Business Combinations

12 Months Ended

Dec. 31, 2022

4. BUSINESS COMBINATION

Ambac has acquired the following entities that were accounted for as business combinations and advance Ambac's strategy of expanding into the Insurance Distribution sector.

•Effective November 1, 2022, Ambac completed the acquisition of 85% of All Trans and 80% of Capacity Marine for a combined purchase price of $26 in cash. Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company's Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period as defined by ASC 805.

•On December 31, 2020, Ambac completed the acquisition of 80% of the membership interests of Xchange for a purchase price of $81 in cash. All amounts recorded at the time of the acquisitions are final and no subsequent adjustments were made within the permitted measurement period as defined by ASC 805.

The following table summarizes the consideration paid for these acquisitions and the estimated fair values of the aggregate assets and liabilities acquired, as well as the fair value of the noncontrolling interest, at the acquisition dates:


Fair Value	All Trans & Capacity Marine		Xchange
Cash	$	4	$	2
Restricted cash	4		4
Intangible assets	16		36
Goodwill	15		46
Other assets	6		8
Total assets acquired	$	45	$	96
Other liabilities	13		8
Total liabilities assumed	13		8
Less: Redeemable noncontrolling interest	5		7
Total consideration	$	26	$	81

Goodwill was recorded to reflect the excess purchase consideration over net assets acquired and primarily consists of the future economic benefits that we expect to receive as a result of the acquisitions, driven by the value potential future distribution and carrier relationships, and synergies with other Ambac business operations. Tax deductible goodwill totaled $21 and $65, deductible over 15 years for each of the All Trans and Capacity Marine and Xchange acquisitions, respectively.

The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions at the time of the acquisitions.

The fair value of the redeemable non-controlling interest of $5 and $7, respectively on the acquisition dates for the All Trans and Capacity Marine and Xchange acquisitions were estimated based on the non-controlling interest’s respective share of each acquiree's enterprise value, adjusted for the value of Ambac's call options to purchase, and the minority owners' put options to sell to Ambac, respectively, the remaining non-controlling interests. Please refer to the Noncontrolling Interests section of Note 2. Basis of Presentation and Significant Accounting Policies, for further information regarding the terms of the call and put options, as well as the redeemable noncontrolling interest balance sheet classification.

The following table sets forth the estimated fair values of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition.


	Fair Value		Weighted Average Remaining Useful Life - Years
All Trans & Capacity Marine
Distribution relationships	$	15	15.0
Trade name	1		15.0


Total	16

Xchange
Distribution relationships	$	33	15.0
Non-compete agreements	1		5.0
Trade name	1		8.0


Total	$	36

The distribution relationships intangible represents existing relationships maintained with a variety of brokers and distributors across its product lines. It excludes the value of potential future distribution relationships that may be developed, which is included in goodwill. The trade name intangible represents the rights to the brand names which are well known in the marketplace that each company competes in. The non-compete agreements intangible relates to agreements entered into with certain key management personnel.

The overall weighted average useful life of the identified amortizable intangible assets acquired is 15 years and 14 years for the All Trans and Capacity Marine and Xchange acquisitions, respectively.

Pro forma information related to the acquisitions was not presented as the impact was not material to the Company’s financial results.