Business Context and Reporting Period
Cohen & Company Inc. (Maryland corporation) filed this Form 8-K on January 11, 2011, reporting events occurring between January 11 and January 13, 2011. The Company entered into an amendment to a Purchase Agreement and subsequently completed the acquisition of JVB Financial Holdings, L.L.C. ("JVB"), a Florida limited liability company. JVB is now a wholly owned subsidiary of Cohen Brothers, LLC, a subsidiary of the Company.
Key Financial Metrics and Transaction Details
The acquisition of JVB was completed on January 13, 2011. The total purchase price structure is as follows:
- Cash Consideration: $8.1 million upfront plus an estimated $9.8 million based on JVB's tangible net worth (primarily trading portfolio) as of December 31, 2010.
- Stock Consideration: 313,051 shares of Company common stock valued at $1.4 million.
- Restricted Units: 559,020 restricted membership units in Cohen Brothers valued at $2.5 million.
- Total Estimated Consideration: Approximately $21.8 million (subject to adjustment based on final tangible net worth).
Liquidity and Escrow: An escrow of $484,000 was established for purchase price adjustments and indemnities. Additionally, $384,000 was withheld for potential payment to sellers contingent on achieving a specific revenue target in the first year post-closing.
Material Changes and Unusual Items
Acquisition Completion: The primary material change is the acquisition of JVB, expanding the Company's operations. The transaction required FINRA approval, which was received on January 10, 2011.
Corporate Name Change: The Company announced an intention to change its name from "Cohen & Company Inc." to "Institutional Financial Markets, Inc." and its trading symbol from "COHN" to "IFMI," effective January 24, 2011.
Board Composition: Neil Subin, a former JVB member, was nominated and elected to the Board of Directors. The Company agreed to nominate Mr. Subin (or his replacement) for reelection through December 31, 2012.
Employee Retention: 64% of the total consideration was paid to JVB employee-owners. All former JVB members executed employment contracts. Restricted Units and $2.9 million of cash consideration are subject to forfeiture based on continued employment and performance goals over a three-year period.
Guidance, Outlook, and Risks
Financial Statements: The filing explicitly states that financial statements of the acquired business and pro forma financial information have not been filed with this initial report but will be filed by amendment.
Risks and Contingencies: The purchase price is subject to adjustment based on the final determination of JVB's tangible net worth as of December 31, 2010. A portion of the consideration ($384,000) is contingent on future revenue targets. The Company has agreed to file a registration statement for the resale of 872,071 shares of common stock issued or issuable in the transaction.
Investor Verification Checklist
- Verify the final determination of JVB's tangible net worth as of December 31, 2010, to confirm the final purchase price adjustment.
- Monitor the upcoming amendment to this Form 8-K for the required financial statements of JVB and pro forma financial information.
- Confirm the effective date of the name change to "Institutional Financial Markets, Inc." and symbol change to "IFMI" on January 24, 2011.
- Review the vesting schedules and performance goals associated with the $2.9 million cash and Restricted Units allocated to JVB employees.
- Track the filing of the registration statement for the resale of the 872,071 shares of common stock issued to sellers.