Annual report pursuant to Section 13 and 15(d)

Acquisitions

v3.24.0.1
Acquisitions
 12 Months Ended
Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
Acquisitions Acquisitions
2021 Acquisitions

Acquisition of Proprietary Technology

The Company previously owned approximately 29% of the outstanding units in a privately held company and accounted for it as an equity method investment. On March 11, 2021, the Company entered into an intellectual property purchase agreement with this privately held company to acquire all of the proprietary technology developed by the privately held company for approximately $35.5 million. Concurrent with the intellectual property purchase agreement, the Company also entered into a redemption agreement with the same privately held company to redeem the Company's previously held equity interest for approximately $10.0 million. The Company accounted for these two arrangements as a single unit of account. As of the acquisition date, the net cost of the proprietary technology acquired, including capitalized transaction costs, was approximately $24.5 million, which will be amortized over a five-year period on a straight-line basis. The proprietary technology has been integrated into the Envestnet Wealth Solutions segment.

Acquisition of Harvest
 
On April 7, 2021, pursuant to an agreement and plan of merger, dated as of March 31, 2021, between, among others, Harvest, a Delaware corporation, and Bounty Merger Sub, a wholly-owned subsidiary of the Company, the Company completed the merger of Harvest with and into Bounty Merger Sub, with Merger Sub continuing as the surviving corporation and operating as a wholly-owned subsidiary of Envestnet. Harvest has been integrated into the Envestnet Wealth Solutions segment.

Harvest provides automated goals-based saving and wealth solutions tools to customers of banks, credit unions, trust companies, and other financial institutions. The acquisition optimizes the Company's API-based financial wellness ecosystem, and also helps strengthen the Company's foothold to enable embedded finance, which the Company sees as a key driver of the future of financial services.

In connection with the Harvest merger, the Company paid consideration of $32.8 million, net of cash acquired (of which approximately $3.0 million was held in escrow for 18 months after the closing date). The Company funded the acquisition with cash on hand.

The following table summarize the final fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Tangible assets acquired, net of cash received $ 5,310 
Identifiable intangible assets 9,500 
Goodwill 18,526 
Total assets acquired 33,336 
Total liabilities assumed (542)
Total net assets acquired, net of cash received $ 32,794 

The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction, primarily related to an increase in future revenue as a result of potential cross selling opportunities, as well as enhancements to the Company's existing technologies. The goodwill is not deductible for income tax purposes.
A summary of intangible assets acquired is as follows:

Gross Carrying Amount Estimated Useful Life Amortization Method
(in thousands) (in years)
Proprietary technology $ 6,900  6 Straight-line
Customer list 2,600  14 Accelerated
Total intangible assets acquired $ 9,500 

The results of Harvest’s operations are included in the consolidated statements of operations beginning April 7, 2021 and were not considered material to the Company’s results of operations.

The Company’s acquisition related costs included in general and administrative expense in the consolidated statements of operations were not material for the years ended December 31, 2023 and 2022.

2022 Acquisitions

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. 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 clients.

In connection with the 401kplans.com acquisition, the Company paid consideration of $14.5 million, net of cash acquired. The Company funded the acquisition with available cash resources.

The following table summarizes the fair values of the assets acquired as of the date of acquisition (in thousands):

Tangible assets acquired, net of cash received
 $ 104 
Identifiable intangible assets 3,000 
Goodwill 11,396 
Total net assets acquired, net of cash received $ 14,500 

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 revenue as a result of potential cross selling opportunities. The goodwill is expected to be deductible for income tax purposes.

A summary of intangible assets acquired is as follows:

Gross Carrying Amount Estimated Useful Life Amortization Method
(in thousands) (in years)
Proprietary technology $ 3,000  5 Straight-line

The results of 401kplans.com's operations are included in the consolidated statements of operations beginning May 31, 2022 and are not considered material to the Company’s results of operations.
The Company’s acquisition related costs included in general and administrative expense in the consolidated statements of operations were not material for the year ended December 31, 2023 and 2022.

Acquisition of Truelytics

On July 1, 2022, pursuant to an agreement and plan of merger, dated as of May 10, 2022, between, among others, Truelytics, Yodlee and Quadrant Merger Sub, a wholly-owned subsidiary of the Company, the Company completed the merger of Truelytics with and into Quadrant Merger Sub, with Truelytics continuing as the surviving corporation and a wholly owned subsidiary of Envestnet. Truelytics has been integrated into the Envestnet Wealth Solutions segment.

The acquisition of Truelytics aligns with the Company's strategy to further connect its ecosystem by creating transformative progress for its advisors and clients. Truelytics is an advisor transition management platform and the first end-to-end data-driven system to help wealth management and insurance enterprises attract, grow, and retain advisory businesses, while also reducing the costs related to advisor transitions. The Truelytics platform combines Envestnet data, analytics, and wealth technology to further support advisors across the ecosystem.

In connection with the Truelytics merger, the Company paid cash consideration of $20.7 million, net of cash acquired. The Company funded the Truelytics acquisition with available cash resources.

The following table summarizes the fair values of the assets acquired as of the date of acquisition (in thousands):

Tangible assets acquired, net of cash received $ 510 
Identifiable intangible assets 4,000 
Goodwill 16,217 
Total net assets acquired, net of cash received $ 20,727 

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 revenue as a result of potential cross selling opportunities. The goodwill is not expected to be deductible for income tax purposes.

A summary of intangible assets acquired is as follows:

Gross Carrying Amount Estimated Useful Life Amortization Method
(in thousands) (in years)
Proprietary technology $ 4,000  5 Straight-line

The results of Truelytics' operations are included in the consolidated statements of operations beginning July 1, 2022 and are not considered material to the Company’s results of operations.

The Company’s acquisition related costs included in general and administrative expense in the consolidated statements of operations were not material for the year ended December 31, 2023 and 2022.

Acquisition of Redi2

On July 1, 2022, pursuant to a stock purchase agreement, dated as of June 24, 2022, between Envestnet and Redi2, Envestnet completed the acquisition of all of the issued and outstanding shares of Redi2. Redi2 provides revenue management and hosted fee-billing solutions. Its platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. Redi2 has been integrated into the Envestnet Wealth Solutions segment.
In connection with the Redi2 acquisition, the Company paid consideration of $68.9 million, net of cash acquired. The Company funded the Redi2 acquisition with available cash resources. In addition, the Company has agreed to pay up to $20.0 million in performance bonuses based upon the achievement of certain performance targets, which will be recognized as employee compensation expense in the consolidated statement of operations. The Company recognized $2.4 million related to these performance bonuses during the year ended December 31, 2023 and an immaterial amount for the year ended December 31, 2022.

The following table summarizes the fair values of the assets acquired as of the date of acquisition (in thousands):

Current assets, net of cash received $ 1,985 
Other assets 3,321 
Identifiable intangible assets 26,500 
Goodwill 46,467 
  Total assets acquired 78,273 
Accounts payable and accrued expenses (2,428)
Operating lease liabilities (2,201)
Deferred revenue (4,771)
  Total liabilities assumed (9,400)
    Total net assets acquired, net of cash received $ 68,873 

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 revenue as a result of potential cross selling opportunities. Goodwill of $40.7 million is expected to be deductible for income tax purposes.

A summary of intangible assets acquired is as follows:

Gross Carrying Amount Estimated Useful Life Amortization Method
(in thousands) (in years)
Customer lists $ 14,000 
14-16 years
 Accelerated
Proprietary technologies 9,500 
6 years
 Straight-line
Trade names 3,000 
6-7 years
 Straight-line
Total intangible assets acquired $ 26,500 

The Company completed the acquisition accounting related to the Redi2 acquisition during the year ended December 31, 2023.

The results of operations of Redi2 are included in the consolidated statements of operations beginning July 1, 2022 and are not considered material to the Company’s results of operations.

The Company’s acquisition related costs included in general and administrative expense in the consolidated statements of operations were not material for the year ended December 31, 2023 and $1.5 million for the year ended December 31, 2022.

Pro Forma Financial Information

The results of the Company's acquisitions since January 1, 2021 were not considered material to the Company's results of operations, therefore, pro forma information is not presented.