Business Context and Reporting Period
Westwood Holdings Group, Inc. filed this Form 8-K on April 1, 2015, to report the completion of the acquisition of Woodway Financial Advisors, A Trust Company ("Woodway"). The transaction closed on April 1, 2015, pursuant to a Merger Agreement signed on January 15, 2015. Woodway merged with Westwood Trust, a wholly-owned subsidiary of Westwood, with Westwood Trust surviving the merger.
Key Financial Metrics and Transaction Details
This filing details the consideration paid for the acquisition rather than standard operating financial metrics like revenue or profit for the reporting period.
- Cash Consideration: $25,331,200 paid on the Closing Date.
- Stock Consideration: 109,712 shares of Westwood common stock, valued at $6,668,800 based on the average closing price over the 15 business days prior to January 15, 2015.
- Total Initial Consideration: Approximately $32,000,000 ($25.33M cash + $6.67M stock).
- Post-Closing Adjustments: Additional cash payments may be required for working capital, outstanding indebtedness, and unpaid transaction expenses.
- Earn-Out Provision: Westwood will pay an earn-out based on annualized revenue from Woodway's post-closing business over the 12-month period following the Closing Date. This amount is capped at $15 million and will be paid 54.84% in cash and 45.16% in Westwood common stock.
Material Changes
The primary material change is the expansion of Westwood's private wealth platform through the acquisition of Woodway Financial Advisors in Houston. The filing notes that the issuance of shares for the initial consideration and the future earn-out is exempt from registration under Section 4(a)(2) of the Securities Act as it does not involve a public offering.
Guidance, Outlook, and Risks
The filing does not provide specific financial guidance or outlook for the combined entity. However, it outlines the following contingencies and future obligations:
- Financial Statements: Westwood will file financial statements of the acquired business pursuant to Rule 3-05 of Regulation S-X within 71 days of the filing date.
- Pro Forma Information: Pro forma financial information pursuant to Article 11 of Regulation S-X will be filed within 71 days.
- Earn-Out Risk: The final earn-out amount is contingent on the revenue performance of the acquired business over the next 12 months and is subject to adjustments for terminated clients or accounts.
Investor Verification Checklist
- Verify the final earn-out calculation once the 12-month Earn-Out Period concludes to determine the total cash and stock obligation.
- Review the upcoming Rule 3-05 financial statements of Woodway to assess the historical financial health of the acquired entity.
- Monitor the 71-day filing deadline for pro forma financial information to understand the projected impact on Westwood's consolidated balance sheet.
- Confirm the exact number of shares issued for the earn-out once the valuation period (last 30 days of the Earn-Out Period) is determined.