Business Combination

6 Months Ended

Jun. 30, 2019

On January 4, 2019, we completed the acquisition of Leerink Holdings LLC, the Boston-based parent company of healthcare and life science investment bank Leerink Partners LLC, now SVB Leerink Holdings LLC ("SVB Leerink"). The acquisition was previously announced on November 13, 2018. SVB Leerink is an investment bank specializing in Equity & Convertible Capital Markets, Mergers & Acquisitions, Equity Research and Sales & Trading for growth and innovation-minded healthcare and life science companies and operates as a wholly-owned subsidiary of SVB Financial.

The acquisition was accounted for as a business combination and accordingly, the results of SVB Leerink's operations have been included in the Company's unaudited interim consolidated financial statements at and for the three and six months ended June 30, 2019 from the date of acquisition. We acquired SVB Leerink for approximately $273.2 million comprised of cash and share-based replacement award liabilities. In addition, we provided a retention pool for employees of $60.0 million to be paid over five years comprised of a mix of cash and equity issued under the Company's current Equity Incentive Plan. Refer to Note 4—“Share-Based Compensation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for more information. The following table summarizes the allocation of the purchase price to the net assets of SVB Leerink as of January 4, 2019:



(Dollars in thousands)	January 4, 2019
Cash paid (1)	$	265,601
Replacement award liabilities (2)	7,629
Total purchase consideration	$	273,230
Fair value of net assets acquired (1)	135,407
Goodwill	$	137,823


(1)	During the three months ended June 30, 2019, the Company recorded purchase price allocation adjustments based on new information about facts and circumstances that existed at the time of the acquisition.


(2)	The replacement award liabilities recognized as part of the total purchase consideration and the post-combination expenses of $9.1 million related to share-based replacement awards will be paid out in cash in accordance with SVB Leerink's original grant date vesting schedules.

The following table summarizes the estimated fair value of assets acquired and liabilities assumed upon the finalization of the purchase:



(Dollars in thousands)	January 4, 2019
Assets acquired:
Cash and cash equivalents	$	163,273
Investment securities (1)	33,644
Accounts receivable (1)	36,538
Intangible assets	60,900
Other assets	35,128
Total assets acquired	329,483
Liabilities assumed:
Accrued compensation	137,206
Due to broker-dealers	18,483
Other liabilities	33,131
Noncontrolling interests	5,256
Total liabilities assumed	194,076
Fair value of net assets acquired	$	135,407


(1)	During the three months ended June 30, 2019, the Company recorded purchase price allocation adjustments described below.

The Company recognized identifiable intangible assets of $60.9 million and goodwill of $137.8 million as a result of the acquisition. Intangible assets of $60.9 million are subject to amortization over their estimated useful lives. The goodwill recorded includes revenue generating synergies expected from collaboration between SVB Leerink and the Company. All reported goodwill amounts have been allocated to the SVB Leerink reporting segment and are expected to be deductible for tax purposes. During the three months ended June 30, 2019, the Company made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments resulted in an increase in goodwill from March 31, 2019 of $2.6 million due to the net impact of an increase in cash paid of $2.3 million, an increase in investment securities of $0.7 million and a reduction in accounts receivable of $1.0 million. The fair value of the noncontrolling interests in Leerink Holdings LLC represents the noncontrolling ownership percentage for SVB Leerink's consolidated VIE investment securities which are measured at net asset value.

The following table summarizes the fair value and estimated useful lives of the other intangible assets at the date of acquisition:



(Dollars in thousands)	Estimated Fair Value		Weighted Average Estimated Useful Life - in Years
Other intangible assets:
Customer relationships	$	42,000	11.0
Other	18,900		9.9
Total other intangible assets	$	60,900

SVB Leerink's net income from January 4, 2019 through June 30, 2019 was approximately $9.7 million. Supplementary pro forma financial information related to the acquisition is not included because the impact to the Company's unaudited interim consolidated statements of income is not material. The following table represents the amount of revenue and earnings attributable to SVB Leerink that is included in our financial results for the three and six months ended June 30, 2019:



(Dollars in thousands)	Three months ended June 30, 2019		Six months ended June 30, 2019
Net interest income	$	242	$	684
Noninterest income	67,035		135,152
Noninterest expense	61,935		122,475
Income before income tax expense	5,342		13,361
Income tax expense	1,449		3,623
Net income attributable to noncontrolling interests	35		35
Net income available to common stockholders	$	3,858	$	9,703

The following table shows the components of acquisition-related activities expense for the three and six months ended June 30, 2019:



(Dollars in thousands)	Three months ended June 30, 2019		Six months ended June 30, 2019
Professional fees	$	283	$	651
Other	69		273
Total acquisition-related expenses	$	352	$	924