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Acquisitions, Goodwill and Intangible Assets

12 Months Ended

Oct. 31, 2012

Acquisitions, Goodwill and Intangible Assets [Abstract]

Acquisitions, Goodwill and Intangible Assets

11. Acquisitions, Goodwill and Intangible Assets

Parametric Risk Advisors LLC (“Parametric Risk Advisors”)

Parametric Risk Advisors is a majority-owned subsidiary of Parametric. In fiscal 2012, Parametric exercised a call option requiring the non-controlling interest holders of Parametric Risk Advisors to sell to Parametric units representing a 10 percent ownership interest in Parametric Risk Advisors for $2.9 million. Pursuant to the acquisition agreement, the exercise price of the call option was based on a multiple of earnings before interest and taxes for the twelve months ended April 30, 2012. As a result of the transaction, Parametric's ownership interest increased from 60 percent to 70 percent. The payment was treated as an equity transaction and reduced redeemable non-controlling interests at closing. Parametric has the right to purchase the remaining non-controlling interest in Parametric Risk Advisors over a three-year period based on a prescribed multiple of earnings before interest and taxes of the entity for the twelve months ending April 30, 2013 and the next two twelve-month periods. The exercise of the call rights is not contingent upon the non-controlling interest holders of Parametric Risk Advisors remaining employees of the Company.

In fiscal 2011, Parametric exercised a call option requiring the non-controlling interest holders of Parametric Risk Advisors to sell to Parametric units representing a 9 percent ownership interest in Parametric Risk Advisors for $2.3 million. As a result of the transaction, Parametric's ownership interest increased from 51 percent to 60 percent. The payment was treated as an equity transaction and resulted in a reduction to redeemable non-controlling interest.

Parametric

In fiscal 2012, the non-controlling interest holders of Parametric exercised a put option requiring the Company to purchase for $17.0 million an additional interest in Parametric representing a 1.7 percent capital interest and a 2.9 percent profit interest in the entity. Pursuant to the acquisition agreement, the exercise price of the put option was based on a multiple of earnings before taxes for the calendar year ended December 31, 2011. The transaction reduced the capital interests held by non-controlling interest holders from 5.2 percent on October 31, 2011 to 3.4 percent on October 31, 2012. Profit interests held by non-controlling interest holders, which include direct profit interests in Parametric as well as indirect profit interests granted as part of a long-term equity incentive plan of that entity, decreased to 9.7 percent on October 31, 2012 from 11.4 percent on October 31, 2011, reflecting the repurchase of the 2.9 percent profit interest referenced above partly offset by an additional 1.1 percent profit interest granted under the long-term equity incentive plan. The exercise of the put was treated as an equity transaction and reduced redeemable non-controlling interests at closing.

In fiscal 2011, the Company exercised a call option requiring the non-controlling interest holders of Parametric to sell to the Company for $4.3 million units representing a 0.5 percent capital ownership interest and a 0.9 percent profits interest in the entity. The transaction reduced the capital interests held by non-controlling interest holders from 5.7 percent on October 31, 2010 to 5.2 percent on October 31, 2011. Profit interests held by non-controlling interest holders increased to 11.4 percent on October 31, 2011 from 11.1 percent on October 31, 2010, reflecting an additional 1.2 percent profit interest granted under the long-term equity incentive plan partly offset by the repurchase of 0.9 percent profit interest referenced above. The exercise of the put was treated as an equity transaction and reduced redeemable non-controlling interests at closing.

Non-controlling interest holders of Parametric will have the right to sell to the Company the remaining 3.4 percent of the capital of Parametric (which entitles the holder to an additional 5.7 percent profits interest) based on financial results of Parametric for the calendar year ending December 31, 2012. The Company has the right to purchase the remaining capital and associated profit interests held by the non-controlling interest holders of Parametric based on its financial results for the calendar year ending December 31, 2012. Prices for acquiring capital and profits interests in Parametric will be based on a multiple of earnings before interest and taxes. Neither the exercise of the puts nor the exercise of the calls is contingent upon the non-controlling interest holders of Parametric remaining employees of the Company.

Atlanta Capital

Non-controlling interest holders of Atlanta Capital have the right to sell a 10.3 percent interest in Atlanta Capital to the Company at a multiple of earnings before taxes based on the financial results of Atlanta Capital for the fiscal year ended October 31, 2012 and each year thereafter subject to certain restrictions. The Company has the right to purchase the remaining non-controlling interest at a multiple of earnings before taxes based on Atlanta Capital's financial results for the fiscal year ending October 31, 2013 and each year thereafter. Neither the exercise of the puts nor the exercise of the calls is contingent upon the non-controlling interest holders of Atlanta Capital remaining employees of the Company.

Profit interests held by non-controlling interest holders increased to 18.1 percent on October 31, 2012 from 16.9 percent on October 31, 2011, reflecting an additional 1.2 percent profit interest granted under the long-term equity incentive plan.

Profit interests held by non-controlling interest holders, which include direct profit interests in Atlanta Capital as well as indirect profit interests granted as part of a long-term equity incentive plan of that entity, increased to 16.9 percent on October 31, 2011 from 15.2 percent on October 31, 2010, reflecting an additional 1.7 percent profit interest granted under the long-term equity incentive plan.

Fox Asset Management

During fiscal 2011, the non-controlling interest holders of Fox Asset Management executed a put option requiring the Company to purchase an additional 16 percent interest in Fox Asset Management. The transaction settled on March 1, 2011 and increased the Company's ownership interest from 84 percent to 100 percent. Pursuant to the terms of the unit purchase agreement, no proceeds were transferred at closing.

TABS

In fiscal 2009, the Company acquired the TABS business of M.D. Sass Investors Services, a privately held investment manager based in New York, New York. Subsequent to closing, the TABS business was reorganized as the Tax-Advantaged Bond Strategies division of Eaton Vance Management (“EVM”). The acquisition was completed prior to the change in accounting for contingent purchase price consideration. Accordingly, all contingent purchase price payments from this acquisition are adjusted to the purchase price allocation.

During fiscal 2012, the Company made a contingent payment of $12.3 million to the selling group based upon prescribed multiples of TABS's revenue for the twelve months ended December 31, 2011. The payment increased goodwill by $12.3 million. The Company will be obligated to make four additional annual contingent payments to the selling group based on prescribed multiples of TABS's revenue for the twelve months ending December 31, 2012, 2014, 2015 and 2016. All future payments will be in cash and will result in an addition to goodwill. These payments are not contingent upon any member of the selling group remaining an employee of the Company.

During fiscal 2011, the Company made a contingent payment of $11.6 million to the selling group based upon prescribed multiples of TABS revenue for the twelve months ended December 31, 2010.

Goodwill

The changes in the carrying amount of goodwill for the years ended October 31, 2012 and 2011 are as follows:

(in thousands)	2012		2011
Balance, beginning of period	$	142,302	$	135,786
Goodwill acquired		12,334		6,516
Balance, end of period	$	154,636	$	142,302

All acquired goodwill is deductible for tax purposes.

The Company completed its most recent goodwill impairment testing in the fourth quarter of fiscal 2012 and determined that there was no impairment in the value of this asset as of September 30, 2012. 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. Based on such 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 under both hypothetical scenarios. There were no significant changes in the assumptions, methodologies or weightings used in the Company's current year goodwill impairment testing.

No impairment loss in the value of goodwill was recognized during the years ended October 31, 2011 and 2010.

Intangible assets

The following is a summary of intangible assets at October 31, 2012 and 2011:

October 31, 2012
(dollars in thousands)	Weighted-average remaining amortization period (in years)	Gross carrying amount		Accumulated amortization		Net carrying amount

Amortizing intangible assets:
Client relationships acquired	7.0	$	110,327	$	(58,681)	$	51,646
Intellectual property acquired	13.6		1,000		(126)		874

Non-amortizing intangible assets:
Mutual fund management contract acquired			6,708		-		6,708
Total		$	118,035	$	(58,807)	$	59,228

October 31, 2011
(dollars in thousands)	Weighted-average remaining amortization period (in years)	Gross carrying amount		Accumulated amortization		Net carrying amount

Amortizing intangible assets:
Client relationships acquired	7.9	$	110,327	$	(50,749)	$	59,578
Intellectual property acquired	14.6		1,000		(62)		938

Non-amortizing intangible assets:
Mutual fund management contract acquired			6,708		-		6,708
Total		$	118,035	$	(50,811)	$	67,224

No impairment loss was recognized in the value of amortizing or non-amortizing intangible assets during the years ended October 31, 2012, 2011 or 2010.

Amortization expense was $8.0 million, $7.9 million and $7.8 million for the years ended October 31, 2012, 2011 and 2010, respectively. Estimated amortization expense for the next five years on a straight-line basis, is as follows:

Year Ending October 31,			Estimated Amortization
(in thousands)			Expense
2013	$	7,995
2014		7,968
2015		7,743
2016		7,301
2017		7,189

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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