Business Combinations

12 Months Ended

Dec. 31, 2012

Business Combinations

Business Combinations

NOTE 11. Business Combinations

Asset Purchase—RangeMark Financial Services

        On November 7, 2012, a subsidiary of the Company acquired certain assets and assumed certain liabilities from RangeMark Financial Services, Inc. and certain of its affiliates and other parties ("RangeMark"). RangeMark specializes in providing quantitative research, advanced analytics and customizing solutions for its clients. These business activities will be reported within the Company's MBS & Rates segment. The aggregate purchase consideration was $2.5 million, payable in four installments commencing September 30, 2013 through March 31, 2015. In addition, 14 employees of RangeMark were hired by the Company.

        This transaction is being accounted for under the acquisition method of accounting in accordance with ASC 805, "Business Combinations." Goodwill of $1.2 million (all of which is expected to be deductible for tax purposes) is calculated as the purchase premium after adjusting for the fair value of net assets acquired and primarily represents the value attributable to the assembled workforce which is subsumed into the reported goodwill. The following condensed statement of net assets acquired reflects the value assigned to RangeMarks's net assets as of the acquisition date:

Condensed Statement of Net Assets Acquired (In thousands of dollars)	November 7, 2012
Assets
Receivables	$	106
Intangible assets*		1,530
Other assets		40
Total assets acquired	$	1,676
Liabilities
Accrued expenses and other liabilities	$	538
Total liabilities assumed	$	538
Net assets acquired	$	1,138
Purchase price (present value)		2,350
Goodwill resulting from transaction	$	1,212

*

Consists primarily of intellectual property and the trade name with estimated useful lives of 5 years and 10 years, respectively.

ClearPoint Funding, Inc. Acquisition

        On January 3, 2011, the Company completed its acquisition of ClearPoint. Pursuant to the related Stock Purchase Agreement, a newly formed subsidiary of the Company, Descap Mortgage Funding, LLC ("Descap LLC"), paid approximately $0.3 million of cash as transaction consideration for all of the issued and outstanding shares of capital stock of ClearPoint. Descap LLC is also obligated to pay the former stockholder of ClearPoint no more than approximately $2.0 million payable in installments on the first, second and third anniversaries of the closing date, contingent upon the continued employment of the former stockholder and certain indemnification matters. The Company recorded a bargain purchase gain of approximately $2.3 million, as the majority of the consideration potentially payable to the former stockholder will be recognized as compensation expense for future services. Therefore, no goodwill was recognized. In connection with the closing of the Homeward Transaction, the Company settled its remaining obligation with a payment to the former stockholder of $0.1 million on March 1, 2013 and the indemnification arrangement from the former stockholder has been terminated.

        The ClearPoint acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, "Business Combinations." The following condensed statement of net assets acquired reflects the value assigned to ClearPoint's net assets as of the acquisition date:

Condensed Statement of Net Asset Acquired (In thousands)	January 3, 2011
Assets
Cash and cash equivalents	$	876
Loans		45,726
Derivative assets		1,117
Intangible assets*		803
Other assets		3,994
Total assets acquired	$	52,516
Liabilities
Secured borrowings	$	44,339
Accrued expenses and other liabilities		5,597
Total liabilities assumed	$	49,936
Net assets acquired	$	2,580

*

Consists primarily of customer relationships with an estimated useful life of 8 years.

        The following table presents unaudited prior period pro forma information as if the acquisition of ClearPoint had occurred on January 1, 2010:

Unaudited Pro Forma Condensed Combined Financial Information (In thousands)	Year Ended December 31, 2010
Net revenues	$	281,482
Total expenses (excluding interest)		(314,310	)
Loss from continuing operations before income taxes and discontinued operations		(32,828	)
Income tax benefit		(12,765	)
Loss from continuing operations	$	(20,063	)

        Pro forma information for the year ended December 31, 2011 has not been provided given the proximity of the acquisition date to the beginning of the year. The unaudited prior period pro forma results include the impact of amortizing certain purchase accounting adjustments such as intangible assets, as well as compensation expense related to the transaction consideration payable to the former stockholder of ClearPoint, contingent upon continued employment. The prior period pro forma financial information does not indicate the impact of possible business model changes nor does it consider any potential impacts of current market conditions, or other factors. Refer to Note 27 herein for additional information regarding ClearPoint's current year financial information.

        On February 14, 2013, the Company entered into the Homeward Transaction, an agreement to sell substantially all of ClearPoint's assets to Homeward Residential, Inc. ("Homeward"). This transaction closed on February 22, 2013, and all remaining business activities of ClearPoint are being wound down. Refer to Note 29 herein for additional information.