Note 4 – Business Changes and Developments

Year Ended December 31, 2011

Lexicon Partnership LLP – On August 19, 2011, the Company completed its acquisition of all of the outstanding partnership interests of 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 was 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 and included in Employee Compensation and Benefits expense. 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 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		9,504
Fixed Assets		429
Other Assets		964
Intangible Assets		7,164
Current Liabilities		(21,592	)
Long-term Debt		(8,318	)

Identifiable Net Assets		17,784

Goodwill Resulting from Business Combination	$	44,286

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 $5,075 of amortization expense related to these intangible assets for the year ended December 31, 2011.

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

During the fourth quarter of 2011, the Company fully integrated the operations of Lexicon in its existing operations. Accordingly, operating costs cannot be explicitly segregated and it is not possible to measure the marginal operating income attributable to the business. Below is an estimate of expenses derived from Lexicon's historical expense run-rate. The Company's consolidated results for the year ended December 31, 2011, included revenue of $41,637 and estimated operating expenses of $32,073, resulting in estimated operating income of $9,564 related to Lexicon from the period of acquisition, August 19, 2011 to December 31, 2011, before taking into consideration certain acquisition related charges, as follows. The Company also incurred $23,587 of other expenses related to the Lexicon acquisition, which included $14,618 of acquisition related compensation charges, $3,894 of Special Charges and $5,075 of intangible amortization expense associated with the acquisition of Lexicon. See Note 5 for a further explanation of Special Charges and Note 22 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 Years Ended December 31,
	2011		2010
	(Unaudited)
Net Revenues	$	575,344	$	446,174
Pre-tax Income	$	31,325	$	18,650
Net Income from Continuing Operations Attributable to Evercore Partners Inc.	$	4,635	$	2,504
Diluted Net Income Per Share from Continuing Operations Available to Evercore Partners Inc.	$	0.15	$	0.10

ABS Investment Management, LLC – On December 29, 2011, the Company completed its acquisition of a 45% non-controlling interest in ABS, a Connecticut based institutionally focused hedge fund-of-funds manager, for a cash purchase price of $45,104, subject to certain adjustments after the closing, as set forth in the Purchase Agreement. Following the consummation of the transaction, the remaining 55% of the interest in ABS is owned by the founders of ABS and its employees. ABS is governed by a five member management committee consisting of three members of ABS' management team and two designees of the Company. The Company does not have majority voting power and therefore the Company does not maintain the unilateral ability to control significant operational or corporate governance matters of ABS and the founders of ABS have certain protective and participating rights which include the ability to block certain corporate actions relating to liquidation or sale of any material assets, approval of any material transaction outside of the ordinary course of business and approval of the annual budget and compensation arrangements. Accordingly, this transaction is accounted for as an equity method investment.

Evercore Asset Management – In October 2011, EAM announced its plan to wind down its business. Management and 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, at this time it was determined there would be no future cash inflows from EAM. As a result, during the third quarter of 2011 the Company concluded that EAM's client-based intangible assets had no future value, which resulted in a $975 charge included within Income (Loss) from Discontinued Operations related to the write-off of these intangibles.

As a result of the above, during October 2011 the Company performed a Step 1 impairment test for the Goodwill in its Institutional Asset Management reporting unit, which included EAM. The amount of Goodwill allocated to this reporting unit was approximately $94,700 as of September 30, 2011. In this process, the Company made estimates and assumptions to determine the fair value of this reporting unit and to project future earnings using valuation techniques. The Company used its best judgment and the information available to it at the time to perform this review. Because assumptions and estimates were used in projecting future earnings as part of the valuation, actual results could differ. Certain circumstances such as continued decreases in AUM resulting from either net outflows or market declines may have a negative impact on the future earnings of this reporting unit and could have a negative effect on its fair value.

In determining the fair value of this reporting unit, the Company utilized both a market multiple approach and a discounted cash flow methodology based on the adjusted cash flows from operations. The market multiple approach included applying the average earnings multiples of comparable public companies multiplied by the forecasted earnings of the reporting unit to yield an estimate of fair value. The discounted cash flow methodology began with the adjusted cash flows from the reporting unit and used a discount rate that reflected the weighted average cost of capital adjusted for the risks inherent in the future cash flows. As of September 30, 2011, the Company concluded that the fair value of our Institutional Asset Management reporting unit exceeded its carrying value by approximately 15%.

The following is a summary of the assets and liabilities of EAM as of December 31, 2011 and 2010:


	December 31,
	2011		2010
Assets
Cash and Cash Equivalents	$	3,480	$	1,534
Accounts Receivable		303		606
Intangible Assets		—		1,073
Other Assets		—		60

Total Assets	$	3,783	$	3,273

Liabilities
Payable to Employees and Related Parties	$	—	$	2,987
Accrued Compensation and Benefits		—		574
Other Liabilities		—		207

Total Liabilities	$	—	$	3,768

EAM had pretax losses of $4,198, $2,618 and $2,264 reported in discontinued operations for the years ended December 31, 2011, 2010 and 2009, respectively.

Year Ended December 31, 2010

Atalanta Sosnoff Capital, LLC – In May 2010, the Company purchased an interest in Atalanta Sosnoff Capital LLC ("Atalanta Sosnoff"), representing a 49% economic interest, for a cash purchase price of $68,992. Following the consummation of the transaction, the remainder of Atalanta Sosnoff's economic interests, which includes management's profits interest, is owned by the senior management of Atalanta Sosnoff. The senior management of Atalanta Sosnoff retains interests comprised of Series A-2 Capital Interests, Series B Capital Interests and Series C Profits Interests, which represents 5.5%, 19.6% and 25.9%, respectively, for a 51% economic interest. The Company owns Series A-1 Capital Interests, which represents a 49% economic interest. The Series C interest is a profits interest; accordingly, the Company is required to account for this interest as a compensation arrangement. Excluding the Series C interest, the Company's equity interest in Atalanta Sosnoff is 66%. Atalanta Sosnoff was purchased to expand the Company's asset management capabilities. Atalanta Sosnoff manages assets for institutional, high net-worth and broker-advised clients, and is focused on managing large-cap U.S. equity and balanced accounts. The Company consolidates the financial results of Atalanta Sosnoff based on provisions in the Operating Agreement which give the Company the majority vote in the Management Committee of Atalanta Sosnoff, which is the governing committee with decision making power over Atalanta Sosnoff's operations. The Management Committee of Atalanta Sosnoff controls the operations of Atalanta Sosnoff, including actions such as the appointment and termination of key management members of Atalanta Sosnoff, the approval of Atalanta Sosnoff's budget as well as any material expenditure outside of its budget, the launch of new products or material changes in the pricing of existing products, and entering or exiting lines of business. Responsibility for day-to-day operations is vested with the management of Atalanta Sosnoff, including managing client relationships and making discretionary investment decisions. The senior management of Atalanta Sosnoff, through a supermajority vote of the Management Committee, retains customary protective rights over specified matters that may arise outside of the ordinary course of business and/or where the probability of occurrence is remote.

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 its fair value at May 28, 2010, as presented below.


Purchase Price:
Cash Paid	$	68,992
Fair Value of Contingent Consideration		14,037

Fair Value of Consideration Transferred		83,029
Fair Value of Noncontrolling Interest		42,381

Total Fair Value of Purchase Price		125,410

Fair Value of Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents		1,410
Accounts Receivable		7,034
Investments		9
Prepaid Expenses		321
Fixed Assets		114
Intangible Assets		43,280
Accounts Payable and Accrued Expenses		(668	)
Accrued Compensation and Benefits		(6,278	)
Income Taxes Payable		(21	)

Identifiable Net Assets		45,201

Goodwill Resulting from Business Combination	$	80,209

In conjunction with the acquisition, the Company recognized accounts receivable with a gross value of $7,034, which approximates fair value. 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 and premiums paid by the Company and inherent in the value of the noncontrolling interest holders.

The Purchase Agreement provided for earn-out consideration to the sellers of $14,700 if Atalanta Sosnoff's earnings before interest, taxes, depreciation and amortization ("EBITDA") exceed $19,500 for 2010. The sellers received a pro-rata portion of the $14,700 if Atalanta Sosnoff's EBITDA exceeded $17,000, but did not exceed $19,500. The earn-out consideration was payable 50% in cash and 50% in restricted Class A Shares. In December 2010, the majority of the earn-out consideration was paid, with 20% of the cash portion paid upon successful completion of an audit in 2011. The fair value of the remaining contingent payment was $1,470 as of December 31, 2010. This earn-out was paid during 2011.

In connection with the acquisition of Atalanta Sosnoff, the Company recorded intangible assets of $39,700, $1,800 and $1,780 relating to Client Relationships, Trademarks and Non-Compete/Non-Solicit Agreements, respectively. Management views client relationships as the primary intangible assets of Atalanta Sosnoff, as management believes the client relationships are stable and recurring. The intangible assets were valued at the date of acquisition at their fair value as determined by management. The intangible assets are generally amortized over estimated useful lives ranging from four to 15 years. The Company recognized $6,228 and $3,632 of amortization expense related to these intangible assets for the years ended December 31, 2011 and 2010, respectively.

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

The Company's consolidated results include revenue of $43,617 and $27,079 and pre-tax income and $7,816 and $5,264, respectively, for the years ended December 31, 2011 and 2010, from Atalanta Sosnoff.

Morse, Williams and Company, Inc. – In May 2010, the Company, through Evercore Wealth Management ("EWM"), acquired Morse Williams and Company, Inc., a registered investment advisor that provides separate management services for tax-exempt institutions and taxable clients. The terms of the acquisition included share-based initial consideration of $1,350 and contingent consideration based on future investment fees earned. The fair value of the earn-out consideration was $1,096 and $627 as of December 31, 2011 and 2010, respectively. The transaction resulted in goodwill of $848 and intangible assets relating to Client Relationships of $1,130, recognized in the Investment Management Segment. The Client Relationships are being amortized over 9 years. Amortization expense related to these intangibles was $124 and $84 for the years ended December 31, 2011 and 2010, respectively.

MJC Associates – In April 2010, the Company entered into an agreement to acquire MJC Associates, a commercial real estate advisory boutique. The terms of the acquisition include $2,000 of cash payable at the closing, $1,000 of cash payable on each of the three anniversary dates of the closing and $3,000 of restricted stock, which is contingently issuable based on minimum future revenues. The transaction was consummated on July 8, 2010. The fair value of the earn-out consideration was $4,570 and $5,282 as of December 31, 2011 and 2010, respectively. The transaction resulted in goodwill of $6,183 and intangible assets relating to Client Relationships of $940 and Non-compete agreements of $135, recognized in the Investment Banking Segment. The Client Relationships and Non-compete agreements are being amortized over five months and five years, respectively. Amortization expense related to these intangibles was $24 and $954 for the years ended December 31, 2011 and 2010, respectively.

Private Funds Group of Neuberger Berman – In February 2010, the Company acquired assets of PFG for initial consideration of $1,000 and contingent consideration based on future revenues earned. The Company's commitment to pay earn-out consideration was based on varied percentages of future fees earned over the 18 month period following the acquisition. The fair value of the earn-out consideration was $1,653 as of December 31, 2010. This earn-out was paid during 2011. The transaction resulted in goodwill of $990 and intangible assets relating to Acquired Mandates and Client Relationships of $1,810 and $2,300, respectively, recognized in the Investment Banking Segment. The Acquired Mandates and Client Relationships are being amortized over four years and seven years, respectively. Amortization expense related to these intangibles was $760 and $664 for the years ended December 31, 2011 and 2010, respectively.

The seller did not maintain U.S. GAAP basis financial statements for PFG. The Company is unable to independently substantiate the significant assumptions that must be made in order to compile U.S. GAAP basis financial statements for prior periods from what was provided by the seller. As a result, the Company believes it is impracticable to disclose pro forma financial information.

Trilantic Capital Partners – In February 2010, the Company announced the formation of a strategic alliance to pursue private equity investment opportunities for Trilantic Capital Partners' ("Trilantic") current fund and to collaborate on the future growth of Trilantic's business. See Note 15 for further discussion.

G5 Holdings S.A. – In October 2010, the Company acquired a 50% interest in G5. The terms of the investment includes initial consideration of $10,319 in restricted shares of Evercore Class A common stock and $10,867 in cash plus contingent consideration based on multiples of G5's net income over the years 2010 through 2014. The contingent consideration will be paid 50% in cash and 50% in restricted Class A Shares. The Company maintains half of the seats on G5's board of directors. The Company does not maintain the unilateral ability to control significant operational or corporate governance matters of G5 and the founders of G5 have certain protective and participating rights which include the ability to block certain corporate actions relating to liquidation or sale of any material assets, approval of any material transaction outside of the ordinary course of business and approval of the annual budget and compensation arrangements. This transaction was therefore accounted for as an equity method investment.

Goodwill and Intangible Assets

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


	Investment Banking			Investment Management		Total
	Investment Banking			Investment Management		Total
Balance at December 31, 2009	$	34,989		$	14,775	$	49,764
Acquisitions		7,173			81,057		88,230
Foreign Currency Translation		1,037			—		1,037

Balance at December 31, 2010		43,199			95,832		139,031
Acquisitions		44,286			80		44,366
Foreign Currency Translation		(5,548	)		—		(5,548	)

Balance at December 31, 2011	$	81,937		$	95,912	$	177,849

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


	December 31, 2011
	Gross Carrying Amount						Accumulated Amortization
	Investment Banking		Investment Management		Total		Investment Banking		Investment Management		Total
	Investment Banking		Investment Management		Total		Investment Banking		Investment Management		Total
Client Related	$	17,835	$	43,250	$	61,085	$	13,874	$	10,197	$	24,071
Professional Licenses		—		—		—		—		—		—
Acquired Mandates		1,810		—		1,810		836		—		836
Non-compete/Non-solicit Agreements		135		1,780		1,915		40		564		604
Other		—		1,800		1,800		—		190		190

Total	$	19,780	$	46,830	$	66,610	$	14,750	$	10,951	$	25,701


	December 31, 2010
	Gross Carrying Amount						Accumulated Amortization
	Investment Banking		Investment Management		Total		Investment Banking		Investment Management		Total
	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 $14,315, $7,541 and $2,096 for the years ended December 31, 2011, 2010 and 2009, respectively.

Based on the intangible assets above, as of December 31, 2011, annual amortization of intangibles for each of the next five years is as follows:


2012	$	10,489
2013	$	7,508
2014	$	5,214
2015	$	3,555
2016	$	3,174

As of December 31, 2011, the Company concluded that there was no impairment of Goodwill or Intangible Assets. See "Evercore Asset Management" above for information regarding the Company's impairment assessment performed during the third quarter of 2011.