Business Combination

12 Months Ended

Dec. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Business Combination

4.    BUSINESS COMBINATION

On July 31, 2024, Ambac completed the acquisition of 60% of Beat for a purchase price of $281,278 of which approximately $252,048 was paid in cash and the remainder was satisfied through the issuance of 2,216,023 shares of Company Common Stock to certain Sellers (the "Beat Transaction"). Beat’s management team and Bain Capital Credit LP (together, the “Rollover Shareholders”) each retained approximately 20% of Beat’s issued share capital immediately after closing. Many of Beat's operating units are minority owned by their respective management teams and accordingly, Ambac's economic interests in those units is less than 60% despite our ownership of 60% of Beat.

AFG funded the cash portion of the consideration with a combination of available cash, approximately $62,000 of funding from AAC in the form of an investment in Cirrata V LLC, and $147,000 from new indebtedness (the "Credit Facility") that was issued in the third quarter of 2024. See Note 12. Debt for the terms of the Credit Facility.

AFG issued the common stock free and clear of any liens or restrictions (other than those arising under state and federal securities laws of the United States) and bearing a restrictive legend. The common stock has not been registered under the Securities Act in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act.

At the closing of the Beat Transaction, AFG entered into a Shareholders’ Agreement by and among AFG, the Purchaser, the Rollover Shareholders and Beat (the “Shareholders’ Agreement”). The Shareholders’ Agreement provides for, among other things, the granting of (i) put options to each Rollover Shareholder to require the Purchaser to purchase from such Rollover Shareholder, the Relevant Shares (as defined in the Shareholders’ Agreement), and (ii) call options to the Purchaser to purchase from each Rollover Shareholder, the Relevant Shares.

The acquisition was accounted for as a business combination using the acquisition method of accounting. The Company has finalized its fair value estimates of the acquired assets, assumed liabilities and NCI as of December 31, 2024, and no subsequent adjustments will be made within the permitted measurement period as defined by ASC 805.

The following table summarizes the consideration transferred to acquire Beat and the estimated fair values of the identified assets acquired and liabilities assumed at the acquisition date, as well as the fair value of the NCI, at the acquisition date:

Fair value of consideration transferred:
Cash	$	252,048
Common shares	29,229
Total consideration	$	281,278
Recognized amounts of assets acquired, liabilities assumed and NCI:
Cash and equivalents	$	8,272
Short-term investments	28,919
Commission receivables and contract assets	47,696
Other assets	10,972
Intangible assets	311,557
Goodwill	357,317
Advanced commissions	(49,299)
Premium payable	(5,722)
Deferred tax liability	(74,300)
Other liabilities	(19,570)
Redeemable NCI	(185,469)
Nonredeemable NCI	(149,095)
Total	$	281,278

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 acquisition, driven by the value of Beat's potential future distribution and carrier relationships, and synergies with other Ambac business operations. All of the $357,317 of goodwill was assigned to the Insurance Distribution segment. The goodwill is not deductible for tax purposes.

The fair value of the redeemable non-controlling interest of $185,469 on the acquisition date was estimated based on the non-controlling interest’s respective share of Beat's enterprise value, adjusted for the value of Ambac's call option to purchase, and the minority owners' put option to sell to Ambac, respectively, the remaining 40% membership interest in Beat. Please refer to the Redeemable Noncontrolling Interest section of Note 2. Basis of Presentation and Significant Accounting Policies, for further information regarding the terms of the call and put option, as well as the redeemable NCI balance sheet classification.

The fair value of the nonredeemable NCI of $149,095 represents the aggregate NCI share in certain Beat operating units which are minority owned by the units' respective management teams. At December 31, 2024, there are no put or call options associated with these minority interests and as such, the aggregate amount is classified as nonredeemable NCI on the balance sheet.

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		Useful Life - Years
Customer relationships	$	303,331	10.0
Trademarks	8,226		10.0
Total	$	311,557

The customer relationships intangible represents existing relationships Beat maintains 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 Beat Capital Partners brand name which is well known in the marketplace in which Beat competes.

The overall weighted average useful life of the identified amortizable intangible assets acquired is 5.1 years.

The acquired business contributed revenues of $40,343 and net income of $4,551 to Ambac for the period from August 1, 2024, to December 31, 2024. The following unaudited pro forma summary presents consolidated information of Ambac as if the business combination had occurred on January 1, 2023.

	Year Ended December 31,
Pro forma (unaudited)	2024		2023
Revenues	$	276,800	$	182,482
Net income (loss) from continuing operations	$	(51,782)	$	(93,021)

Ambac did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and net income.

These pro forma amounts have been calculated after applying Ambac's accounting policies and adjusting the results of Beat to reflect amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from January 1, 2023, with the consequential tax effects.

In 2024, Ambac incurred $27,388 of acquisition-related costs. These expenses are included in general and administrative expense on Ambac's consolidated statement of comprehensive income (loss) for the year ended December 31, 2024. In the table above, these expenses are reflected in the pro forma net income for the year ended December 31, 2023.