Stout was engaged to provide accounting and valuation services in connection with the recent merger of a leading investment management firm and a leading merchant bank. The combination of the two companies created a preeminent advisory and investment firm with more than $50 billion in assets under management.

Accounting and Reporting Advisory Services

Our accounting and reporting advisory group worked with management to identify and document the key accounting policy components of the transaction, including identifying the accounting acquirer, determining the purchase consideration, and assisting with adjustments to the closing balance sheet. We then developed a preliminary opening balance sheet that included goodwill and intangible assets.

We also assisted the client in liaising with their auditors and answering any necessary queries, streamlining the company’s audit process.

Valuation Services

Our valuation team assessed the intangible assets in need of recognition, the most significant of which were the acquiree’s investment management contracts.

As a registered investment advisor managing assets across a variety of investment strategies, the acquiree serves business owners and investors who seek long-term risk adjusted investment opportunities. Within each investment area, the company maintains multiple investment management contracts with distinct investment terms, some of which do not have a set maturity date or fixed investment period. These funds are considered to be evergreen funds that continually reinvest profits and admit new investors.

As such, the management contracts for these funds are deemed to be indefinite-lived intangible assets. Other funds have targeted liquidation dates, and the associated management contracts are deemed to be finite-lived intangible assets.

Stout’s valuation team worked with the client to identify investment management contracts that are deemed to be finite-lived or indefinite-lived intangible assts, considering investment horizons, investors’ reinvestment rate, and committed capital.

Next, Stout was able to analyze the economics of each investment management contract to determine their respective fair values using a multi-period excess earnings method. Additionally, we valued the trade names and trademarks of the company.

Client Outcome

As a result of our accounting and valuation work, the company was able to meet its financial reporting obligations and, with Stout’s assistance, provide all necessary support and documentation to its financial statement auditors.