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Acquisitions | 12 Months Ended
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Dec. 31, 2012
Acquisitions | 4. ACQUISITIONS Fairfax, LLC Effective in September 2010, the Company acquired Fairfax I.S., LLC (“Fairfax”). Fairfax was a FINRA regulated U.S. broker-dealer. The Company subsequently changed its name to CCCM. The purchase price was $297. The Company allocated the purchase price as follows (dollars in thousands):
Restricted cash |  | $ | 100 |
Other assets |  |  | 220 |
Accounts payable |  |  | (23 | )
Purchase price |  | $ | 297 |
Included in other assets, the Company assigned $166 to the value of the broker-dealer license. This was treated as an indefinitely lived intangible asset and was reviewed for impairment annually until it was written off as a component of professional services and other operating expense during 2012 in connection with CCCM’s merger into CCPR. In May 2011, the Company contributed CCCM to CCPRH. In February 2012, PrinceRidge merged CCCM into CCPR. See the discussion about “PrinceRidge” below. JVB Financial Holdings, L.L.C. On September 14, 2010, the Company entered into a Purchase and Contribution Agreement (the “Purchase Agreement”) with JVB Holdings, the sellers listed in the Purchase Agreement (the “Sellers”), and certain employees of JVB Holdings (the “Management Employees”). On January 13, 2011, the Company and the Operating LLC completed the acquisition of JVB Holdings. As contemplated by the Purchase Agreement, the Sellers sold all of the outstanding equity interests in JVB Holdings to the Operating LLC and JVB Holdings became a wholly owned subsidiary of the Operating LLC. The purchase price consisted of $5,646 in cash, 313,051 shares of IFMI Common Stock, and 559,020 restricted membership units in the Operating LLC plus a cash amount equal to JVB Holdings’ tangible net worth. In addition, the Company agreed to pay $2,482 to the Management Employees in three equal installments, one on each of the first three anniversaries of the closing date of the acquisition, contingent upon each individual’s continued employment at each payment date. Upon the closing of the acquisition, an escrow of $484 was established for the payment of any adjustments to the purchase price based on the final tangible net worth of JVB Holdings as of the closing of the transaction and particular indemnities, and $384 was withheld for payment to the Sellers only if a specific revenue target was achieved at the end of the first year of operation following the closing of the transaction. All of the restricted membership units in the Operating LLC were delivered to the Management Employees and vest in three equal installments on each of the first three anniversaries of the closing date, subject to the terms and conditions contained in each employee’s employment agreement. Once vested, the holder of the restricted membership units in the Operating LLC may require that the Operating LLC redeem such restricted membership units for cash or, at the Company’s option, shares of the Common Stock of the Company. The above transaction was accounted for under the acquisition method in accordance with U.S. GAAP. Accordingly, the transaction was accounted for as an acquisition by the Operating LLC of JVB Holdings. The effective date of the transaction with JVB Holdings for accounting purposes was January 1, 2011. JVB Holdings’ results of operations were included in the Company’s statements of operations beginning January 1, 2011. For the year ended December 31, 2012 and 2011, JVB Holdings contributed $23,072 and $18,637, respectively, of revenue and $1,997 and $192, respectively, of net income to the Company. If the acquisition of JVB Holdings had occurred on January 1, 2010, the Company’s 2010 revenue would have been $150,361 and its 2010 earnings would have been $7,727 on a pro forma consolidated basis. The following table summarizes the calculation of the fair value of consideration transferred by the Company to acquire JVB Holdings (dollars in thousands except share and per share data):
Equity consideration: |  |  |  |  |  |  |  |
Shares of IFMI issued (1) |  |  | 313,051 |  |  |  |  |
Multiplied by (2) |  | $ | 4.89 |  |  |  |  |
Value of stock consideration |  | $ | 1,531 |  |  | $ | 1,531 |
Cash consideration (3) |  |  |  |  |  |  | 14,956 |
Contingent payments due (4) |  |  |  |  |  |  | 326 |
Total purchase price |  |  |  |  |  | $ | 16,813 |
(1) | Excluded 559,020 units of the Operating LLC issued to certain JVB Holdings Sellers that remained employees of JVB Holdings. These units vest over a three year period and are treated as compensation for future service and not part of the purchase price. See notes 19 and 20.
(2) | Represented the closing price of IFMI shares on January 13, 2011.
(3) | When closing the transaction, payment was made based on an estimate of JVB Holdings’ tangible net worth. However, a mechanism existed in the contract whereby the Company would owe additional funds or could recapture funds to the extent JVB Holdings’ tangible net worth differed from the amount estimated. The amount of cash consideration represented actual cash paid at closing of $15,044 less $88 receivable from escrowed proceeds for the tangible net worth adjustment. Also, cash consideration excluded $2,482 to be paid over time to the Management Employees. The amount is contingent upon the individuals remaining employees. It is earned ratably over a three-year period. If the employee terminates employment during the three year period, any unearned portion is refundable to the Company. It is treated as compensation for future services and not part of the purchase price.
(4) | Represents contingent payments due to the Sellers based on performance targets. A specific business unit of JVB Holdings was required to earn a minimum amount of revenue within 12 months of the business combination in order for this amount to be due to the owners of JVB Holdings. If that threshold was met, the owners of JVB Holdings would receive an additional payment of $384 which the Company would have treated as contingent consideration. Accordingly, the Company determined the fair value of this arrangement and recorded a liability equal to the fair value as of the date of the business combination. The Company had determined that the fair value of this obligation at the business combination date was $326. The Company carried this liability at fair value and any future adjustments in fair value were recognized in earnings. As of December 31, 2011, the Company carried this liability at $0 on the Company’s consolidated balance sheets and recognized income of $326 for the year ended December 31, 2011, which was included in principal transactions and other income in the Company’s consolidated income statement.
The following table summarizes the amounts of identified assets acquired and liabilities assumed at the acquisition date as of January 1, 2011 (dollars in thousands):
|  | Total Estimated Fair Value as of Acquisition Date |
Assets acquired: |  |  |  |
Cash and cash equivalents |  | $ | 91 |
Receivables from brokers, dealers and clearing agencies (deposits with clearing organizations) |  |  | 100 |
Investments-trading |  |  | 31,935 |
Other assets (1) (2) |  |  | 1,077 |
Liabilities assumed: |  |  |  |
Payables to brokers, dealers, and clearing agencies |  |  | (17,655 | )
Accounts payable and other liabilities |  |  | (1,221 | )
Trading securities sold, not yet purchased |  |  | (4,497 | )
Fair value of net assets acquired |  |  | 9,830 |
Purchase price for net assets acquired |  | $ | 16,813 |
Goodwill (2) (3) |  | $ | 6,983 |
(1) | Other assets are comprised of a purchase accounting adjustment of $166, which represents the estimated value of the broker-dealer license. The intangible asset of $166 related to the broker-dealer license was allocated to the Capital Markets business segment.
(2) | During the measurement period, which ended on January 13, 2012, an adjustment of $30 reducing the fair value of the assets acquired was made with a corresponding adjustment to increase goodwill by $30.
(3) | Goodwill recognized as of the acquisition date was allocated to the Capital Markets business segment.
The allocation of the purchase price to the consolidated assets and liabilities of JVB Holdings resulted in goodwill of $6,983 (which is the difference between the fair value of JVB Holdings’ net assets and the purchase price paid by the Company). The goodwill was allocated to the Capital Markets business segment. PrinceRidge On April 19, 2011, the Operating LLC acquired PrinceRidge. Pursuant to the agreement of the parties, the transaction was effective May 31, 2011. The Operating LLC contributed $45,000, which was comprised of cash, amounts payable, and all of the equity ownership interests in CCCM, a broker-dealer comprising a substantial part of the Operating LLC’s Capital Markets business segment, to PrinceRidge in exchange for an approximate 70% interest (consisting of equity and profit interests) in PrinceRidge. The transaction was subject to final FINRA approval, which was received on October 19, 2011. Upon the closing of the transactions, the limited liability company agreement of PrinceRidge GP and the limited partnership agreement of CCPRH were amended and restated and IFMI, LLC was admitted as a member of PrinceRidge GP and a limited partner in CCPRH. Except as otherwise provided by the limited liability company agreement of PrinceRidge GP, the business and affairs of PrinceRidge GP are managed under the direction of the Board of Managers of PrinceRidge GP. Following the closing of the transactions contemplated by the Contribution Agreement, PrinceRidge GP’s Board of Managers was comprised of five members: three IFMI, LLC designees and two designees by the individuals that were members of PrinceRidge GP prior to the transaction. The transaction was accounted for as an acquisition by the Operating LLC of PrinceRidge. The effective date of the acquisition transaction with PrinceRidge for accounting purposes was May 31, 2011. The results of operations of PrinceRidge are included in the Company’s statements of operations beginning June 1, 2011. PrinceRidge (including the operations of CCCM since its contribution on June 1, 2011) contributed $43,925 and $27,406 of revenue and $386 and $5,003 of net loss attributable to the Company for the years ended December 31, 2012 and 2011, respectively. The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition had occurred on January 1, 2010:
|  | Pro forma Year ended December 31, |
|  | 2011 |  |  | 2010 |
|  | (dollars in thousands) |
Revenue |  | $ | 114,007 |  |  | $ | 150,294 |
Earnings (loss) attributable to IFMI |  | $ | (10,527 | ) |  | $ | 5,097 |
The following table summarizes the amounts of identified assets acquired and liabilities assumed at the acquisition date of May 31, 2011. In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, the Company has one year from the closing of the transaction, referred to as the measurement period, to finalize the accounting for business combinations. The measurement period for the PrinceRidge acquisition expired on May 31, 2012. During the second quarter of 2012, the Company made a measurement period adjustment to the redeemable non-controlling interest with a corresponding adjustment to goodwill related to the acquisition of PrinceRidge. The measurement period adjustment was related to the change in the effective ownership percentage between IFMI and the non-controlling interest. The adjustment reduced goodwill and the redeemable non-controlling interest by $93. The balance sheet at December 31, 2011 was not retrospectively adjusted to reflect these adjustments since the Company believes this revision was not material based on the Company’s assessment performed in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99, Materiality.
|  | Total Estimated Fair Value as of Acquisition Date (provisional) (1) |  |  | Measurement Period Adjustments |  |  | Total Estimated Fair Value as of Acquisition Date (final) |
|  | (dollars in thousands) |
Assets acquired: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 2,149 |  |  | $ | — |  |  | $ | 2,149 |
Receivables from brokers, dealers, and clearing agencies |  |  | 9,382 |  |  |  | — |  |  |  | 9,382 |
Other receivables |  |  | 1,815 |  |  |  | — |  |  |  | 1,815 |
Investments-trading |  |  | 42,407 |  |  |  | — |  |  |  | 42,407 |
Receivables under resale agreements |  |  | 158,688 |  |  |  | — |  |  |  | 158,688 |
Other assets |  |  | 4,730 |  |  |  | — |  |  |  | 4,730 |
Liabilities assumed: |  |  |  |  |  |  |  |  |  |  |  |
Accrued compensation |  |  | (1,725 | ) |  |  | — |  |  |  | (1,725 | )
Accounts payable and other liabilities |  |  | (2,877 | ) |  |  | — |  |  |  | (2,877 | )
Trading securities sold, not yet purchased |  |  | (38,605 | ) |  |  | — |  |  |  | (38,605 | )
Securities sold under agreement to repurchase |  |  | (158,620 | ) |  |  | — |  |  |  | (158,620 | )
Fair value of existing PrinceRidge net assets |  |  | 17,344 |  |  |  | — |  |  |  | 17,344 |
Purchase price (2) (4) |  | $ | 18,502 |  |  | $ | (93 | ) |  | $ | 18,409 |
Excess of purchase price over net fair value |  |  | 1,158 |  |  |  | (93 | ) |  |  | 1,065 |
Less amount allocated to intangible asset (3) |  |  | (166 | ) |  |  | — |  |  |  | (166 | )
Goodwill (4) (5) |  | $ | 992 |  |  | $ | (93 | ) |  | $ | 899 |
(1) | As previously reported in the Company’s 2011 Annual Report on Form 10-K.
(2) | The purchase price represents the fair value of PrinceRidge retained by the members of PrinceRidge other than the Operating LLC:
|  | Total Estimated Fair Value as of Acquisition Date (provisional) |  |  | Measurement Period Adjustments |  |  | Total Estimated Fair Value as of Acquisition Date (final) |
|  | (dollars in thousands) |
Summary Purchase Accounting |  |  |  |  |  |  |  |  |  |  |  |
Net Fair Value Summary |  |  |  |  |  |  |  |  |  |  |  |
Net Fair Value of IFMI Contribution |  | $ | 45,000 |  |  | $ | — |  |  | $ | 45,000 |
Net Fair Value of PrinceRidge immediately prior to IFMI Contribution |  |  | 17,344 |  |  |  | — |  |  |  | 17,344 |
Net Fair Value of PrinceRidge After IFMI Contribution |  |  | 62,344 |  |  |  | — |  |  |  | 62,344 |
Effective Ownership Percentage (as negotiated) |  |  |  |  |  |  |  |  |  |  |  |
IFMI |  |  | 70.3 | % |  |  | 0.02 | % |  |  | 70.5 | %
Non-Controlling Interest |  |  | 29.7 | % |  |  | (0.02 | )% |  |  | 29.5 | %
Total |  |  | 100.0 | % |  |  | — |  |  |  | 100.0 | %
Allocable Net Fair Value of PrinceRidge After IFMI Contribution |  |  |  |  |  |  |  |  |  |  |  |
IFMI |  |  | 43,842 |  |  |  | 93 |  |  |  | 43,935 |
Non-Controlling Interest (purchase price) |  |  | 18,502 |  |  |  | (93 | ) |  |  | 18,409 |
Total |  | $ | 62,344 |  |  | $ | — |  |  | $ | 62,344 |
See note 18 for a description of the redeemable non-controlling interest. The excess of the purchase price over the net fair value of PrinceRidge immediately prior to the IFMI contribution equals $1,065 calculated as the purchase price of $18,409 minus the fair value of PrinceRidge prior to IFMI’s contribution of $17,344. The excess of $1,065 can also be calculated as IFMI’s contribution of $45,000 minus IFMI’s allocable fair value of PrinceRidge subsequent to IFMI’s contribution of $43,935.
(3) | The intangible asset of $166 represented the estimated value of the broker-dealer license, which was allocated to the Capital Markets business segment.
(4) | Goodwill recognized as of the acquisition date was allocated to the Capital Markets business segment. The December 31, 2011 balance of goodwill related to the acquisition of PrinceRidge was not retrospectively adjusted for the measurement period adjustment since the Company believed this adjustment was not material. As of December 31, 2012 and 2011, the goodwill related to the acquisition of PrinceRidge reported on its consolidated balance sheets was $899 and $992, respectively. See note 12.
The allocation of the purchase price to the consolidated assets and liabilities of PrinceRidge results in goodwill of $899. The goodwill is not deductible for tax purposes. In October 2012, the Board of Managers of PrinceRidge GP was reduced to three members, all of whom are designated by the Operating LLC. Following the repurchase of certain outstanding equity interests in PrinceRidge, the Operating LLC owned 98% of PrinceRidge as of December 31, 2012. See notes 17 and 18.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7659399&loc=d3e1392-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4845-128472 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4926-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7659399&loc=d3e1490-128463 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6927-128479 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7008-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7000-128479 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=7659399&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7659399&loc=d3e1383-128463 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7659399&loc=d3e1486-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=7659399&loc=d3e1500-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph 67-73 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4934-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph F4 -Subparagraph e -Appendix F Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7659399&loc=d3e1497-128463 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4922-128472 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 88-16 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141 -Paragraph 51, 52 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6996-128479 + Details
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