Business Changes And Developments

9 Months Ended

Sep. 30, 2011

Business Changes And Developments

Business Changes And Developments

Note 4 – Business Changes and Developments

Lexicon Partnership LLP – On August 19, 2011, the Company completed its previously announced acquisition of all of the outstanding partnership interests of The Lexicon Partnership LLP ("Lexicon"), in accordance with the definitive sale and purchase agreement entered into on June 7, 2011, for consideration consisting of cash and stock. In the aggregate, the sellers will receive approximately £46,142, or $76,167, in cash and 1,911 shares of the Company's Class A common stock, par value $0.01 per share ("Class A Shares"). Of the total consideration, £31,598, or $52,160, in cash was paid and 28 Class A Shares were issued to the sellers at closing, and approximately £5,619, or $9,274, in cash will be paid to the sellers on December 31, 2011. Payment of the remaining approximately £8,925, or $14,733, in cash and 1,883 restricted Class A Shares will be deferred and will vest under graded vesting in various installments over a four-year period. Accordingly, these amounts will be expensed over the graded vesting period. This deferred consideration, whether in the form of Class A Shares or cash, upon vesting, will be delivered to the sellers on the earlier of (i) the first anniversary of the relevant vesting date and (ii) the date of the first secondary offering by the Company following the relevant vesting date. Vesting of the Class A Shares and cash consideration will accelerate in certain circumstances, including, but not limited to, a seller's termination without cause, a qualifying retirement or upon a change of control. In addition, upon closing the Company funded the repayment of £5,039, or $8,318, of outstanding Lexicon capital notes. These notes are included as Long-term Debt in the table below.

Lexicon was purchased to expand the Company's advisory capabilities.

The purchase price of the acquisition has been allocated to the assets acquired and liabilities assumed using the fair values as determined by management as of the acquisition date. The computation of goodwill was based on the fair value at August 19, 2011. The preliminary purchase price allocation is as follows:

	Amount
Purchase Price:
Cash Paid	$	52,160
Fair Value of Shares Issued		636
Fair Value of Deferred Cash Consideration		9,274
Total Fair Value of Purchase Price		62,070
Fair Value of Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents		21,812
Accounts Receivable		7,821
Prepaid Expenses		11,627
Fixed Assets		429
Other Assets		964
Intangible Assets		7,164
Current Liabilities		(21,592	)
Long-term Debt		(8,318	)
Identifiable Net Assets		19,907
Goodwill Resulting from Business Combination	$	42,163

In conjunction with the acquisition, the Company recognized accounts receivable with a gross value of $7,821, which approximates fair value, all of which are expected to be collected. The goodwill reflects the replacement cost of an assembled workforce associated with personal reputations, relationships and business specific knowledge, as well as the value of expected synergies. The total amount of goodwill is expected to be deductible for tax purposes.

In connection with the acquisition of Lexicon, the Company recorded Client Related intangible assets of $7,164. Management views client related assets as the primary intangible assets of Lexicon. The intangible assets were valued at the date of acquisition at their fair value as determined by management. The intangible assets are amortized over an estimated useful life of six months. The Company recognized $1,595 of amortization expense related to these intangible assets for the three and nine months ended September 30, 2011.

Goodwill and intangible assets recognized as a result of this acquisition are included in the Investment Banking Segment.

The Company's consolidated results for the three and nine months ended September 30, 2011, included revenue of $7,383 and operating expenses of $7,348, resulting in income of $35 related to Lexicon from the period of acquisition, August 19, 2011 to September 30, 2011, before taking into consideration certain acquisition related charges. The Company also incurred $11,950 of other expenses related to the Lexicon acquisition, which included $7,729 of acquisition related compensation charges, $2,626 of Special Charges and $1,595 of intangible amortization expense associated with the acquisition of Lexicon. The Pre-tax income (loss) related to Lexicon including the other expenses noted above was ($11,915). See Note 5 for a further explanation of Special Charges and Note 19 for a further explanation of Other Expenses.

If the acquisition of Lexicon was effective as of January 1, 2010, the operating results of the Company, on a pro forma basis, would have been:

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2011			September 30, 2010		September 30, 2011		September 30, 2010
	(Unaudited)
Net Revenues	$	169,993		$	133,924	$	464,859	$	311,897
Pre-tax Income	$	5,529		$	12,815	$	29,324	$	14,832
Net Income (Loss) Attributable to Evercore Partners Inc.	$	(1,133	)	$	2,293	$	4,325	$	3,899
Diluted Net Income (Loss) Per Share Available to Evercore Partners Inc.	$	(0.04	)	$	0.11	$	0.15	$	0.17

Goodwill and Intangible Assets

Goodwill associated with the Company's acquisitions is as follows:

	Investment Banking			Investment Management		Total
Balance at December 31, 2010	$	43,199		$	95,832	$	139,031
Acquisitions		42,163			80		42,243
Foreign Currency Translation		(4,337	)		—		(4,337	)
Balance at September 30, 2011	$	81,025		$	95,912	$	176,937

Intangible assets associated with the Company's acquisitions are as follows:

	September 30, 2011
	Gross Carrying Amount						Accumulated Amortization
	Investment Banking		Investment Management		Total		Investment Banking		Investment Management		Total
Client Related	$	17,869	$	43,250	$	61,119	$	9,943	$	8,643	$	18,586
Professional Licenses		70		—		70		75		—		75
Acquired Mandates		1,810		—		1,810		723		—		723
Non-compete/Non-solicit Agreements		135		1,780		1,915		33		475		508
Other		—		1,800		1,800		—		160		160
Total	$	19,884	$	46,830	$	66,714	$	10,774	$	9,278	$	20,052

	December 31, 2010
	Gross Carrying Amount						Accumulated Amortization
	Investment Banking		Investment Management		Total		Investment Banking		Investment Management		Total
Client Related	$	11,242	$	44,430	$	55,672	$	7,120	$	4,212	$	11,332
Professional Licenses		275		—		275		259		—		259
Acquired Mandates		1,810		—		1,810		384		—		384
Non-compete/Non-solicit Agreements		518		1,780		2,298		380		208		588
Other		714		1,800		2,514		703		71		774
Total	$	14,559	$	48,010	$	62,569	$	8,846	$	4,491	$	13,337

Expense associated with the amortization of intangible assets was $3,893 and $8,649 for the three and nine months ended September 30, 2011, respectively, and $2,768 and $4,761 for the three and nine months ended September 30, 2010, respectively.

Based on the intangible assets above, as of September 30, 2011, annual amortization of intangibles for each of the next five years is as follows:

2011 (last three months)	$	5,815
2012	$	10,607
2013	$	7,505
2014	$	5,211
2015	$	3,555
2016 (first nine months)	$	2,408

On October 25, 2011, Evercore Asset Management ("EAM") decided to wind down its business. The Company made this decision because EAM was unable to attain sufficient scale to be a viable business due to several factors including the ongoing effects of the financial crisis. Accordingly, this resulted in a $975 charge in the Investment Management segment related to the write-off of client-based intangible assets during the third quarter of 2011, which is included within Special Charges on the Condensed Consolidated Statement of Operations.