Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions

On July 1, 2022, AB Holding acquired a 100% ownership interest in CarVal, a global private alternatives investment manager primarily focused on opportunistic and distressed credit, renewable energy, infrastructure, specialty finance and transportation investments that, as of the acquisition date, constituted approximately $12.2 billion in AUM. Also, on July 1, 2022, immediately following the acquisition of CarVal, AB Holding contributed 100% of its equity interests in CarVal to AB in exchange for AB Units. Post-acquisition, CarVal was rebranded AB CarVal Investors (“AB CarVal”).

On the acquisition date, AB Holding issued approximately 3.2 million AB Holding Units (with a fair value of $132.8 million) with the remaining 12.1 million Units (with a fair value of $456.4 million) issued on November 1, 2022. The fair value of the units issued on November 1, 2022 reflect final adjustments to the estimated unit issuance recorded as of acquisition close on July 1, 2022 and as disclosed in the third quarter 2022 Form 10-Q.

AB received a 100% equity interest in CarVal from AB Holding and issued approximately 15.3 million AB Units (with a fair value of $589.2 million). AB also recorded a contingent consideration payable of $228.9 million (to be paid predominantly in AB Units) based on AB CarVal achieving certain performance objectives over a six-year period ending December 31, 2027. The AB Units, as discussed above, were issued to AB Holding; AB Holding then issued the equal amount of AB Holding Units to CarVal. The excess of the purchase price over the current fair value of identifiable net liabilities acquired of $156.1 million (net of cash acquired of $40.8 million), and the recording of a net deferred tax asset of $5.1 million resulted in the recognition of $666.1 million of goodwill and the recording of $303.0 million of finite-lived intangible assets primarily relating to investment management contracts and investor relationships with useful lives ranging from 5 to 10 years. The goodwill recorded is not deductible for tax purposes as the CarVal acquisition was an investment in a partnership.

The following table summarizes the amounts of identified assets acquired and liabilities assumed at the acquisition date (reflecting acquisition adjustments recorded in the fourth quarter of 2022), as well as the consideration transferred to acquire CarVal (in thousands):


Summary of purchase consideration:
Fair value of AB Holding units issued	$	589,169
Fair value of contingent consideration	228,885
Total purchase consideration	$	818,054

Purchase price allocation:
Assets acquired:
Cash and cash equivalents	$	40,777
Receivables, net	82,523
Investments - other	947
Furniture, equipment, and leasehold improvements, net	2,464
Right-of-use assets	16,482
Other assets	10,600
Deferred tax asset	5,073
Intangible assets	303,000
Goodwill	666,130
Total assets acquired	1,127,996

Liabilities assumed:
Accounts payable and accrued expenses	(17,793)
Accrued compensation and benefits	(219,726)
Debt	(42,661)
Lease liabilities	(16,571)
Non-redeemable non-controlling interests in consolidated entities	(13,191)
Total liabilities assumed	(309,942)

Net assets acquired	$	818,054

The CarVal acquisition did not have a significant impact on our 2022 revenues and earnings. As a result, we have not provided supplemental pro forma financial information.

Divestitures

On November 22, 2022, AB and SocGen, a leading European bank, announced plans to form a joint venture combining their respective cash equities and research businesses. The consummation of the joint venture is subject to customary closing conditions, including regulatory clearances. The closing is expected to occur before the end of 2023. Upon closing, AB will own a 49% interest in the joint venture and SocGen will own a 51% interest in the joint venture, with an option to reach 100% ownership after five years. The assets and liabilities of AB's research services business (“the disposal group”) have been classified as held for sale on the consolidated statement of financial condition and recorded at fair value, less cost to sell. As a result of classifying these assets as held for sale, we recognized a non-cash valuation adjustment of $7.4 million on the consolidated statement of income, to recognize the net carrying value at lower of cost or fair value, less estimated costs to sell.

The following table summarizes the assets and liabilities of the disposal group classified as held for sale on the consolidated statement of financial condition as of December 31, 2022:


Cash and cash equivalents	$	159,123
Receivables, net:
Brokers and dealers	44,717
Brokerage clients	29,243
Other fees	22,988
Investments	24,507
Furniture and equipment, net	4,128
Other assets	107,764
Right-of-use assets	1,552
Intangible assets	4,903
Goodwill	159,826
Valuation adjustment (allowance) on disposal group	(7,400)
Total assets held for sale	$	551,351

Payables:
Brokers and dealers	$	32,983
Brokerage clients	10,232
Other liabilities	50,884
Accrued compensation and benefits	13,853
Total liabilities held for sale	$	107,952

As of December 31, 2022, cash and cash equivalents classified as held for sale included in the consolidated statement of cash flows was $159.1 million.

We have determined that the exit from the sell-side research business does not represent a strategic shift that had a major effect on our consolidated results of operations. Accordingly, we have not classified the disposal group as discontinued operations. The results of operations of the disposal group up to the respective dates of sale will be included in our consolidated results of operations for all periods presented. The lower of amortized cost or fair value adjustment upon transferring these assets to held for sale was not material.