Acquisitions and Disposals (Notes)

12 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Acquisitions and Disposals

Acquisition in Fiscal 2016

Sterne Agee

Effective July 1, 2016, the Company acquired all of the equity interests of Sterne Agee, LLC’s (a wholly-owned subsidiary of Stifel Financial Corp.) legacy independent brokerage and clearing businesses, Sterne Agee & Leach, Inc.; Sterne Agee Clearing, Inc.; Sterne Agee Financial Services, Inc. Effective August 1, 2016, the Company acquired all of the equity interests of Sterne Agee, LLC’s legacy Registered Investment Advisor (“RIA”) business, Sterne Agee Asset Management, Inc. and Sterne Agee Investment Advisor Services, Inc. - collectively (“Sterne Agee”) for cash consideration.

The acquisition-date fair value of the consideration transferred totaled $45.0 million. The preliminary purchase price allocation resulted in $24.9 million in cash, $151.6 million in receivables, $5.7 million in deferred tax assets,$4.8 million in other assets and $136.0 million in liabilities assumed. The fair value of identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred. Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. As a result, the Company recognized a gain of $6.2 million, which is included in the line item ‘gain on acquisition’ in the consolidated income statement. The Company believes the transaction resulted in a gain primarily due to the Company’s ability to incorporate these business activities into its existing business structure, and its ability to utilize certain deferred tax assets and other assets while operating the business that may not have been likely to be realized by the seller. The allocation of the consideration to the fair value of the assets acquired and liabilities assumed is preliminary and subject to further adjustment as additional information is obtained. These allocations are subject to change within the measurement period (up to one year from the acquisition date) as final information is obtained.

The businesses have been included within the Company’s Clearing and Execution Services Segment. The Company’s consolidated income statement for the year ended September 30, 2016 includes the post acquisition results of the Sterne Agee businesses, which were immaterial. The acquired businesses contributed net operating revenues of $8.6 million and net loss of $0.1 million to the Company for the period from July 1, 2016 to September 30, 2016.

Acquisition in Fiscal 2015

The Company’s consolidated financial statements include the operating results of the acquired businesses from the dates of acquisition.

G.X. Clarke & Co.

Effective January 1, 2015, the Company acquired all of the partnership interests of G.X. Clarke & Co., an SEC registered institutional dealer in fixed income securities. G.X. Clarke was based in New Jersey, transacted in U.S. Treasury, U.S. government agency and agency mortgage-backed securities, and was a FINRA member with an institutional customer base consisting of asset managers, commercial bank trust and investment departments, broker-dealers, and insurance companies. The purchase price payable by the Company was equal to G.X. Clarke’s net tangible book value at closing of approximately $25.9 million plus a premium of $1.5 million, and up to an additional $1.5 million over the next three years, subject to the achievement of certain profitability thresholds. In conjunction with the acquisition, the name of G.X. Clarke was changed to INTL FCStone Partners L.P.

The acquisition agreement includes the purchase of certain tangible assets and assumption of certain liabilities. For the acquisition, management made an initial fair value estimate of the assets acquired and liabilities assumed as of January 1, 2015. The Company believes that due to the short-term nature of many of the tangible assets acquired and liabilities assumed, that their carrying values, as included in the historical financial statements of G.X. Clarke, approximate their fair values. The Company finalized its purchase accounting estimates with the assistance of a third-party valuation expert. The portion of the purchase price representing the initial premium of $1.5 million and the contingent consideration of $0.1 million has been assigned to the customer base and software programs/platforms intangible assets (see Note 9). The Company assigned useful lives of 5 years for the customer base and software programs/platforms intangible assets.

As part of the net cash paid, the Company and G.X. Clarke established two escrow accounts totaling $10.0 million, related to an Adjustment Escrow and Indemnity Escrow. The Adjustment Escrow, of $5.0 million, related to potential purchase price adjustment obligations was released, during year ended September 30, 2015, upon determination of the final tangible book value of net assets of G.X. Clarke. The Indemnity Escrow, of $5.0 million, relates to potential claims made by the Company for indemnification in accordance with the terms of the acquisition agreement and is to be released immediately following the twenty-four month anniversary of the closing date of the acquisition. The remaining escrow balance is included in ‘other assets’ in the consolidated balance sheet.

In addition, as part of the net cash paid for the acquisition, the Company has deferred payment of $5.0 million, in accordance with the terms of the acquisition agreement. The deferred payment shall be equal to $5.0 million less the aggregate net loss, if any, incurred for the twelve full fiscal quarters commencing after the closing date. The deferred payment amount shall be due and payable shortly after the twelfth full fiscal quarter commencing after the closing date. The deferred payment is included in ‘accounts payable and other accrued liabilities’ in the consolidated balance sheet.

As discussed above, the terms of the acquisition agreement include a contingent payment of an additional purchase price of up to $1.5 million, based on the performance of the acquired business. The contingent consideration, which in no event shall exceed $1.5 million, is expected to be paid in two payments. The first payment was made after the first four full fiscal quarters commencing after the closing date, and totaled $0.5 million, as the acquired business generated more than $5.0 million in after-tax net income over the first four full fiscal quarters after the closing date. The second and final payment is expected to occur after the twelfth full fiscal quarter commencing after the closing date. This payment is estimated to be $1.0 million, if the acquired business has generated accumulated after-tax net income of greater than $30.0 million over the twelve full fiscal quarters commencing after the closing date.

Acquisition in Fiscal 2014

The Company’s consolidated financial statements include the operating results of the acquired businesses from the dates of acquisition.

Forward Insight Commodities LLC

In April 2014, the Company’s wholly owned subsidiary, FCStone Group, Inc. (“FCG”), acquired all of the outstanding member interests of Forward Insight Commodities, LLC (“FIC”). FIC was a brokerage firm focused on the structuring and execution of transactions in the energy derivative space.

The consideration paid for the acquisition consisted of contingent payments based on the pre-tax earnings of the business for the twelve month period following the acquisition and was estimated to be $0.5 million as of the acquisition date. The purchase price for the acquisition was not material to the consolidated financial statements. The intangible assets recognized in this transaction of $0.5 million were assigned to the Clearing and Execution Services segment and were amortized over a 12 month useful life.