Quarterly report pursuant to Section 13 or 15(d)

Business Acquisitions

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Business Acquisitions
3 Months Ended
Mar. 31, 2012
Business Acquisitions [Abstract]  
Business Acquisitions
3. Business Acquisitions

FundQuest Acquisition

On December 13, 2011, the Company acquired all of the outstanding shares of FundQuest Incorporated (“FundQuest”), a subsidiary of BNP Paribas Investment Partners USA Holdings, Inc. for total consideration of approximately $27,796. FundQuest was renamed Envestnet Portfolio Solutions, Inc. (“EPS”) subsequent to the acquisition. EPS provides managed account programs, overlay portfolio management, mutual funds, institutional asset management and investment consulting to registered investment advisors, independent advisors, broker-dealers, banks and trust organizations. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is not-deductible for income tax purposes.

 

During the three months ended March 31, 2012, the Company finalized the estimated working capital adjustment. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date of December 13, 2011 as initially reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011:

 

                         
    December 13, 2011     Consideration     December 13, 2011  
    (As initially reported)     Adjustments     (As adjusted)  

Accounts receivable

  $ 2,603     $ —       $ 2,603  

Prepaid expenses and other current assets

    46       —         46  

Property and equipment

    442       —         442  

Intangible assets

    11,830       —         11,830  

Goodwill

    20,192       (889     19,303  

Accounts payable and accrued liabilities

    (1,364     —         (1,364

Deferred income taxes

    (4,710     —         (4,710

Deferred revenue

    (354     —         (354
   

 

 

   

 

 

   

 

 

 

Total assets acquired

  $ 28,685     $ (889   $ 27,796  
   

 

 

   

 

 

   

 

 

 

The initially reported estimated fair values of assets acquired and liabilities assumed were based on the information that was available at the time the Company filed its annual report on Form 10-K for the year ended December 31, 2011. As of May 9, 2012, management of the Company believes all relevant information is now available to finalize the estimates.

Pro forma results for Envestnet, Inc. giving effect to the FundQuest acquisition

The following unaudited pro forma financial information presents the combined results of operations of Envestnet and FundQuest. For the three months ended March 31, 2011, the unaudited pro forma financial information presents the results of the FundQuest acquisition as if the acquisition had occurred as of the beginning of 2011.

Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented.

 

         
    Three Months ended  
    March 31,  
    2011  

Revenue

  $ 32,481  

Net income

    1,955  

Net income per share:

       

Basic

    0.06  

Diluted

    0.06  

Prima Capital Holding, Inc. Agreement

On April 5, 2012, the Company completed the acquisition of Prima Capital Holding, Inc. (“Prima”) (Note 16). In accordance with the stock purchase agreement, the Company acquired all of the outstanding shares of Prima for cash consideration of approximately $13,750, subject to certain post-closing adjustments of which the Company is still in the process of completing. Prima provides investment management due diligence, research applications, asset allocation modeling and multi-manager portfolios to the wealth management and retirement industries. Prima’s clientele includes seven of the top 20 banks in the U.S. as measured by total assets, independent RIAs, regional broker-dealers, family offices and trust companies.

The Company currently is in the initial phase of gathering financial information and has not completed the estimated fair values of the assets acquired and liabilities assumed. At this time, the unaudited pro forma financial information is not presented for the three months ended March 31, 2012 or 2011, as Prima’s financial statements for these periods do not contain all adjustments which are necessary to present fairly Prima’s results of operations and information for pro forma adjustments related to the acquisition is not available.

Tamarac, Inc. Agreement

On May 1, 2012, the Company completed the acquisition of Tamarac, Inc. (“Tamarac”) (Note 16). In accordance with the merger agreement, a newly formed subsidiary of Envestnet merged with and into Tamarac, and Tamarac became a wholly owned subsidiary of Envestnet. Under the terms of the merger agreement, total cash consideration was approximately $54,000 for all of the outstanding stock of Tamarac, subject to certain post-closing adjustments of which the Company is still in the process of completing. The Company has established a management incentive plan funded by $7,000 of common stock for the benefit of certain employees of Tamarac. Such shares vest at pre-established intervals, but in no event later than May 15, 2015, based upon Tamarac meeting certain financial targets. Tamarac is a provider of sophisticated portfolio management technology that enables RIA’s to efficiently deliver customized individual account management to their clients.

The Company currently is in the initial phase of gathering financial information and has not completed the estimated fair values of the assets acquired and liabilities assumed. At this time, the unaudited pro forma financial information is not presented for the three months ended March 31, 2012 or 2011, as Tamarac’s financial statements for these periods do not contain all adjustments which are necessary to present fairly Tamarac’s results of operations and information for pro forma adjustments related to the acquisition is not available.

For the three months ended March 31, 2012, acquisition related costs for Tamarac and Prima, totaled $617 and are included in general and administration expenses. The Company will incur additional Tamarac and Prima related acquisition costs during the second quarter of 2012.