Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2017

6. Goodwill and Intangible Assets

Prior to the Acquisition, the Company was managed and operated as one business, and accordingly, operated under one reportable segment. As a result of the acquisition of KCG, beginning in the third quarter of 2017 the Company has three operating segments: (i) Market Making; (ii) Execution Services; and (iii) Corporate. The Company allocated goodwill to the new reporting units using a relative fair value approach. In addition, the Company performed an assessment of potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment was indicated.

The following table presents the details of goodwill by segment:


	Market		Execution
(in thousands)	Making		Services		Corporate		Total
Balance as of December 31, 2016	$	657,985	$	57,394	$	—	$	715,379
Additions		108,276		35,943		—		144,219
Balance as of September 30, 2017	$	766,261	$	93,337	$	—	$	859,598

On May 3, 2017, the Company completed the acquisition of certain legal entities that owned select strategic telecommunications assets from Teza Technologies. The total purchase price incurred was $5.6 million, of which $1.2 million was recorded as goodwill, and $1.9 million was recorded as intangible assets. This acquisition was accounted for as a business combination. The acquisition related disclosures required by ASC 805 Business Combinations were finalized as of September 30, 2017, a decrease of $1.9 million in goodwill and an increase of $1.9 million in intangible assets were recorded as adjustments to preliminary analysis during the three months ended September 30, 2017.

As described in Note 3 “Merger of Virtu Financial, Inc. and KCG Holdings, Inc.”, on July 20, 2017 the Company completed the acquisition of KCG. The aggregate cash purchase price of $1.40 billion has been allocated to the assets acquired and liabilities assumed using their estimated fair values at the Closing Date of the Acquisition. The Company has allocated $143.0 million and $156.3 million to goodwill and identified intangible assets, respectively This Acquisition was accounted for as a business combination.

The Company recorded provisional amounts based upon its best estimate of the value as a result of preliminary analysis. As of September 30, 2017 and December 31, 2016, the Company’s total amount of goodwill recorded was $859.6 million and $715.4 million, respectively. No goodwill impairment was recognized in the three and nine months ended September 30, 2017 and 2016.

Acquired intangible assets consisted of the following:


	As of September 30, 2017
	Gross
	Carrying		Accumulated		Net Carrying		Useful Lives
(in thousands)	Amount		Amortization		Amount		(Years)
Purchased technology	$	110,000	$	110,000	$	—	1.4	to	2.5
ETF issuer relationships		950		533		417		9
ETF buyer relationships		950		533		417		9
Leases		1,800		247		1,553		3
FCC licenses		200		12		188		7
Technology		67,800		5,001		62,799	1	to	6
Customer relationships		77,100		1,027		76,073	13	to	17
Trade names		5,000		98		4,902		10
Exchange memberships		6,400		—		6,400		Indefinite
	$	270,200	$	117,451	$	152,749


	As of December 31, 2016
	Gross
	Carrying		Accumulated		Net Carrying		Useful Lives
(in thousands)	Amount		Amortization		Amount		(Years)
Purchased technology	$	110,000	$	110,000	$	—	1.4	to	2.5
ETF issuer relationships		950		454		496		9
ETF buyer relationships		950		454		496		9
	$	111,900	$	110,908	$	992

Amortization expense relating to finite-lived intangible assets was approximately $6.4 million and $0.05 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $6.5 million and $0.16 million for the nine months ended September 30, 2017 and 2016, respectively. This is included in amortization of purchased intangibles and acquired capitalized software in the accompanying condensed consolidated statements of comprehensive income (loss).

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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