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Acquisitions (Notes) | 12 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | The Company’s consolidated financial statements include the operating results of the acquired businesses from the dates of acquisition. Acquisitions in Fiscal 2019 Carl Kliem S.A. On November 30, 2018, the Company acquired the entire issued and outstanding share capital of Carl Kliem S.A., an independent interdealer broker based in Luxembourg, which provides foreign exchange, interest rate and fixed income products to institutional clients across the European Union (“E.U.”). Carl Kliem S.A. employs approximately 40 people and has more than 400 active institutional clients. This acquisition provides the Company with access to additional European institutional clients that can benefit from the Company’s full suite of financial services and a E.U.-based entity in anticipation of the U.K.’s planned exit from the E.U. The purchase price was $2.1 million of cash consideration, and was equal to the net tangible book value on the closing date less restructuring costs. The Company subsequently renamed Carl Kliem S.A. to INTL FCStone Europe S.A. The final purchase price allocation resulted in cash and cash equivalents of $1.7 million, receivables from clients of $1.1 million, property and equipment of $0.1 million, income tax receivables of $0.1 million, accounts payable and other accrued liabilities of $0.6 million, and payable to broker-dealers, clearing organizations, and counterparties of $0.2 million. The net fair value of the assets acquired exceeded the aggregate cash purchase price; accordingly, the Company recorded a bargain purchase gain of $0.1 million during the year ended September 30, 2019, which is presented within ‘other gains’ in the consolidated income statement. The business activities of INTL FCStone Europe S.A. have been included within the Company’s Securities and Clearing and Execution Services reportable segments. The Company’s consolidated income statement for the year ended September 30, 2019 includes operating revenues and a net loss of $4.2 million and $2.3 million, respectively, for the post-acquisition results of the acquired business. GMP Securities LLC On January 14, 2019 the Company acquired 100% of the U.S.-based broker-dealer GMP Securities LLC (“GMP”), formerly known as Miller Tabak Securities, LLC, an independent, SEC-registered broker-dealer and Financial Industry Regulatory Authority, Inc. (“FINRA”) member. GMP has an institutional fixed-income trading business which deals in high yield, convertible and emerging market debt and makes markets in certain equity securities. This transaction also involved the purchase of GMP’s U.S.-based parent. This acquisition allows the Company to expand its fixed income product offerings to clients and adds new institutional clients who can benefit from the Company’s full suite of financial services. The purchase price was $8.2 million of cash consideration was equal to the final net tangible book value determined as of the acquisition date less $2.0 million. The net fair value of the assets acquired exceeded the aggregate cash purchase price, and accordingly the Company recorded a bargain purchase gain of $5.4 million during the year ended September 30, 2019, which is presented within ‘other gains’ in the consolidated income statement. The Company believes the transaction resulted in a bargain purchase gain due to the Company’s ability to incorporate GMP’s business activities into its existing business structure, and its ability to utilize certain deferred tax assets, including net operating loss carryforwards, and other assets while operating the business that may not have been likely to be realized by the seller nor was contemplated in the purchase price. On May 1, 2019, GMP was merged into the Company’s wholly owned regulated U.S. subsidiary, INTL FCStone Financial. The Company’s consolidated income statement includes the post-acquisition results, which include operating revenues and a net loss before tax of $8.2 million and $2.1 million, respectively, for the year ended September 30, 2019. The acquired businesses are included within the Company’s Securities reportable segment. The following represents the final allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed as of the acquisition date:
(in millions) | Fair Value
Cash and cash equivalents | $ | 1.1 |
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties (1) | 7.7 |
Financial instruments owned, at fair value (2) | 7.1 |
Deferred income taxes | 2.7 |
Property and equipment | 0.7 |
Other assets | 0.7 |
Total fair value of assets acquired | 20.0 |
Accounts payable and other accrued liabilities | 1.9 |
Payable to broker-dealers, clearing organizations, and counterparties | 0.1 |
Financial instruments sold, not yet purchased, at fair value (2) | 4.4 |
Total fair value of liabilities assumed | 6.4 |
Fair value of net assets acquired | 13.6 |
Purchase price | 8.2 |
Bargain purchase gain | $ | 5.4 |
(1) Amount represents the contractual amount of deposits and receivables due from the clearing organization for trading activity as of the acquisition date. (2) Financial instruments owned and sold, not yet purchased, at fair value primarily includes equity securities and high yield, convertible and emerging market fixed income securities. Equity securities have been included within Level 1 of the fair value hierarchy and fixed income securities have been included in Level 2 of the fair value hierarchy as disclosed in Note 4. CoinInvest GmbH and European Precious Metal Trading GmbH On April 1, 2019, the Company’s subsidiary INTL FCStone (Netherlands) B.V. acquired 100% of the outstanding shares of CoinInvest GmbH and European Precious Metal Trading GmbH. Through the websites coininvest.com and silver-to-go.com, CoinInvest GmbH and European Precious Metal Trading GmbH are leading European online providers of gold, silver, platinum, and palladium products to retail investors, institutional investors, and financial advisors. The addition of CoinInvest GmbH and European Precious Metal Trading GmbH to the Company’s global product suite expands its offering, providing clients the ability to purchase physical gold and other precious metals, in multiple forms, and in denominations of their choice, to add to their investment portfolios. The purchase price consisted of cash consideration of $22.0 million, including $11.2 million for the purchase of shareholders loans outstanding with the acquired entities. The cash consideration transferred exceeded the preliminary fair value of the tangible net assets acquired on the closing date by $6.8 million. The Company acquired certain identifiable intangible assets, including website domain names and internally developed software. The Company has engaged a third-party valuation specialist to assist with the valuation of these acquired intangible assets. Based upon the preliminary valuation analysis, the Company has allocated $2.1 million and $2.5 million of the excess consideration over the preliminary fair value of tangible net assets acquired on the closing date to the identifiable domain names and internally developed software, respectively. The remaining excess of $2.2 million was allocated to goodwill. The goodwill represents the synergies expected to be achieved by combining the acquired business with the Company’s existing precious metals offering and the acquired assembled workforce. The internally developed software was assigned to the Physical Commodities reportable segment and will be amortized over a useful life of 5 years. The useful life of the domain names was determined to be indefinite. The Company’s consolidated income statement includes the post-acquisition results, including operating revenues and a net loss before tax of $0.6 million and $0.3 million, respectively, for the year ended September 30, 2019. Operating revenues during the year ended September 30, 2019 include unrealized losses on derivatives held to manage the downside price risk of physical commodities inventory, which is valued at the lower of cost or net realizable value; therefore, inventory was not recorded above its cost basis. The acquired businesses are included within the Company’s Physical Commodities reportable segment. The following represents a preliminary allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed as of the acquisition date:
(in millions) | Fair Value
Cash and cash equivalents | $ | 2.0 |
Receivables from clients (1) | 1.2 |
Receivable from affiliate | 1.1 |
Income tax receivable | 0.1 |
Physical commodities inventory | 9.8 |
Deferred tax assets, net | 0.2 |
Other assets | 1.2 |
Total fair value of tangible assets acquired | 15.6 |
Accounts payable and other accrued liabilities | 0.2 |
Payables to clients | 0.2 |
Total fair value of tangible liabilities assumed | 0.4 |
Fair value of net tangible assets acquired | 15.2 |
Purchase price | 22.0 |
Excess purchase price over fair value of tangible net assets acquired | $ | 6.8 |
Excess purchase price over fair value of tangible net assets acquired allocated to identifiable intangible assets: |
Domain names | $ | 2.1 |
Internally developed software | 2.5 |
Total excess purchase price allocated to identifiable intangible assets | 4.6 |
Remaining excess allocated to goodwill | $ | 2.2 |
(1) Amount represents the contractual amount of receivables due from clients for trading activity, all of which the Company expects to be collectible as of the closing date. Fillmore Advisors, LLC On September 1, 2019, the Company acquired 100% of the U.S.-based trading firm Fillmore Advisors, LLC (“Fillmore”). Fillmore is an independent, SEC-registered broker-dealer firm and FINRA member firm and a leading provider of outsourced trading solutions and operational consulting to institutional asset managers. The firm, headquartered in Park City, Utah, is composed of traders that specialize in global buy-side and sell-side experience. Institutional clients can benefit from Fillmore’s comprehensive product coverage offering for equities, equity-linked, foreign exchange, credit, rates, and commodities. Fillmore will become an extension of the newly established prime brokerage division of the Company’s Securities reportable segment. The purchase price consists of $1.4 million of cash consideration and also includes a contingent earn-out with payments over the eight quarters following the acquisition. The contingent earn-out payments are variable in nature and equal to 50% of Segment Income, as defined in the SPA, for each quarterly period. The fair value of the contingent consideration was estimated at $1.8 million as of the closing date. See Note 4 for fair value measurement considerations. The Company acquired certain identifiable intangible assets related to Fillmore’s client base. Based upon the preliminary valuation analysis, the Company has allocated $0.7 million of the excess consideration over the preliminary fair value of tangible net assets acquired on the closing date to this intangible asset. The remaining excess of $1.9 million was allocated to goodwill. The goodwill represents the synergies expected to be achieved by combining the acquired business with the Company’s existing prime brokerage offering and the acquired assembled workforce. The client base intangible asset and goodwill were assigned to the Securities reportable segment. The client base intangible asset will be amortized over a useful life of 5 years. The following represents a preliminary allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed as of the acquisition date:
(in millions) | Fair Value
Cash and cash equivalents | $ | 0.2 |
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties | 0.3 |
Receivables from clients, net (1) | 0.2 |
Other assets | 0.4 |
Total fair value of tangible assets acquired | 1.1 |
Accounts payable and other accrued liabilities | 0.5 |
Total fair value of tangible liabilities assumed | 0.5 |
Fair value of net tangible assets acquired | 0.6 |
Purchase price (2) | 3.2 |
Excess purchase price over fair value of tangible net assets acquired | $ | 2.6 |
Excess purchase price over fair value of tangible net assets acquired allocated to identifiable intangible assets: |
Client relationships | $ | 0.7 |
Total excess purchase price allocated to identifiable intangible assets | 0.7 |
Remaining excess allocated to goodwill | $ | 1.9 |
(1) Amount represents the contractual amount of receivables due from clients for trading activity, all of which the Company expects to be collectible as of the closing date. (2) Includes the fair value of contingent consideration of $1.8 million. Subsequent Acquisition UOB Bullion and Futures Limited On March 19, 2019, the Company’s subsidiary INTL FCStone Pte Ltd executed an asset purchase agreement to acquire the futures and options brokerage and clearing business of UOB Bullion and Futures Limited, a subsidiary of United Overseas Bank Limited. Closing was conditional upon receiving regulatory approval by the Monetary Authority of Singapore (“MAS”). This acquisition provides the Company access to an established institutional client base and also augments the Company’s global service capabilities in Singapore. The purchase price for the acquired assets is $5.0 million of which $2.5 million was due upon the execution of the asset purchase agreement and is included in ‘other assets’ on the consolidated balance sheet as of September 30, 2019. The remaining $2.5 million was paid to the seller at closing of the acquisition, which occurred on October 7, 2019. The Company will account for this transaction as the acquisition of a business. The initial purchase price allocation for this acquisition is not yet complete. Acquisitions in Fiscal 2018 PayCommerce Financial Solutions, LLC On September 5, 2018, the Company acquired all of the outstanding membership interests of PayCommerce Financial Solutions, LLC (“PCFS”). Subsequent to the acquisition, the Company renamed PCFS to INTL Technology Services, LLC (“ITS”). ITS is a fully accredited Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) Service Bureau provider. This acquisition enables the Company to act as a SWIFT Service Bureau for its 300-plus correspondent banking network, thus providing another important service for delivering local currency, cross-border payments to the developing world. The purchase price was approximately $3.8 million of cash consideration. The initial purchase price allocation resulted in $0.7 million in receivables, $0.8 million in property, plant, and equipment, a $0.5 million equity investment related to a minority interest in the joint venture entity Akshay Financeware, Inc., and $2.2 million in liabilities assumed. Additionally, the Company acquired identifiable, definite-lived client relationship and client list assets that have been assigned a fair value of $1.3 million and a useful life of 5 years. The fair value of the consideration transferred exceeded the initial fair value of identifiable assets acquired and liabilities assumed. The excess of the purchase consideration over the initial fair value of net tangible and identifiable intangible assets acquired of $2.6 million was recorded as goodwill as of September 30, 2018. On February 13, 2019, the Company paid $0.2 million to acquire the majority interest in Akshay Financeware, Inc. The acquisition of the majority interest in Akshay Financeware, Inc. was accounted for as a step acquisition. As a result, the Company changed the classification and measurement of the $0.5 million previously held equity interest and recognized all identifiable assets and liabilities of the wholly-owned entity at fair value. The Company recorded $2.7 million of indefinite-lived intangible assets related to SWIFT licenses held by the acquired entity and an associated deferred tax liability of $0.7 million. Additionally, the Company recorded a measurement period adjustment to goodwill of $1.3 million. As of September 30, 2019, the Company had recorded goodwill of $1.3 million related to the acquisition of PCFS and the step acquisition of Akshay Financeware, Inc. Management believes that the goodwill represents the synergies expected from the incremental revenue that can be realized from combining the technologies acquired with the Company’s pre-existing correspondent banking network. This business has been included within the Company’s Global Payments Segment. The Company’s consolidated income statement for the year ended September 30, 2018 includes the post-acquisition results of ITS, which was immaterial in relation to the Company’s consolidated results. Acquisition in Fiscal 2017 ICAP’s EMEA Oils Broking Business Effective October 1, 2016, the Company’s subsidiary, INTL FCStone Ltd acquired the London-based EMEA oils voice brokerage business of ICAP Plc. The business provides brokerage services across the fuel, crude, and middle distillates markets to commercial and institutional clients throughout EMEA. The terms of the agreement included cash consideration of $6.0 million paid directly to ICAP as well as incentive amounts payable to employees acquired based upon their continued employment. The cash consideration paid to ICAP was dependent upon the number of brokers who accepted INTL FCStone Ltd.’s employment offer. The transaction was accounted for as an asset acquisition in accordance with FASB ASC 805-50 and FASB ASC 350. The cash consideration paid was allocated entirely to the intangible asset recognized related to the client base acquired. The intangible asset was assigned to the Clearing and Execution Services segment and is being amortized over a useful life of 5 years.

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