On and effective July 1, 2019, the Company completed the acquisition of USAA Adviser and VCTA (collectively, the “USAA Acquired Companies”), which includes the USAA Mutual Fund Business, and executed Amendment No. 1 (the “Amendment”) to the stock purchase agreement (the “Stock Purchase Agreement”). The Amendment amended the Stock Purchase Agreement entered into on November 6, 2018 between the Company, USAA Investment Corporation, and for certain limited purposes, USAA Capital Corporation. The assets acquired and liabilities assumed and results of the USAA Mutual Fund Business are reflected in the consolidated financial statements from the closing date of July 1, 2019.

The USAA AMCO Acquisition expands and diversifies the Company’s investment platform, particularly in the fixed income and solutions asset classes, and increases the Company’s size and scale. Additional products added to the investments platform include target date and target risk strategies, managed volatility mutual funds, active fixed income ETFs, sub-advised and multi-manager equity funds. The acquisition also added to the Company’s lineup of asset allocation portfolios and smart beta equity ETFs and provided the Company the rights to offer products and services using the USAA brand and the opportunity to offer its products to USAA members through a direct member-channel.

The Company purchased 100% of the outstanding common stock of the USAA Acquired Companies. Total consideration is $950.1 million, comprised of $851.3 million of cash paid at closing (which included restricted cash of $71.9 million) plus $98.8 million in contingent consideration due to sellers. The purchase price remains subject to certain customary post-closing adjustments.

A maximum of $150.0 million ($37.5 million per year) in contingent payments is payable to sellers based on the annual revenue of USAA Adviser attributable to all “non-managed money”-related AUM in each of the first four years following the closing. To receive any contingent payment in respect of “non-managed money”-related assets for a given year, annual revenue from “non-managed money”-related assets must be at least 80% of the revenue run-rate (as calculated under the Stock Purchase Agreement) of the USAA Adviser’s “non-managed money”-related assets under management as of the Closing, and to achieve the maximum contingent payment for a given year, such annual revenue must total at least 100% of that Closing revenue run-rate. Annual contingent payments in respect of “non-managed money”-related assets are subject to certain “catch-up” provisions set forth in the USAA Stock Purchase Agreement.

The Company accounted for the acquisition in accordance with ASC 805, Business Combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the USAA AMCO Acquisition. We used an independent valuation specialist to assist with the determination of fair value for certain of the acquired assets and assumed liabilities disclosed below.

The excess purchase price over the estimated fair values of assets acquired and liabilities assumed of $120.6 million was recorded to goodwill in the audited Consolidated Balance Sheets, all of which is expected to be deductible for tax purposes. The goodwill arising from the acquisition primarily results from expected future earnings and cash flows, as well as the expected synergies created by the integration of the USAA Acquired Companies within our organization.

The following table presents the estimated amounts of assets acquired and liabilities assumed as of the acquisition date:

(in thousands)
Cash and cash equivalents	$	17,473
Investment management fees receivable		25,353
Fund administration and distribution fees receivable		4,779
Other receivables and prepaid expenses		948
Property and equipment		1,165
Other intangible assets⁽¹⁾		808,670
Goodwill		120,643
Accounts payable and accrued expenses		(5,575	)
Accrued compensation and benefits		(5,907	)
Payable to members and custodians		(17,473	)
Contingent consideration payable to sellers		(98,800	)
Cash paid at closing	$	851,276

As of December 31, 2019, the purchase price allocation for the USAA AMCO Acquisition is preliminary as customary post-closing purchase adjustments have not been finalized. The final purchase price allocation may reflect changes to the preliminary valuations for other receivables and prepaid expenses, accounts payable and accrued expenses and accrued compensation and benefits for net working capital adjustments. Adjustments will be made, as necessary, during the measurement period of up to one year after the closing date.

The acquisition date fair value of contingent consideration payable to sellers was $98.8 million and was estimated using the real options method. Revenue related to “non-managed money” assets was simulated in a risk-neutral framework to calculate expected probability-weighted earn out payments, which were then discounted from the expected payment dates at the relevant cost of debt. Significant assumptions and inputs include the “non-managed money” revenue projected annual growth rate, the market price of risk, which adjusts the projected revenue growth rate to a risk-neutral expected growth rate, revenue volatility and discount rate. The projected annual growth rate for “non-managed money” revenue was approximately 3%. The market price of risk and revenue volatility of approximately 4% and 20%, respectively, were based on data for comparable companies. As the contingent consideration represents a subordinate, unsecured claim of the Company, we have assessed a discount rate of approximately 7%, which incorporates adjustments for credit risk and the subordination of the contingent consideration. Total undiscounted earn out payments ranged from $119 million to $150 million, the maximum amount payable to sellers.

The fair value of contingent consideration payable to sellers was estimated at $118.7 million at December 31, 2019, an increase of $19.9 million from the acquisition date, which was recorded in change in value of consideration payable for acquisition of business in the Consolidated Statements of Operations. The market price of risk and revenue volatility inputs were similar to those used at the acquisition date valuation. The projected annual growth rate for “non-managed money” revenue during the earn out period was approximately 4%, and the discount rate was approximately 5%. Total estimated undiscounted earn out payments ranged from $133 million to $150 million.

In 2019, the Company incurred $8.7 million in restructuring and integration costs associated with the USAA AMCO Acquisition. No USAA AMCO restructuring and integration costs were incurred in 2018 or 2017.

Revenue of the USAA Acquired Companies subsequent to the effective closing date of July 1, 2019 for the six months ended December 31, 2019, was as follows:

Net income attributable to the USAA Acquired Companies for the six months ended December 31, 2019 is impractical to determine as the Company does not prepare discrete financial information at that level.

The Company’s consolidated financial statements for the year ended December 31, 2019 include the operating results of the USAA Acquired Companies for the period from July 1, 2019 to December 31, 2019. The historical consolidated financial information of Victory and the USAA Acquired Companies have been adjusted to give effect to unaudited pro forma events that are directly attributable to the transaction, factually supportable and expected to have continuing impact on the combined results. These amounts have been calculated after adjusting the results of the USAA Acquired Companies to reflect additional interest expense, distribution costs, share-based compensation expense, income taxes and intangible asset amortization that would have been expensed assuming the fair value adjustments had been applied on January 1, 2018. In addition, Victory’s and the USAA Acquired Companies’ results were adjusted to remove incentive compensation, legal fees and mutual fund proxy costs directly attributable to the acquisition.

The following Unaudited Pro Forma Condensed Combined Statements of Operations are provided for illustrative purposes only and assume that the acquisition occurred on January 1, 2018. This unaudited information should not be relied upon as indicative of historical results that would have been obtained if the acquisition had occurred on that date, nor of the results that may be obtained in the future.

	Unaudited
	Twelve Months Ended December 31,
(in thousands, except per share amount)	2019		2018
Revenue	$	851,440	$	906,844
Net income		114,988		71,471

Earnings per share of common stock
Basic	$	1.70	$	1.08
Diluted	$	1.56	$	1.01

Weighted average number of shares outstanding
Basic		67,693		66,295
Diluted		73,612		70,511

On September 21, 2018, the Company entered into the Harvest Purchase Agreement, whereby the Company agreed to purchase 100% of the equity interests of Harvest, an asset management company specializing in yield enhancement overlay, risk reduction, alternative beta and absolute return investment strategies. The transaction was subject to the receipt of a specified level of client consents, termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other closing conditions. The Harvest Purchase Agreement contained customary termination rights for the Company and Harvest.

On April 22, 2019, the Company, Harvest and the Members’ Representative entered into an agreement to mutually terminate the Harvest Purchase Agreement as of April 22, 2019. Neither Victory nor Harvest was responsible for any termination fee to the other party as a result of the termination.

Under the terms of the acquisition of Compass Efficient Model Portfolios, LLC (the “CEMP Acquisition”), we paid cash related to base payments and contingent earnouts annually following each of the first four anniversaries of the CEMP Acquisition. Each annual base payment was fixed in amount, with the amounts increasing over the four-year period. The earn‑out payments were calculated as a fixed percentage of the net revenue earned by the Company on the CEMP business over the twelve-month period ending on each of the first four anniversaries of the CEMP closing date.

In the third quarter of 2019, we paid the fourth and final payment of $6.0 million in cash to the sellers. The Company paid sellers a total of $6.0 million, $4.4 million and $2.7 million, respectively, in base payments and earn out payments in 2019, 2018 and 2017.

In connection with business combinations, asset purchases and changes in business strategy, the Company incurs costs integrating investment platforms, products and personnel into existing systems, processes and service provider arrangements and restructuring the business to capture operating expense synergies.

The following table presents a rollforward of restructuring and integration liabilities:

(in millions)	2019			2018			2017
Liability balance, beginning of period	$	0.1		$	0.1		$	7.4
Severance expense
USAA AMCO Acquisition		6.2			—			—
RS Investments		—			—			0.5
Other		—			0.7			0.3
Contract termination expense
RS Investments		—			—			5.0
USAA AMCO Acquisition		0.2			—			—
Integration costs		2.3			—			0.4
Restructuring and integration costs		8.7			0.7			6.2
Settlement of liabilities		(5.8	)		(0.7	)		(13.5	)
Liability balance, end of period	$	3.0		$	0.1		$	0.1
Accrued expenses	$	2.9		$	0.1		$	0.1
Other liabilities		0.1			—			—
Liability balance, end of period	$	3.0		$	0.1		$	0.1

Costs related to acquisitions are summarized below and include legal and filing fees, advisory services, mutual fund proxy voting costs and other one‑time expenses related to the transactions. These costs were expensed in 2019, 2018 and 2017 and are included in acquisition‑related costs in the Consolidated Statements of Operations.

	Acquisition-related costs
(in thousands)		2019		2018		2017
USAA AMCO	$		21,333	$	3,180	$	-
Harvest			895		1,116		-
RS Investments			-		-		355
Other			89		50		1,739
	$		22,317	$	4,346	$	2,094