Fair Value of Financial Instruments

Assets and liabilities are classified in their entirety based on their lowest level of input that is significant to the fair value measurement. For the three and six month periods ended June 30, 2018 and the year ended December 31, 2017, the Company had Level 1 assets and Level 3 liabilities measured at fair value.

The following tables set forth the measurement at fair value on a recurring basis of the investments in money market funds, short-term cash instruments and U.S. government securities. The securities are categorized as a Level 1 asset, as their valuation is based on quoted prices for identical assets in active markets. See "Note 3 — Cash and Cash Equivalents".

Assets Measured at Fair Value on a Recurring Basis as of June 30, 2018



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2018
	(in thousands, unaudited)
Assets
Cash and cash equivalents	$	41,769	$	—	$	—	$	41,769
Total	$	41,769	$	—	$	—	$	41,769

Assets Measured at Fair Value on a Recurring Basis as of December 31, 2017



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2017
	(in thousands)
Assets
Cash and cash equivalents	$	193,315	$	—	$	—	$	193,315
Total	$	193,315	$	—	$	—	$	193,315

In connection with the acquisition in April 2015 of Cogent Partners, LP and its affiliates ("Cogent") (now known as the secondary capital advisory business), the Company agreed to pay to the sellers in the future $18.9 million in cash and 334,048 shares of Greenhill common stock if certain agreed revenue targets are achieved (the "Earnout"). The cash payment and the issuance of common shares related to the Earnout will be made if secondary capital advisory revenues of $80.0 million or more are earned during either the two year period ending on the second anniversary of the closing or the two year period ending on the fourth anniversary of the closing. The revenue generated by the secondary capital advisory business for the first two year period ended March 31, 2017 was slightly less than required to achieve the Cogent earnout. If the revenue target is achieved during the second two year period ending on March 31, 2019, the contingent consideration will be paid promptly after that date. If the revenue target is not achieved during the remaining two year earnout period, a payment will not be made. Based on the revenue generated by the secondary fund placement business since April 1, 2017, it is highly likely that the revenue target for the second two-year period will be achieved. The fair value of the contingent cash consideration was valued on the date of the acquisition at $13.1 million and is remeasured quarterly based on a probability weighted present value discount that the revenue target may be achieved. At June 30, 2018, based on the estimated probability of achievement and the present value of the remaining term, the contingent cash consideration was valued at $17.4 million. Due to the remeasurement of the likelihood of achievement of the Earnout, for the three and six month periods ended June 30, 2018, the Company recognized increases in other operating expenses of $2.7 million and $3.6 million, respectively. For the three and six month periods ended June 30, 2017, the Company recognized decreases in other operating expenses of $1.5 million and $7.5 million, respectively. See "Note 8 — Earnings per Share".

The following tables set forth the measurement at fair value on a recurring basis of the contingent cash consideration due to the selling unitholders of Cogent related to the Earnout. The liability arose as a result of the acquisition of Cogent and is categorized as a Level 3 liability, which is remeasured each quarterly period based on the probability of achieving the target revenue threshold and weighted average discount rate as discussed below.

Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2018



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2018
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	—	$	—	$	17,354	$	17,354
Total	$	—	$	—	$	17,354	$	17,354

Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2017



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2017
	(in thousands)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	—	$	—	$	13,763	$	13,763
Total	$	—	$	—	$	13,763	$	13,763

Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and six month periods ended June 30, 2018 are as follows:



	Opening Balance as of April 1, 2018		Total realized and unrealized gains (losses) included in Net Income			Unrealized gains (losses) included in Other Comprehen-sive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2018		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2018
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	14,673	$	(2,681	)	$	—	$	—	$	—	$	—	$	—	$	17,354	$	(2,681	)
Total	$	14,673	$	(2,681	)	$	—	$	—	$	—	$	—	$	—	$	17,354	$	(2,681	)



	Opening Balance as of January 1, 2018		Total realized and unrealized gains (losses) included in Net Income			Unrealized gains (losses) included in Other Comprehen-sive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2018		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2018
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	13,763	$	(3,591	)	$	—	$	—	$	—	$	—	$	—	$	17,354	$	(3,591	)
Total	$	13,763	$	(3,591	)	$	—	$	—	$	—	$	—	$	—	$	17,354	$	(3,591	)

Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and six month periods ended June 30, 2017 are as follows:



	Opening Balance as of April 1, 2017		Total realized and unrealized gains (losses) included in Net Income		Unrealized gains (losses) included in Other Comprehen-sive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2017		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2017
	(in thousands, unaudited)
Liabilities
Contingent obligation due to selling unitholders of Cogent	$	9,090	$	1,508	$	—	$	—	$	—	$	—	$	—	$	7,582	$	1,508
Total	$	9,090	$	1,508	$	—	$	—	$	—	$	—	$	—	$	7,582	$	1,508



	Opening Balance as of January 1, 2017		Total realized and unrealized gains (losses) included in Net Income		Unrealized gains (losses) included in Other Comprehen-sive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2017		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2017
	(in thousands, unaudited)
Liabilities
Contingent obligation due to selling unitholders of Cogent	$	15,095	$	7,513	$	—	$	—	$	—	$	—	$	—	$	7,582	$	7,513
Total	$	15,095	$	7,513	$	—	$	—	$	—	$	—	$	—	$	7,582	$	7,513

Realized and unrealized gains (losses) are reported as a component of other operating expenses in the condensed consolidated statements of operations.

The following table presents quantitative information about the significant unobservable inputs utilized by the Company in the fair value measure of Level 3 liabilities measured at fair value on a recurring basis, as of June 30, 2018:



	Fair Value as of June 30, 2018		Valuation Technique(s)	Unobservable Input(s)		Range (Weighted Average)
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	17,354	Present value of expected payments	Discount rate		11.8	%
				Forecast revenue	(a)

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(a) The Company's estimate of contingent consideration as of June 30, 2018 was principally based on the acquired business' actual and projected revenue generation from April 1, 2017 through March 31, 2019.

Valuation Processes - Level 3 Measurements - The Company utilizes a valuation technique based on a present value method applied to the probability of achieving a range of potential revenue outcomes. The valuation was conducted by the Company. The Company updates unobservable inputs each reporting period and has a formal process in place to review changes in fair value.

Sensitivity Analysis - Level 3 Measurements - The significant unobservable inputs used in determining fair value are the discount rate and forecast revenue information. Significant increases (decreases) in the discount rate would have resulted in a lower (higher) fair value measurement, respectively. Significant increases (decreases) in the forecast revenue information would result in a higher (lower) fair value measurement, respectively. For all significant unobservable inputs used in the fair value measurement of the Level 3 liabilities, a change in one of the inputs would not necessarily result in a directionally similar change in the other inputs.