Business Combination (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Measurement of Assets Acquired and Liabilities Assumed

The following table summarizes the fair value measurement of the assets acquired and liabilities assumed (in thousands):


	Fair Value at Acquisition Date		Measurement Period Adjustments(1)		Adjusted Fair Value at Acquisition Date
ASSETS
Loans receivable(1)	$	232,344	$	(26,116)	$	206,228
Fees receivable	29,168		—		29,168
Investment in public equity securities	24,550		—		24,550
Other assets	14,053		—		14,053
Intangible assets(2)	3,449		—		3,449
Total identifiable assets acquired	303,564		(26,116)		277,448
LIABILITIES
Other borrowings	153,086		—		153,086
Commercial loan agreement from parent	168,420		—		168,420
Other liabilities and deferred revenue	105,866		—		105,866
Accounts payable and accrued expenses	13,713		—		13,713
Total liabilities assumed	441,085		—		441,085
Net liabilities assumed	(137,521)		(26,116)		(163,637)
NONCONTROLLING INTERESTS
Common Units not owned by GWG Holdings(3)	181,383		—		181,383
Class S Ordinary Units	85,448		—		85,448
Class S Preferred Units	17		—		17
Preferred Series A Subclass 1 Unit Accounts	1,269,654		—		1,269,654
Total noncontrolling interests	1,536,502		—		1,536,502
ACQUISITION CONSIDERATION
Cash, less cash acquired	61,479		—		61,479
Fair value of preexisting investment in Common Units(4)	622,503		—		622,503
Fair value of noncontrolling interest	1,536,502		—		1,536,502
Total estimated consideration	2,220,484		—		2,220,484
Less: Net liabilities assumed	(137,521)		(26,116)		(163,637)
Resulting preliminary goodwill	$	2,358,005	$	26,116	$	2,384,121

______________________________________________

(1)As a result of additional information obtained about the collateral value used in the valuation of the loan portfolio for certain collateral dependent loans, the Company recorded measurement period adjustments during the nine months ended September 30, 2020, which resulted in a decrease to loans receivable of $26.1 million with a corresponding adjustment to goodwill. The measurement period adjustments are comprised of $14.6 million during the three months ended March 31, 2020 and $11.5 million during the three months ended June 30, 2020.

(2)Includes an insurance license valued at $3.1 million and a non-compete agreement valued at $0.3 million.

(3)Calculated as 1,974,677 Common Units not owned by GWG Holdings at December 31, 2019, multiplied by the $15 per unit derived from the enterprise valuation of Beneficient on that date. Also includes $151.8 million of equity-based payment awards that were granted by Beneficient prior to the change in control but were not replaced by awards of GWG Holdings upon the change in control. These awards were treated as noncontrolling interests in accordance with ASC 805, Business Combinations.

(4)Calculated as 41,505,279 Common Units owned by GWG Holdings prior to the change in control multiplied by the $15 per unit derived from the enterprise valuation of Beneficient.

Pro Forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations of GWG Holdings for the three and nine months ended September 30, 2019, as if the acquisition of Ben LP had occurred as of January 1, 2019 (in thousands, except per share data):


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Total Revenue
Pro forma	$	36,532	$	123,242
As reported	22,211		71,439

Net Loss Attributable to Common Shareholders
Pro forma	$	(26,761)	$	(66,564)
As reported	(24,635)		(69,154)

Net Loss per Diluted Common Share
Pro forma	$	(0.81)	$	(2.02)
As reported	(0.75)		(2.09)