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Divestitures And Acquisitions
 12 Months Ended
Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
Divestitures And Acquisitions Divestitures and Acquisitions
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 "Initial Plan"). In the Initial Plan, AB would own a 49% interest in the joint venture and SocGen would own a 51% interest in the global joint venture, with an option to reach 100% ownership after five years.
During the fourth quarter of 2023, AB and SocGen negotiated a revised plan (the "Revised Plan") to form a North American joint venture (the "NA JV") and an International joint venture (the "International JV"). Under the Revised Plan, AB would own a majority economic and voting interest in the NA JV and a 49% economic and voting interest in the International JV. The Revised Plan, as compared to the Initial Plan, will not have a significant impact on our results of operations or financial condition.
SocGen will continue to have an option to reach 100% ownership in the International JV after five years and AB would have an option to sell its share in both joint ventures to SocGen, subject to regulatory approval. The consummation of the joint ventures is subject to customary closing conditions, including regulatory clearances. The closings are expected to occur in the first half of 2024.
The structure of the Board of Directors of the NA JV Holding Company, which will include two independent directors, precludes AB from controlling the Board and therefore from having a controlling financial interest in the entity. Upon review of the consolidation guidance under U.S. GAAP, we have concluded we will not consolidate the NA JV Holding Company and will maintain an equity method investment in both the NA JV and the International JV holding companies. Accordingly, the assets and liabilities of AB's research services business (“the disposal group”) continue to be 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 $6.6 million in general and administrative expenses on the condensed consolidated statement of income for the twelve months ended December 31, 2023, as well as $7.4 million for the three months ended December 31, 2022, to recognize the net carrying value at lower of cost or fair value, less estimated costs to sell. Approximately $7.2 million in costs to sell have been paid as of December 31, 2023.
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, 2023 and 2022:
Years Ended December 31
20232022
(in thousands)
Cash and cash equivalents$153,047 $159,123 
Receivables, net:
Brokers and dealers32,669 44,717 
Brokerage clients74,351 29,243 
Other fees15,326 22,988 
Investments17,029 24,507 
Furniture and equipment, net5,807 4,128 
Other assets104,228 107,764 
Right-of-use assets5,032 1,552 
Intangible assets4,061 4,903 
Goodwill159,826 159,826 
Valuation adjustment (allowance) on disposal group(6,600)(7,400)
Total assets held for sale$564,776 $551,351 
Payables:
Brokers and dealers$39,359 $32,983 
Brokerage clients16,885 10,232 
Other liabilities67,938 50,884 
Accrued compensation and benefits29,160 13,853 
Total liabilities held for sale$153,342 $107,952 
As of December 31, 2023 and 2022, cash and cash equivalents classified as held for sale included in the consolidated statement of cash flows were $153.0 million and $159.1 million, respectively.
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.
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 consideration228,885 
Total purchase consideration $818,054 
Purchase price allocation:
Assets acquired:
Cash and cash equivalents $40,777 
Receivables, net82,523 
Investments - other947 
Furniture, equipment, and leasehold improvements, net2,464 
Right-of-use assets16,482 
Other assets10,600 
Deferred tax asset5,073 
Intangible assets303,000 
Goodwill
666,130 
Total assets acquired1,127,996 
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.