Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

7. 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		97,307		32,197		—		129,504
Balance as of December 31, 2017	$	755,292	$	89,591	$	—	$	844,883

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 $2.0 million was recorded as intangible assets. This acquisition was accounted for as a business combination.

As described in Note 3 “Acquisition of 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 $128.3 million and $175.0 million to goodwill and identified intangible assets, respectively.

As of December 31, 2017 and December 31, 2016, the Company’s total amount of goodwill recorded was $844.9 million and $715.4 million, respectively. No goodwill impairment was recognized in the years ended December 31, 2017 and 2016.

As described in Note 4 “Business Held for Sale”, the Company reclassified net assets related to the BondPoint Sale to Business held for sale on the consolidated statement of financial condition as of December 31, 2017. An aggregated net carrying amount of $50.8 million ( $53.7 million of gross carrying amount net of $2.9 million accumulated amortization from the period between the Closing Date of the Acquisition of KCG to December 31, 2017) was reclassified from intangible assets to Business held for sale.

Acquired intangible assets consisted of the following as of December 31, 2017 and December 31, 2016:


	As of December 31, 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		559		391		9
ETF buyer relationships		950		559		390		9
Leases		1,800		397		1,403		3
FCC licenses		200		19		181		7
Technology		60,000		9,644		50,356	1	to	6
Customer relationships		49,000		1,822		47,178	12	to	17
Favorable occupancy leases		5,895		408		5,487		7
Exchange memberships		5,838		—		5,838		Indefinite
	$	234,633	$	123,408	$	111,224


	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 $15.4 million, $0.2 million, and $0.2 million for the years ended December 31, 2017, 2016, and 2015, respectively. This is included in amortization of purchased intangibles and acquired capitalized software in the accompanying consolidated statements of comprehensive income.

- 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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