Note 3 – Acquisitions

Miller Buckfire & Co. LLC

On December 20, 2012, we acquired 100% of the ordinary members’ partnership interests in Miller Buckfire & Co. LLC (“Miller Buckfire”), an investment banking firm. Miller Buckfire provides a full range of investment banking advisory services, including financial restructuring, mergers and acquisitions, and debt and equity placements.

The aggregate consideration paid by us in the Miller Buckfire acquisition included $7.3 million in cash, our initial investment of $28.0 million and common stock with a fair value of $21.7 million. The fair value of the common stock was determined using the market price of our common stock on the acquisition date. The acquisition of Miller Buckfire enables us to efficiently provide capital markets and investment banking services to clients with special financing needs, such as those historically provided by Miller Buckfire.

The acquisition was accounted for under the acquisition method of accounting in accordance with Topic 805 “Business Combinations.” Accordingly, goodwill was measured as the excess of the acquisition-date fair value of the consideration transferred over the fair value of acquisition-date identifiable assets acquired net of assumed liabilities. We recorded $57.7 million of goodwill as an asset in the consolidated statement of financial condition, which has been allocated to our company’s Institutional Group reporting segment. The allocation of the purchase price is preliminary and will be finalized upon completion of the analysis of the fair values of the net assets of Miller Buckfire as of December 20, 2012 and the identified intangible assets. The final goodwill recorded on the consolidated statement of financial condition may differ from that reflected herein as a result of future measurement period adjustments and the recording of identified intangible assets. In management’s opinion, the goodwill represents the value expected from the synergies created through the operational enhancement benefits that will result from the integration of Miller Buckfire’s business and the reputation and expertise of Miller Buckfire in the investment banking business. Goodwill will be deductible for federal income tax purposes.

Pro forma information is not presented, because the acquisition is not considered to be material, as defined by the Securities and Exchange Commission (the “SEC”). The results of operations of Miller Buckfire have been included in our results prospectively from the date of acquisition.

East Shore Aircraft LLC

On December 21, 2012, we completed the acquisition of East Shore. East Shore was initially formed to acquire fifteen Boeing 757-200 aircraft from UAL in sale-leaseback transactions with UAL. The purchase price of $112.9 million was financed through a combination of existing cash and the issuance of non-recourse debt. We will collect 100% of the monthly lease payments with approximately 65% allocated to pay interest first then principal on non-recourse debt. In addition, as each aircraft is sold at the various lease expiration dates a portion of the proceeds will be applied to the principal balance of the non-recourse debt.

The acquired assets consisted primarily of direct financing leases and operating leases. The purchase was accounted for under the acquisition method of accounting in accordance with Topic 805. Accordingly, the purchase price was allocated to the acquired assets and liabilities assumed based on their estimated fair values as of the acquisition date. The allocation of the purchase price based on the fair values of the assets acquired and liabilities assumed resulted in no goodwill or intangible assets being recorded.

Pro forma information is not presented, because the acquisition is not considered to be material, as defined by the SEC. The results of operations of East Shore have been included in our results prospectively from the date of acquisition.

Stone & Youngberg LLC

On October 1, 2011, we acquired Stone & Youngberg, a leading financial services firm specializing in municipal finance and fixed income securities. The purchase consideration consisted of cash, a portion paid at closing and $24.0 million to be paid in installments over the next three years, and common stock. In addition, we may be required to pay a contingent earn-out over a five year period after the closing, which is capped at $25.0 million, based upon revenue goals, as established in the purchase agreement.

The fair value of the common stock was determined using the market price of our common stock on the acquisition date. Stone & Youngberg’s comprehensive institutional group expanded our public finance, institutional sales and trading and bond underwriting, particularly in the Arizona and California markets, and expanded our Private Client Group.

We recognized a liability of $23.5 million for estimated earn-out payments over the five-year period. Additionally, we recognized a liability for the installment payments to be made over the next three years. In December 2012, we paid the first of three installment payments of $7.0 million. The liability for the installment payments was $17.0 million at December 31, 2012. These liabilities are included in accounts payable and accrued expenses in the consolidated statements of financial condition.

Thomas Weisel Partners Group, Inc.

On July 1, 2010, we completed the purchase of all the outstanding shares of common stock of TWPG, an investment banking firm based in San Francisco, California. The purchase was completed pursuant to the merger agreement dated April 25, 2010. We issued shares of common stock, including exchangeable shares, to holders of TWPG common stock and restricted stock units to employees of TWPG as consideration for the merger. The fair value of the common stock and restricted stock units was determined using the market price of our common stock on the date of the merger.

The following unaudited pro forma financial information presents the combined results of operations as if the merger had occurred on January 1, 2010. Pro forma results have been prepared by adjusting our historical results to include TWPG’s results of operations adjusted for the following changes: amortization expense adjusted as a result of acquisition-date fair value adjustments to intangible assets; interest expense adjusted for revised debt structures; and the income tax effect of applying our statutory tax rates to TWPG’s results. However, the information does not reflect the costs of any integration activities. The pro forma results include estimates and assumptions, which management believes are reasonable. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had TWPG been combined with us as of the beginning of 2010.


(000s, except per share amounts, unaudited)	2010
Total net revenues	$	1,472,905
Net loss		(66,809	)
Loss per share:
Basic		(1.38	)
Diluted		(1.38	)

UBS Wealth Management Americas Branch Network

On March 23, 2009, we announced that Stifel Nicolaus had entered into a definitive agreement with UBS Financial Services Inc. (“UBS”) to acquire certain specified branches from the UBS Wealth Management Americas branch network. As subsequently amended, we agreed to acquire 56 branches from UBS in four separate closings pursuant to this agreement. We completed the closings on the following dates: August 14, 2009, September 11, 2009, September 25, 2009, and October 16, 2009.

A contingent earn-out payment was payable over the two-year period following the closing based on the performance of the UBS financial advisors who joined Stifel Nicolaus. We recognized a liability of $9.7 million for estimated earn-out payments over the two-year period. The liability is included in accounts payable and accrued expenses in the consolidated statements of financial condition at December 31, 2011. The final earn-out payment of $ 9.2 million was made during the first quarter of 2012.