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Fair Value Disclosures | 12 Months Ended
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Dec. 31, 2024
Fair Value Disclosures [Abstract] |
Fair Value Disclosures | Fair Value Disclosures The Company classifies its fair value measurements using a three-tiered fair value hierarchy. The basis of the tiers is dependent upon the various “inputs” used to determine the fair value of the Company’s assets and liabilities. Fair value is considered the value using the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The inputs are summarized in the three broad levels listed below: •Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. •Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. •Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Level 3 Valuation Techniques In the absence of observable market prices, the Company values financial instruments using valuation methodologies applied on a consistent basis. For some investments little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors. Financial instruments for which market prices are not observable include: •Business Combination Earn-Out Liability - The Company’s valuation approach utilized a Monte Carlo simulation to estimate future share prices and the implied earn-out payment discounted using the risk-free rate. •TRA Liability - The Company’s valuation approach utilized a Monte Carlo simulation to estimate future taxable income, share prices, and the implied TRA payments discounted using the liability discount rate which is estimated based on the Company’s credit rating. •AWMS Earn-Out Liability - The Company’s valuation approach utilized a Monte Carlo simulation to estimate future revenue and the implied earn out payment discounted using the liability discount rate which is estimated based on the Company’s credit rating. As of September 30, 2024, the settlement amount became known, which is based on actual revenues received. As such, the use of the Level 3 valuation technique has been discontinued. Additionally, during the fourth quarter of 2024, the AWMS earn-out liability was fully paid. •EEA Earn-Out Liability - The Company’s valuation approach utilized a Discounted Cash Flow approach to determine the fair value using the liability discount rate which is estimated based on the Company’s credit quality. •Envoi Earn-Out Consideration Liability - The Company’s valuation approach utilized a risk-adjusted Discounted Cash Flow approach to determine the fair value using the liability discount rate which is estimated based on the Company’s credit quality rating. •Envoi Earn-Out Growth Consideration Liability - The Company’s valuation approach utilized a Monte Carlo simulation to estimate future revenue and the implied earn out payment discounted using the liability discount rate which is estimated based on the Company’s credit quality rating. •Earn-In Consideration Payable - The Company’s valuation approach utilized a Monte Carlo simulation to estimate future revenue and the implied earn in payment discounted using the liability discount rate which was estimated based on the credit rating of TWMH. On July 14, 2023, the Company amended the Holbein purchase agreement related to the Holbein acquisition discussed in Note 5 (Equity-Based Compensation), which crystallized the contingent earn-in consideration amount and discontinued the use of a Level 3 valuation technique. •Investments in External Strategic Managers - The Company utilized a Discounted Cash Flow approach to determine the fair value of the External Strategic Managers. The discount rate selection for each investment was calibrated using the implied internal rate of return as of the original investment date, adjusted for certain market- and company-specific factors. The selected long-term growth rate for each investment was based on long-term GDP growth rates in the geographic locations of the underlying External Strategic Manager, with consideration for general growth in the asset management industry. •Contingent Consideration Receivable - The Company utilized a Monte Carlo simulation to estimate the future share price of the acquirer of LRA, and the implied contingent consideration discounted using the risk-free rate and the acquirer’s estimated credit spread. •Preferred Stock Tranche Liability - The fair value of the Allianz Tranche Right is determined based on Level 3 inputs using a binomial lattice model. At each node of the binomial lattice model, the decision to exercise the Allianz Tranche Right is determined based on if the value of the Series A Preferred Stock at such node is greater than the right’s strike price of $1,000 per share. At nodes where the Allianz Tranche Right is exercised, the resulting payoff of the right is discounted back to the prior node at the risk-free rate. The fair value of the Allianz Tranche Right is estimated by backward inducting values in the binomial lattice model to the initial node. A probability-weighted assessment is also included as part of the inputs to the valuation of the Allianz Tranche Right. Refer to the valuation methodologies table below for further analysis of Level 3 valuations. The following is a summary categorization of the Company’s financial instruments based on the inputs utilized in determining the value of such financial instruments. Investments at fair value as of December 31, 2024, and December 31, 2023 are presented below:
| As of December 31, 2024
| Level 1 |  | Level 2 |  | Level 3 |  |
(Dollars in Thousands) | Quoted Prices |  | Observable Inputs |  | Unobservable Inputs |  | Total
Assets: |  |  |  |  |  |  |
Mutual funds | $ | 105 |  |  | $ | — |  |  | $ | — |  |  | $ | 105 |
Exchange-traded funds and BDC funds | 118 |  |  | — |  |  | — |  |  | 118 |
Investments – External Strategic Managers (1) | — |  |  | — |  |  | 147,568 |  |  | 147,568 |
Investments – Affiliated Funds (2) | — |  |  | — |  |  | — |  |  | 883 |
Contingent consideration receivable | — |  |  | — |  |  | 1,389 |  |  | 1,389 |
Total | $ | 223 |  |  | $ | — |  |  | $ | 148,957 |  |  | $ | 150,063 |
Liabilities: |  |  |  |  |  |  |
Preferred stock tranche liability | $ | — |  |  | $ | — |  |  | $ | 3,940 |  |  | $ | 3,940 |
Earn-out liabilities | — |  |  | — |  |  | 64,639 |  |  | 64,639 |
TRA liability (3) | — |  |  | — |  |  | 9,378 |  |  | 9,378 |
Earn-in consideration payable | 932 |  |  | — |  |  | — |  |  | 932 |
Total | $ | 932 |  |  | $ | — |  |  | $ | 77,957 |  |  | $ | 78,889 |
(1) The fair value of certain investments within the Company’s Investments - External Strategic Managers are reported on a one-month lag from the fund financial statements due to timing of the information provided by the funds and third-party entities unless information is available on a timelier basis. As a result, any changes in the markets in which our managed funds operate, and the impact market conditions have on underlying asset valuations, may not yet be reflected in reported amounts. (2) Investments in Affiliated Funds are measured at fair value using the net asset value (or its equivalent) practical expedient. The Company’s investments in Affiliated Funds represent interests that do not trade in an active market and are valued using the NAV of each investment company as reported and without adjustment. The Company does not have any commitments to the Affiliated Funds and redemptions are permitted on a monthly basis and require 30 days’ notice. The strategies of the Affiliated Funds primarily focus on near-dated, hard catalyst events that typically involve hostile deals, proposals, minority interest buy-ins, leverage buyouts, activism, spin-offs, recapitalizations, and agreed upon deals. The investments held in the Affiliated Funds are primarily highly liquid and marketable securities. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statement of Financial Position. (3) The Company carries a portion of its TRA liability at fair value equal to the expected future payments under the TRA.
| As of December 31, 2023
| Level 1 |  | Level 2 |  | Level 3 |  |
(Dollars in Thousands) | Quoted Prices |  | Observable Inputs |  | Unobservable Inputs |  | Total
Assets: |  |  |  |  |  |  |
Mutual funds | $ | 75 |  |  | $ | — |  |  | $ | — |  |  | $ | 75 |
Exchange-traded funds | 108 |  |  | — |  |  | — |  |  | 108 |
Investments – External Strategic Managers | 7 |  |  | — |  |  | 164,077 |  |  | 164,084 |
Investments – Affiliated Funds (1) | — |  |  | — |  |  | — |  |  | 1,627 |
Total | $ | 190 |  |  | $ | — |  |  | $ | 164,077 |  |  | $ | 165,894 |
Liabilities: |  |  |  |  |  |  |
Earn-out liabilities | $ | — |  |  | $ | — |  |  | $ | 63,444 |  |  | $ | 63,444 |
TRA liability (2) | — |  |  | — |  |  | 13,233 |  |  | 13,233 |
Earn-in consideration payable | 1,830 |  |  | — |  |  | — |  |  | 1,830 |
Total | $ | 1,830 |  |  | $ | — |  |  | $ | 76,677 |  |  | $ | 78,507 |
(1) Investments in Affiliated Funds are measured at fair value using the net asset value (or its equivalent) practical expedient. The Company’s investments in Affiliated Funds represent interests that do not trade in an active market and are valued using the NAV of each investment company as reported and without adjustment. The Company does not have any commitments to the Affiliated Funds and redemptions are permitted on a monthly basis and require 30 days’ notice. The strategies of the Affiliated Funds primarily focus on near-dated, hard catalyst events that typically involve hostile deals, proposals, minority interest buy-ins, leverage buyouts, activism, spin-offs, recapitalizations, and agreed upon deals. The investments held in the Affiliated Funds are primarily highly liquid and marketable securities. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statement of Financial Position. (2) The Company carries a portion of its TRA liability at fair value based on the expected future payments under the TRA. Reconciliation of Fair Value Measurements Categorized within Level 3 Unrealized gains and losses on the Company’s assets and liabilities carried at fair value on a recurring basis are included within other losses in the Consolidated Statement of Operations. During the year ended December 31, 2024, there was one transfer from Level 3 to Level 1 of the AWMS earn-out liability. During the year ended December 31, 2023, there was one transfer from Level 3 to Level 1 of the earn-in consideration payable. The following table sets forth a summary of changes in the fair value of Level 3 measurements as of December 31, 2024 and December 31, 2023:
| Level 3 Liabilities as of December 31, 2024
(Dollars in Thousands) | TRA liability |  | Earn-out liability |  | AWMS earn-out liability |  | EEA earn-out liability |  | Envoi earn-out consideration liability |  | Envoi earn-out growth consideration liability |  |  |  |  |  |  |  | Preferred stock tranche liability |  | Total
Beginning balance | $ | 13,233 |  |  | $ | 62,380 |  |  | $ | 1,064 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 76,677 |
Issuances | — |  |  | — |  |  | — |  |  | 23,308 |  |  | 7,980 |  |  | 1,020 |  |  |  |  |  |  |  |  | 4,540 |  |  | 36,848 |
Settlements | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  | — |  |  | — |
Net (gains) losses | (3,855) |  |  | (38,532) |  |  | 39 |  |  | 6,563 |  |  | 1,620 |  |  | 300 |  |  |  |  |  |  |  |  | (600) |  |  | (34,465) |
Transfers out of Level 3 | $ | — |  |  | $ | — |  |  | (1,103) |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  | $ | — |  |  | $ | (1,103) |
Ending balance | $ | 9,378 |  |  | $ | 23,848 |  |  | $ | — |  |  | $ | 29,871 |  |  | $ | 9,600 |  |  | $ | 1,320 |  |  |  |  |  |  |  |  | $ | 3,940 |  |  | $ | 77,957 |
| Level 3 Liabilities as of December 31, 2023
(Dollars in Thousands) | TRA Liability |  | Earn-out Liability |  | AWMS earn-out liability |  | Earn-in consideration payable |  | Total
Beginning balance | $ | 13,000 |  |  | $ | 91,761 |  |  | $ | — |  |  | $ | 1,519 |  |  | $ | 106,280 |
Issuances | — |  |  | — |  |  | 2,721 |  |  | — |  |  | 2,721 |
Settlements | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net (gains) losses | 233 |  |  | (29,381) |  |  | (1,657) |  |  | 311 |  |  | (30,494) |
Transfers out of Level 3 | $ | — |  |  | $ | — |  |  | — |  |  | $ | (1,830) |  |  | $ | (1,830) |
Ending balance | $ | 13,233 |  |  | $ | 62,380 |  |  | $ | 1,064 |  |  | $ | — |  |  | $ | 76,677 |
| Level 3 Assets as of December 31, 2024
(Dollars in Thousands) | Investments – External Strategic Managers |  | Contingent Consideration Receivable |  | Total
Beginning balance | $ | 164,077 |  |  | $ | — |  |  | $ | 164,077 |
Realized and Unrealized Gains (Losses) | (16,509) |  |  | (546) |  |  | (17,055) |
Purchases | — |  |  | 1,935 |  |  | 1,935 |
Ending balance | $ | 147,568 |  |  | $ | 1,389 |  |  | $ | 148,957 |
| Level 3 Assets as of December 31, 2023
(Dollars in Thousands) | Investments – External Strategic Managers |  |  |  | Total
Beginning balance | $ | 146,130 |  |  |  |  | $ | 146,130 |
Realized and Unrealized Gains (Losses) | $ | 2,580 |  |  |  |  | $ | 2,580 |
Purchases | $ | 15,367 |  |  |  |  | $ | 15,367 |
Ending balance | $ | 164,077 |  |  |  |  | $ | 164,077 |
Valuation Methodologies for Fair Value Measurements Categorized within Level 3 as of December 31, 2024
(Dollars in Thousands) | Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Ranges |  | Impact to Valuation from an Increase in Input
Level 3 Assets: |  |  |  |  |  |  |  |  |
Investments – External Strategic Managers | $ | 147,568 |  |  | Discounted Cash Flow |  | Discount rate |  | 18.0% -33% |  | Lower
|  |  |  |  | Long-term growth rate |  | 4.0 | % |  | Higher
Contingent consideration receivable | $ | 1,389 |  |  | Monte Carlo |  | Risk-free rate |  | 4.2 | % |  | Higher
|  |  |  |  | Volatility |  | 26.5 | % |  | Lower
|  |  |  |  | Credit spread |  | 0.8 | % |  | Lower
Level 3 Liabilities: |  |  |  |  |  |  |  |  |
TRA liability | $ | 9,378 |  |  | Monte Carlo |  | Volatility |  | 55.0 | % |  | Lower
|  |  |  |  | Correlation |  | 22.5 | % |  | Higher
|  |  |  |  | Cost of debt range |  | 10.2% - 10.9% |  | Lower
|  |  |  |  | Equity risk premium |  | 6.1% - 13.2% |  | Lower
Business Combination earn-out liability | $ | 23,848 |  |  | Monte Carlo |  | Volatility |  | 70.0 | % |  | Higher
|  |  |  |  | Risk-free rate |  | 4.3 | % |  | Higher
EEA earn-out liability | $ | 29,871 |  |  | Discounted Cash Flow |  | EBITDA Discount Rate |  | 16.3 | % |  | Lower
|  |  |  |  | Risk-free rate |  | 4.3 | % |  | Lower
|  |  |  |  | Credit spread |  | 7.9 | % |  | Lower
Envoi earn-out consideration liability | $ | 9,600 |  |  | Discounted Cash Flow |  | Growth rate |  | 10.9 | % |  | Higher
|  |  |  |  | Revenue risk-adjusted discount rate |  | 12.5 | % |  | Lower
|  |  |  |  | Risk-free rate |  | 4.2 | % |  | Lower
|  |  |  |  | Credit spread |  | 7.7 | % |  | Lower
Envoi earn-out growth consideration liability | $ | 1,320 |  |  | Monte Carlo |  | Metric volatility |  | 33.0 | % |  | Lower
|  |  |  |  | Risk-free rate |  | 4.3 | % |  | Lower
|  |  |  |  | Revenue discount rate |  | 12.5 | % |  | Lower
|  |  |  |  | Credit Risk Adjusted Discount Rate |  | 11.9 | % |  | Lower
Preferred stock tranche liability | $ | 3,940 |  |  | Binomial lattice model |  | Volatility |  | 50.0 | % |  | Higher
|  |  |  |  | Probability of option exercise |  | 50.0 | % |  | Higher
|  |  |  |  | Risk-free rate |  | 4.8 | % |  | Lower
|  |  |  |  | Credit spread |  | 7.9 | % |  | Lower
Valuation Methodologies for Fair Value Measurements Categorized within Level 3 as of December 31, 2023
(Dollars in Thousands) | Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Ranges |  | Impact to Valuation from an Increase in Input |  |
Level 3 Assets: |  |  |  |  |  |  |  |  |  |  |
Investments – External Strategic Managers | $ | 164,077 |  |  | Discounted Cash Flow |  | Discount rate |  | 21.5% -29.0% |  | Lower |  |
|  |  |  |  | Long-term growth rate |  | 4.0 | % |  | Higher |  |
Level 3 Liabilities: |  |  |  |  |  |  |  |  |  |  |
TRA liability | $ | 13,233 |  |  | Monte Carlo |  | Volatility |  | 40.0 | % |  | Lower |  |
|  |  |  |  | Correlation |  | 20.0 | % |  | Higher |  |
|  |  |  |  | Cost of debt range |  | 4.1% - 5.1% |  | Lower |  |
|  |  |  |  | Equity risk premium |  | 7.4% - 13.1% |  | Lower |  |
Business Combination earn-out liability | $ | 62,380 |  |  | Monte Carlo |  | Volatility |  | 40.0 | % |  | Higher |  |
|  |  |  |  | Risk-free rate |  | 3.9 | % |  | Higher |  |
AWMS earn-out liability | $ | 1,064 |  |  | Monte Carlo |  | Revenue Volatility |  | 14.0 | % |  | Higher |  |
|  |  |  |  | Risk-free rate |  | 1.1 | % |  | Higher |  |
|  |  |  |  | Revenue Discount Rate |  | 3.5 | % |  | Lower |  |
|  |  |  |  | Liability Discount Rate |  | 5.6 | % |  | Lower |  |
|  |  |  |  | Deferred Payment Liability Discount Rate |  | 5.3 | % |  | Lower |  |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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