Business Combinations

12 Months Ended

Dec. 31, 2020

On May 24, 2019, the company acquired OppenheimerFunds, an investment management subsidiary of Massachusetts Mutual Life Insurance Company's (MassMutual). The following table summarizes the finalized amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the consideration transferred to acquire OppenheimerFunds.



$ in millions			Fair Value
ASSETS
Cash and cash equivalents			360.0
Accounts receivable			133.1
Investments			178.4
Prepaid assets			24.8
Other assets			181.2
Property, equipment and software, net			104.1
Intangible assets (1)			5,189.0
Goodwill (2)			1,505.3
Total assets			7,675.9
LIABILITIES
Accrued compensation and benefits			263.9
Accounts payable and accrued expenses			728.1
Deferred tax liabilities, net			1,088.0
Total liabilities			2,080.0
Total identifiable net assets			5,595.9

Summary of consideration
Cash consideration			35.0
Common stock consideration (3)			1,453.6
Preferred stock consideration (4)			4,010.5
Other consideration (5)			96.8
Total cash and stock consideration			5,595.9

____________

(1) Intangible assets are comprised of the following:

•indefinite-lived intangible asset related to management contracts of $4,907.0 million consists primarily of contracts related to mutual funds.

•finite-lived intangible asset related to management contracts of $255.0 million consists primarily of contracts related to sub-advised accounts and has an estimated useful life of eight years.

•acquired trade name asset of $27.0 million has an estimated useful life of six years.

The intangible assets created in the acquisition are not expected to be deductible for tax purposes.

(2) Goodwill is calculated as the difference between the acquisition date fair value of the total consideration transferred and the aggregate values assigned to the assets acquired and liabilities assumed. The goodwill created in the acquisition is not expected to be deductible for tax purposes. The goodwill balance resulted primarily from the opening balance sheet net deferred tax liability. See Note 7, "Goodwill," for an analysis of the change in goodwill balances between periods. As a result of an accounting matter related to four Master Limited Partnership funds, the company adjusted the initial accounting for the acquisition by recording a liability of an estimated amount of $380.5 million, an adjustment to goodwill of $287.0 million and a deferred tax asset of $93.5 million (for expected future tax benefits) during the first quarter of 2020. See Note 20, "Commitments and Contingencies," for additional details regarding the accounting matter.

(3) The common shares were fair valued using the company’s market price on closing date and reflects a discount for the common shares issued to MassMutual (75,563,041 shares) with a two-year lock-up period, resulting in a value of approximately $19.195 per share. Common shares issued to OppenheimerFunds employee shareholders (153,574 shares) were valued at the market price on closing date, which was $20.42.

(4) The preferred shares (4,010,448 shares) were fair valued using a discounted cash flow model, resulting in a value of $1,000 per share.

(5) Other consideration primarily consists of the fair value of the vested portion of replacement employee common share-based awards.

Transaction and integration costs related to the OppenheimerFunds acquisition included within the Transaction, integration and restructuring line item on the Consolidated Statements of Income were $221.3 million, for the year ended December 31, 2020 (December 31, 2019: $625.0 million).

Supplemental Pro Forma Information

The following unaudited pro forma summary presents consolidated information of the company as if the business combination had occurred on January 1, 2019, the earliest period presented herein.


			For the year ended December 31,
$ in millions			2019
Operating revenues			6,935.1
Net income			683.4

The pro forma adjustments include dividends on preferred shares, transaction costs and adjustments to depreciation and intangible asset amortization expense. Cost savings or operating synergies expected to result from the acquisition are not included in the pro forma results. These pro forma results are not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations.