, the Company applied a hypothetical 10 percent and 20 percent decrease to the fair value of each reporting unit. Under both hypothetical scenarios, the results of the Company’s impairment testing would not change, as the reporting units still had an excess of fair value over the carrying value.

No impairment in the value of goodwill was recognized during the years ended October 31, 2019, 2018 or 2017.

Intangible assets

The following is a summary of intangible assets:

October 31, 2019
(dollars in thousands)	Weighted-Average Remaining Amortization Period (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Client relationships acquired	9.5	$	134,247	$	(115,921)	$	18,326
Intellectual property acquired	6.6		1,025		(586)		439
Trademark acquired	11.1		4,257		(1,558)		2,699
Research system acquired	0.2		639		(604)		35
Non-amortizing intangible assets:
Mutual fund management contracts
acquired			54,408		-		54,408
Total		$	194,576	$	(118,669)	$	75,907

October 31, 2018
(dollars in thousands)	Weighted-Average Remaining Amortization Period (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Client relationships acquired	9.5	$	134,247	$	(111,591)	$	22,656
Intellectual property acquired	7.6		1,025		(519)		506
Trademark acquired	11.6		4,257		(1,190)		3,067
Research system acquired	1.2		639		(391)		248
Non-amortizing intangible assets:
Mutual fund management contracts
acquired			54,408		-		54,408
Total		$	194,576	$	(113,691)	$	80,885

No impairment in the value of amortizing or non-amortizing intangible assets was recognized during the years ended October 31, 2019, 2018 or 2017.

Amortization expense was $5.0 million, $8.9 million and $9.0 million for the years ended October 31, 2019, 2018 and 2017, respectively. Estimated amortization expense to be recognized by the Company over the next five years, on a straight-line basis, is as follows:

		Estimated
Year Ending October 31,		Amortization
(in thousands)		Expense
2020	$	3,807
2021		2,282
2022		2,154
2023		1,754
2024		1,679