Quarterly report pursuant to Section 13 or 15(d)

Acquisitions and Other Investments

Acquisitions and Other Investments
6 Months Ended
Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
Acquisitions and Other Investments Acquisitions and Other Investments
Investment in Privately Held Company

On May 20, 2022, the Company acquired a 25.0% interest in a privately held company for cash consideration of $5.0 million. Subject to the occurrence of certain conditions, the Company agreed to invest up to an additional $10.0 million for additional units in the future. The Company uses the equity method of accounting to record its portion of this privately held company's net income or loss on a one quarter lag from the actual results of operations. The Company uses the equity method of accounting because of its less than 50% ownership interest and lack of control and does not otherwise exercise control over the significant economic and operating decisions of the privately held company.

Acquisition of 401kplans.com

On May 31, 2022, Envestnet Retirement Solutions, LLC, a wholly-owned subsidiary of the Company, acquired all of the issued and outstanding membership interests of 401kplans.com LLC (“401kplans.com”). 401kplans.com has been integrated into the Envestnet Wealth Solutions segment.

401kplans.com provides a digital 401(k) retirement plan marketplace that streamlines retirement plan distribution and due diligence among financial advisors and third-party administrators. The acquisition demonstrates Envestnet's commitment to the retirement plan industry and is expected to create a more seamless experience and enhance productivity for advisors by helping them shop, compare and select the best-fitting 401(k) plan for their client.

In connection with the 401kplans.com acquisition, the Company paid estimated consideration of $14.5 million, net of cash acquired, subject to certain post-closing adjustments. The Company funded the acquisition with cash on hand.

The following table summarizes the estimated fair values of the assets acquired at the date of acquisition:

Preliminary Estimate
(in thousands)
Tangible assets acquired, net of acquired cash $ 94 
Identifiable intangible assets 3,000 
Goodwill 11,378 
Total net assets acquired $ 14,472 

The goodwill arising from the acquisition represents the expected benefits of the transaction, primarily related to the enhancement of the Company's existing technologies and increase in future revenues as a result of potential cross selling opportunities. The estimated goodwill is deductible for income tax purposes.

A summary of estimated intangible assets acquired, estimated useful lives and amortization method is as follows:

Preliminary Estimate
(in thousands)
Estimated Useful Life in Years Amortization Method
Proprietary technology $ 3,000  5 Straight-line

The estimated fair values of certain of the assets acquired are provisional and based on information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation procedures that are in progress and not yet at the point where there is sufficient information for a definitive measurement. The Company believes the preliminary information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize those fair values. Therefore, provisional measurements of fair values reflected herein are subject to change and such changes could be significant. The Company expects to finalize the valuation of tangible assets acquired, identifiable intangible assets and goodwill balances and complete the acquisition accounting as soon as reasonably practicable but no later than May 31, 2023.
The results of 401kplans.com's operations are included in the condensed consolidated statements of operations beginning May 31, 2022 and were not considered material to the Company’s results of operations.

For the three and six months ended June 30, 2022, the Company’s acquisition related costs were not material, and are included in general and administration expenses. The Company may incur additional acquisition related costs over the remainder of 2022.