Acquisition

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition

Acquisition

On July 1, 2022, AB Holding acquired a 100% ownership interest in CarVal Investors L.P. (“CarVal”), a global private alternatives investment manager primarily focused on opportunistic and distressed credit, renewable energy infrastructure, specialty finance and transportation investments that, as of the acquisition date, constituted approximately $12.2 billion in AUM. Immediately following the acquisition of CarVal by AB Holding, AB Holding contributed 100% of its equity interests in CarVal to AB in exchange for AB Units and a receivable for future consideration to be paid. Post-acquisition, CarVal was rebranded AB CarVal Investors (“AB CarVal”).

On the acquisition date, AB Holding issued approximately 3.2 million AB Holding Units (with a fair value of $132.8 million) and recorded a $419.4 million receivable for the issuance of additional AB Holding Units in exchange for AB Units on November 1, 2022 and associated liability to CarVal for $419.4 million. AB Holding immediately contributed 100% of its equity interests in CarVal to AB.

AB received 100% equity interest in CarVal from AB Holding and issued approximately 3.2 million AB Units (with a fair value of $132.8 million) and recorded a $419.4 million liability payable to AB Holding for the issuance of additional AB Units on November 1, 2022. AB also recorded a contingent consideration payable of $227.1 million (to be paid predominantly in AB Units) based on CarVal achieving certain performance objectives over a six-year period ending December 31, 2027. The AB Units, as discussed above, were issued, or will be issued, to AB Holding; AB Holding then issued, or will issue, the equal amount of AB Holding Units to CarVal. The excess of the purchase price over the current fair value of identifiable net liabilities acquired of $156.1 million, net cash acquired of $40.8 million, resulted in the recognition of $632.4 million of goodwill and the recording of $303.0 million of finite-lived intangible assets primarily relating to investment management contracts and investor relationships with useful lives ranging from 5 to 10 years. As a result of the transfer of equity to AB, AB recorded a net deferred tax asset of $4.8 million, resulting in the recognition of $627.6 million of goodwill. The goodwill recorded is not deductible for tax purposes as the CarVal acquisition was an investment in a partnership.

The following table summarizes the amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the consideration transferred to acquire CarVal (in thousands):

Summary of purchase consideration:
Fair value of AB Holding units issued	$	552,196
Fair value of contingent consideration	227,071
Total purchase consideration	779,267
Purchase price allocation:
Assets acquired:
Cash and cash equivalents	$	40,777
Receivables, net	82,523
Investments - other	947
Furniture, equipment, and leasehold improvements, net	2,464
Right-of-use assets	16,482
Other assets	14,230
Intangible assets	303,000
Goodwill	632,416
Total assets acquired	1,092,839
Liabilities assumed:
Accounts payable and accrued expenses	(33,134)
Accrued compensation and benefits	(208,015)
Debt	(42,661)
Lease liabilities	(16,571)
Non-redeemable non-controlling interests in consolidated entities	(13,191)
Total liabilities assumed	(313,572)
Net assets acquired	$	779,267

The CarVal acquisition has not had a significant impact on our 2022 revenues and earnings. As a result, we have not provided supplemental pro forma financial information.