Note 4 — Acquisitions

Acquisition of Kapstream

On July 1, 2015, JCG announced and closed the acquisition of a controlling 51% voting interest in Kapstream, a global macro fixed income asset manager located in Australia. The acquisition serves to further expand JCG's fixed income capabilities and build out its global macro fixed income team. JCG has an option to purchase the remaining 49% interest from Kapstream management on the third and fourth anniversaries of the acquisition.

The transaction included initial upfront cash consideration of $84.1 million and contingent consideration with a present value of $6.0 million, with the contingent consideration payable at 18 and 36 months after acquisition if certain Kapstream assets under management reach defined targets. The total maximum payment over the entire contingent consideration period is $9.1 million as of December 31, 2015. The fair value of the contingent consideration is calculated on a quarterly basis by forecasting certain Kapstream assets under management over the contingency period and determining whether the forecasted amounts meet the defined targets. Significant unobservable inputs used in the valuation are limited to forecasted Kapstream assets under management. Fair value adjustments to the contingent consideration during the year ended December 31, 2015, resulted in a $1.2 million increase to the liability and expense, including the monthly accretion of the liability to the future value of the consideration. At December 31, 2015, the contingent consideration had a fair value of $6.9 million; $3.8 million and $3.1 million was included in the other accrued liabilities and other non-current liabilities on JCG's Consolidated Balance Sheets, respectively.

The Company also acquired certain distribution rights for an additional cash consideration of $3.9 million. The Company incurred $2.1 million in investment bank advisory fees and other deal costs during the second quarter 2015 related to the acquisition. The deal costs are included in general, administrative and occupancy on JCG's Consolidated Statements of Comprehensive Income.

JCG completed a preliminary allocation of the July 1, 2015 purchase price to the acquired assets during the third quarter 2015. Certain adjustments were recorded to intangible assets, goodwill and deferred income taxes in the fourth quarter 2015 and the purchase price allocation was finalized as of December 31, 2015. The total purchase price was allocated as follows (in millions):

	Preliminary purchase price allocation			Adjustments			Final purchase price allocation
Assets:
Cash and cash equivalents	$	7.3		$	—		$	7.3
Investment securities		4.4			—			4.4
Accounts receivable		4.6			—			4.6
Intangible assets		114.7			(3.1	)		111.6
Goodwill		90.1			7.2			97.3
Other current assets		3.1			—			3.1
Other non-current assets, net		0.1			—			0.1
Liabilities:
Contingent consideration		(6.0	)		—			(6.0	)
Deferred income taxes		(34.4	)		0.9			(33.5	)
Other accrued liabilities		(10.2	)		—			(10.2	)
Noncontrolling interests		(85.7	)		—			(85.7	)

Net assets acquired	$	88.0		$	5.0		$	93.0

Goodwill represents the excess of cost over the fair value of the identifiable net assets acquired and is largely attributable to the existing workforce of Kapstream. The acquisition will expand JCG's fixed income capabilities and reinforce the Company's efforts to build a global macro fixed income team. The goodwill recognized as a result of the acquisition is not deductible for tax purposes.

The intangible assets include investment management agreements, client relationships and trade name. The client relationships have an estimated useful life of 10 years and are being amortized over the 10-year period. The investment management agreements and trade name have an indefinite life and as such, are not being amortized.

Noncontrolling interests were recognized on the Consolidated Balance Sheets for the 49% interest in Kapstream held by Kapstream management. The fair value of the noncontrolling interests as of the acquisition date of July 1, 2015, was $85.7 million.

Kapstream's functional currency is the Australian dollar. Assets and liabilities of Kapstream are translated into U.S. dollars at current exchange rates as of the end of each accounting period. Related revenue and expenses are translated at average exchange rates during the accounting period. Net translation gains and losses are excluded from income and recorded in other comprehensive loss, net of tax on the Company's Consolidated Statements of Comprehensive Income. JCG recognized a foreign currency translation loss of $4.3 million for the year ended December 31, 2015, related to Kapstream.

Acquisition of VelocityShares

On October 13, 2014, the Company entered into an agreement to acquire 100% of the outstanding voting equity interests of VS Holdings Inc., the parent company of VelocityShares. VelocityShares is a sponsor of ETPs, including rules-based exchange-traded funds ("ETFs"), which provide volatility management solutions to institutional clients. As of December 31, 2015 and 2014, VelocityShares-branded products had $3.2 billion and $2.4 billion in assets, respectively. The majority of these assets represent tactical trading products serving short-term investors and traders in the form of exchange-traded notes. The acquisition of VelocityShares is expected to facilitate JCG's entrance into the ETP business.

On December 1, 2014, JCG announced the closing of the VelocityShares acquisition. The transaction included initial upfront cash consideration of $32.7 million with up to an additional $36.0 million in contingent cash consideration if certain revenue targets are achieved over a four-year period. The contingent consideration is payable on the first, second, third and fourth anniversaries of the acquisition, in amounts up to $10.0 million each for the first and second anniversaries, and $8.0 million each for the third and fourth anniversaries. The total maximum payment over the entire contingent consideration period is $36.0 million. In November 2015, VelocityShares reached the defined net revenue target and the Company paid the first contingent consideration amount of $10.0 million, which represents the maximum amount for the first anniversary.

The payments are contingent on certain VelocityShares' ETPs reaching defined net revenue targets. The fair value of the contingent consideration is calculated on a quarterly basis by forecasting net ETP revenue, as defined by the purchase agreement, over the contingency period, and determining whether targets are met given forecasted VelocityShares operating results. Forecasted contingent payments are then discounted back to the valuation date. Significant unobservable inputs used in the valuation are limited to forecasted gross revenues and certain expense items, which are deducted from these revenues. Increases in forecasted net revenue increase the fair value of the consideration, subject to payment limitations, while decreases in net revenues would decrease the fair value. Fair value adjustments to the contingent consideration during the year ended December 31, 2015, resulted in a $5.2 million increase to the liability and expense, including the monthly accretion of the liability to the future value of the consideration. At December 31, 2015, $8.1 million and $5.0 million of the contingent consideration was included in other accrued liabilities and other non-current liabilities on JCG's Consolidated Balance Sheets, respectively.

The total purchase price, including the upfront payment and the present value of the expected contingent payments, was allocated as follows:


Assets:
Intangible assets	$	36.9
Goodwill		21.5
Cash acquired		4.3
Liabilities:
Deferred tax liability		(11.0	)
Other liabilities, net		(1.1	)

Net assets acquired	$	50.6