Discontinued Operations

3 Months Ended

Mar. 31, 2020

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

In the third quarter of 2019, the Company completed the sale of its traditional asset management business, which was conducted through its wholly-owned subsidiary Advisory Research, Inc. ("ARI"). On September 20, 2019, the Company completed the sale of the master limited partnerships ("MLP") and energy infrastructure strategies business to Tortoise Capital Advisors. Additionally, on September 27, 2019, the Company completed the sale of its remaining equity strategies business to its former management team.

The transactions generated cash proceeds of $52.9 million and include the potential for the Company to receive additional cash consideration payments based on prospective revenues. The Company is eligible to receive an additional payment of up to $35.7 million contingent upon contractually defined MLP revenue exceeding a revenue threshold in the one-year period following the close of the transaction. The Company may also receive an additional payment based upon a multiple of aggregate revenue with respect to certain sub-advised accounts as of December 31, 2020. The Company will record a gain upon receipt of the earnout payments, if any.

In addition, the Company is eligible to receive additional payments up to a total of $10.0 million based on the revenues of the equity strategies business during each of the four annual periods from January 1, 2020 to December 31, 2023. The Company estimated the fair value of this earnout to be $2.2 million upon the close of the transaction, which will be reevaluated at each reporting date. As of March 31, 2020, the Company had a $2.2 million receivable recorded in other assets on the consolidated statements of financial condition.

ARI's results have been presented as discontinued operations for all prior periods presented. The components of discontinued operations were as follows:

	Three Months Ended
(Amounts in thousands)	March 31, 2019
Net revenues	$	9,290
Operating expenses	8,139
Intangible asset amortization	1,359
Total non-interest expenses	9,498
Loss from discontinued operations before income tax benefit	(208		)
Income tax benefit	(69		)
Loss from discontinued operations, net of tax	$	(139	)