Acquisitions

12 Months Ended

Dec. 31, 2011

Acquisitions

Acquisitions

(6)   Acquisitions

Ross Smith Energy Group Ltd.

        On June 3, 2011, the Company completed its acquisition of Ross Smith Energy Group Ltd. ("RSEG"), a Calgary-based independent provider of research on the oil and gas industry. RSEG provides detailed technical and financial analysis of North American resource plays, public and private corporations, as well as coverage of international and macroeconomic energy issues, for more than 200 clients in North America and Europe, a number of which are new clients for ITG. The acquisition of RSEG expands the ITG Investment Research platform to include differentiated views into the exploration and production activities of North American and international energy companies.

        The results of RSEG have been included in the Company's consolidated financial statements since its acquisition date. The $38.6 million purchase price for RSEG consists of all cash with no contingent payment provisions. In connection with the acquisition, the Company also incurred approximately $0.7 million of acquisition related costs, including legal fees and other professional fees, as well as $1.8 million in connection with the termination of a distribution agreement with a third party, net of a $1.0 million recovery from RSEG's former owners. These costs were classified in the Consolidated Statements of Operations as acquisition related costs.

        The assets and liabilities of RSEG were recorded as of the acquisition date, at their respective fair values, under business combination accounting. The purchase price allocation is based on estimates of the fair value of assets acquired and liabilities assumed as follows (dollars in thousands):

Cash	$	2,540
Accounts receivable, net		1,422
Customer related intangible asset		6,950
Accounts payable and accrued liabilities		(1,505	)
Deferred income		(2,151	)
Other assets and liabilities, net		611
Goodwill		30,715
Total purchase price	$	38,582

        Goodwill and customer-related intangible asset were assigned to the U.S. Operations segment, which is expected to be the primary beneficiary of the synergies achieved from the business combination. The goodwill is deductible for corporate income tax purposes over 15 years. The acquired customer related intangible asset of $7.0 million has a 10 year useful life. The pro forma results of the RSEG acquisition would not have been material to the Company's results of operations.

Majestic Research Corp.

        On October 25, 2010, the Company acquired Majestic Research Corp. ("Majestic"), a privately-held, independent provider of data-driven equity research for the institutional investment community for $56.2 million. Majestic (together with RSEG, now ITG Investment Research) helps investors gain independent perspectives on companies and their sectors based on proprietary data sources and rigorous analysis, providing coverage (at the time of acquisition) of 17 industry sectors as well as macroeconomics and customized research reports to institutional investors and corporate clients. This acquisition is part of the Company's strategy to expand its addressable market and compete for research-driven commissions.

        The results of Majestic have been included in the Company's consolidated financial statements since its acquisition date. The $56.2 million purchase price for Majestic (including a purchase price adjustment of $144,000 paid in 2011) is comprised of $53.2 million in cash and $3.0 million in converted equity awards. In connection with the acquisition, the Company also incurred approximately $2.4 million of acquisition related costs, including legal fees and other professional fees, accelerated employee equity awards and severance costs, which are classified as acquisition related costs in the Consolidated Statements of Operations.

        The assets and liabilities of Majestic were recorded as of the acquisition date, at their respective fair values, under business combination accounting. The purchase price allocation is based on estimates of the fair value of assets acquired and liabilities assumed as follows:

Cash	$	7,151
Accounts receivable, net		3,194
Customer related intangible assets		12,500
Deferred tax assets		4,027
Other assets		1,133
Accounts payable and accrued liabilities		(10,098	)
Deferred revenue		(5,093	)
Deferred tax liabilities		(5,182	)
Other liabilities		(134	)
Goodwill		48,717
Total purchase price	$	56,215

        The goodwill and customer-related intangible asset was assigned to the U.S. Operations segment. The goodwill is not deductible for tax purposes. The acquired customer-related intangible asset of $12.5 million has a 12 year useful life. The pro forma results of the Majestic acquisition would not have been material to the Company's result of operations.

RedSky Financial, LLC

        On July 31, 2007, the Company acquired 100% of RedSky Financial, LLC (now ITG Derivatives) for $22.5 million and incurred acquisition costs of $0.4 million. In 2009, a contingent payment of $2.5 million was made in accordance with the purchase agreement, of which $1.9 million was included in the $22.9 million purchase price and $0.6 million was recognized as expense over the appropriate period since the acquisition date as it was considered to be compensatory.

        Pursuant to the purchase agreement, a guaranteed payment of $7.5 million was payable in 2011, of which $5.6 million was included in the purchase price of $22.9 million. The remaining $1.9 million was considered compensatory and was recognized as expense over the appropriate period through December 31, 2010. However, due to employee terminations resulting in payout forfeitures, the $1.9 million was adjusted down by $0.1 million to $1.8 million. As a result, a guaranteed payment of $7.4 million was made in January 2011.

        The purchase agreement provided for additional contingent payments of up to $12.5 million based on the three year cumulative results ended December 31, 2010, with approximately $7.0 million of such payments to be recognized as expense in the appropriate periods as this amount was considered to be compensatory. Based on the three year cumulative results, the above noted contingent payments were not required.