Equity Method Investments in Affiliates

6 Months Ended

Jun. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

In the first quarter of 2022 the Company completed an additional investment in Systematica Investments (“Systematica”), an innovative technology-driven systematic manager. The Company expects the majority of the consideration paid for Systematica will be deductible for U.S. tax purposes over a 15-year life. The Company’s purchase price allocation for the investment was measured using a discounted cash flow analysis that included assumptions of expected market performance, net client cash flows, and discount rates.

The financial results of certain Affiliates accounted for under the equity method are recognized in the Consolidated Financial Statements one quarter in arrears.

Equity method investments in Affiliates (net) consisted of the following:


	December 31, 2021		June 30, 2022
Goodwill	$	1,264.4	$	1,346.7
Definite-lived acquired client relationships (net)	470.1		499.3
Indefinite-lived acquired client relationships (net)	174.4		173.6
Undistributed earnings and tangible capital	225.5		84.5
Equity method investments in Affiliates (net)	$	2,134.4	$	2,104.1

The following table presents the change in Equity method investments in Affiliates (net):


	Equity Method Investments in Affiliates (Net)
Balance, as of December 31, 2021	$	2,134.4
Investments in Affiliates	182.8
Earnings	137.0
Intangible amortization and impairments	(57.9)
Distributions of earnings	(276.4)
Return of capital	(0.8)
Foreign currency translation	(11.2)
Other	(3.8)
Balance, as of June 30, 2022	$	2,104.1

Definite-lived acquired client relationships at the Company’s Affiliates accounted for under the equity method are amortized over their expected period of economic benefit. The Company recognized amortization expense for these relationships of $29.3 million and $64.5 million for the three and six months ended June 30, 2021, respectively, and $34.6 million and $57.9 million for the three and six months ended June 30, 2022, respectively. Based on relationships existing as of June 30, 2022, the Company estimates the amortization expense attributable to its Affiliates will be approximately $45 million for the remainder of 2022, approximately $80 million in 2023, approximately $50 million in each of 2024 and 2025, and approximately $40 million in each of 2026 and 2027.

As of June 30, 2022, the estimated fair values of the Company’s Affiliates accounted for under the equity method exceeded their carrying values.

The Company had liabilities for deferred and contingent payment obligations related to certain of its investments in Affiliates accounted for under the equity method. See Note 9.

The Company had 21 Affiliates accounted for under the equity method as of December 31, 2021 and June 30, 2022. The majority of these Affiliates are partnerships with structured interests that define how the Company will participate in Affiliate earnings, typically based upon a fixed percentage of revenue reduced by, in some cases, certain agreed-upon expenses. The partnership agreements do not define a fixed percentage for the Company’s ownership of the equity of the Affiliate. These percentages would be subject to a separate future negotiation if an Affiliate were to be sold or liquidated.

On March 16, 2022, the Company and other parties entered into a Securities Purchase and Merger Agreement with EQT AB (“EQT”), a public company listed on Nasdaq Stockholm (EQT.ST), under which the Company and each of the other owners agreed to sell their respective equity interests in Baring Private Equity Asia (“BPEA”), an Affiliate accounted for by the Company under the equity method, to EQT, in connection with the announced strategic combination of BPEA and EQT. Pursuant to the terms of the agreement, the Company will receive $240.0 million in cash and 28.68 million EQT ordinary shares (25% of which are subject to a six-month lock-up), and will retain a portion of future carry in certain existing funds. The Company acquired its interest in BPEA for $187.5 million in 2016 and, as of June 30, 2022, its carrying value was $135.3 million. BPEA will continue to be included in the Company’s results until closing of the transaction, which is expected to occur in the fourth quarter of 2022, subject to customary closing conditions. The Company’s gain on the transaction will be taxable at closing.