Acquisition

On April 1, 2010, the Company acquired 100% ownership of Caliburn Partnership Pty Limited ("Caliburn", which was renamed Greenhill Australia. See "Note 1 — Organization") from its founding partners (the “Acquisition”) in exchange for (i) 1,099,874 shares of Greenhill common stock, with a fair value on the date of the Acquisition of $90.2 million and (ii) 1,099,877 shares of contingent convertible preferred stock (“Performance Stock”). The Performance Stock does not pay dividends and will convert to shares of the Company’s common stock in tranches of 659,926 and 439,951 shares on the third and fifth anniversaries of closing, respectively, if certain revenue targets are achieved. If those revenue targets are not achieved, the Performance Stock will be canceled for each such period as of the third and fifth anniversaries of closing, respectively. The fair value of the Performance Stock on the date of the Acquisition was $47.0 million and has been recorded as a component of equity. As of December 31, 2012, the revenue target for the first tranche was achieved and the Performance Stock was included in the weighted average number of shares.

In addition, the Company granted at closing performance based restricted stock units (“Performance RSUs”) of which 104,484 remain outstanding at December 31, 2012. The Performance RSUs will vest in tranches of 62,690 and 41,794 shares on the third and fifth anniversaries of the closing, respectively, subject to the achievement of the same revenue targets as the Performance Stock. Amortization of each tranche of the Performance RSUs will begin at the time it is deemed probable that the revenue targets will be achieved and the value of the award at that date will be amortized over the remaining vesting period of each award. If those revenue targets are not achieved, the Performance RSUs will be canceled and no amount will be expensed. In 2011, the Company deemed it probable that the revenue targets related to the first tranche would be achieved. For the years ended December 31, 2012 and 2011, the Company expensed $1.7 million and $3.0 million, respectively, related to the Performance RSUs. No amount was expensed for the year ended December 31, 2010. See "Note 9 — Equity" and "Note 10 — Earnings per Share".

The Acquisition has been accounted for using the purchase method of accounting and the results of operations for Greenhill Australia have been included in the consolidated statements of income from the date of acquisition. The Company incurred $1.2 million of costs related to the Acquisition which were included as a component of professional fees in the consolidated statement of income for the year ended December 31, 2010.

The total purchase price of $137.2 million (AUS $149.6 million) was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of April 1, 2010, the date of the acquisition, as follows (in thousands):

Assets acquired and liabilities assumed:



Assets:
Cash	$	4,712
Other current assets	3,887
Property and equipment	643
Deferred compensation plan investments	11,295
Deferred tax assets	3,756
Identifiable intangible assets	8,568
Goodwill	127,972
Total assets	160,833
Liabilities:
Other current liabilities	5,438
Deferred compensation payable	11,295
Due to affiliates	6,861
Total liabilities	23,594
Purchase price	$	137,239

The excess of the purchase price over the fair value of net assets acquired has been recorded as goodwill. Therefore, the Company recognized $128.0 million (AUS $139.0 million) of goodwill as a result of the Acquisition. Goodwill is translated at the rate of exchange prevailing at the end of each period.

The fair value of the identifiable intangible assets acquired, which consist of the trade name, the backlog of investment banking client assignments that existed at the time of the closing, and customer relationships, is based, in part, on a valuation using an income approach, market approach or cost approach, as appropriate, and has been included in other assets on the consolidated statements of financial condition. The estimated fair value ascribed to the identifiable intangible assets is amortized on a straight-line basis over the estimated remaining useful life of each asset over periods ranging between two to three years. For the years ended December 31, 2012, 2011 and 2010, the Company recorded $2.9 million, $3.5 million and $2.4 million respectively, of amortization expense in respect of these assets.

In addition to the equity consideration provided to the sellers, under the terms of the sale agreement, the selling shareholders and certain other non-founding partners received post-closing distributions of profits accrued prior to the acquisition date of approximately $6.9 million (AUS $7.6 million).

In connection with the Acquisition, the Company assumed amounts due under Caliburn’s deferred compensation plan and acquired a corresponding amount of investments of approximately $11.3 million (AUS $12.3 million). Under this plan, a portion of certain employees’ compensation was deferred and invested in cash or, at the election of each respective employee, in certain mutual fund investments. The cash and mutual fund investments will be distributed to those employees of Greenhill Australia, who were employed on the date of acquisition, over a 7 year period ending in 2016. During the years ended December 31, 2012 and 2011, distributions of $3.0 million (AUS $2.9 million) and $2.3 million (AUS $2.3 million), respectively, were made from the mutual fund investments in accordance with the terms of the plan. The invested assets relating to this plan have been recorded on the consolidated statements of financial condition as components of both cash and cash equivalents and other investments. A deferred compensation liability relating to the plan of $2.5 million and $5.2 million, as of December 31, 2012 and 2011, respectively, has been recorded on the consolidated statements of financial condition as a component of compensation payable. Subsequent to the Acquisition the Company has discontinued future participation in the plan. See “Note 2 — Summary of Significant Accounting Policies — Cash and Cash Equivalents” and “Note 4 — Investments — Other Investments”.

The Company granted 275,130 restricted stock units to current employees of Greenhill Australia at closing of the Acquisition. These awards vest ratably over three to five years from the date of grant subject to continued employment and are amortized over the service period.

Set forth below is the Company’s unaudited pro forma results of operations for the year ended December 31, 2010. The unaudited pro forma results of operations for the year ended December 31, 2010 include the historical results of the Company and give effect to the Acquisition as if it had occurred on January 1, 2010. These pro forma results include the actual results of Caliburn from January 1, 2010 through March 31, 2010. For the period April 1, 2010 through December 31, 2010, Greenhill Australia’s results were included in the consolidated results of the Company.

The unaudited pro forma results of operations do not purport to represent what the Company’s results of operations would actually have been had the Acquisition occurred as of January 1, 2010, or to project the Company’s results of operations for any future period. Actual future results may vary considerably based on a variety of factors beyond the Company’s control.



	For the Year Ended December 31,
	2010
	(in millions, except per share amounts)
	(unaudited pro forma)
Revenues	$	282.7
Income before taxes	59.0
Net income allocated to common stockholders	34.6
Diluted earnings per share	$	1.12

The pro forma results include: (i) an adjustment to Caliburn's compensation expense to Greenhill’s historical ratio of compensation expense to revenue for the period presented, (ii) the elimination of professional fees of $1.4 million incurred by Caliburn in connection with the Acquisition in the three months ended March 31, 2010, and (iii) the recording of income tax expense resulting from the pro forma adjustments before tax at the Australian effective tax rate of 30%. The calculation of pro forma diluted earnings per share does not include the contingent convertible preferred shares issued to the founding partners of Caliburn in connection with the Acquisition. These shares may be converted in aggregate to 1,099,877 common shares in the event that Greenhill Australia achieves certain three and five year revenue targets. See “Note 10 — Earnings Per Share”.