INTL FCStone 2011 Annual Report Download - page 21

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INTL FCSTONE INC.Form10K 7
PARTI
ITEM 1 Business
Acquisitions made in the 2010 Fiscal Year
During scal year2010, the Company acquired three separate
business groups, Risk Management Incorporated and RMI
Consulting,Inc., Hanley Trading,LLC and related companies
and Provident Group, which were not considered signi cant on
an individual or aggregate basis. e Company’s consolidated
fi nancial statements include the operating results of each business
from the related dates of acquisition.
RMI Companies
In April,2010, we acquired Risk Management Incorporated
and RMI Consulting,Inc. (the “RMI Companies”). e RMI
Companies provide execution and consulting services to some of
the largest natural gas consumers in North America, including
municipalities and large manufacturing fi rms, as well as major
utilities. In addition to its risk-management and brokerage
services, the RMI Companies also off er a wide range of other
programs, including a proprietary on-line energy procurement
platform. e acquisition added extensive and proven expertise in
the natural gas, electricity and related energy markets where the
RMI Companies have a leading presence, as well as a broad range
of long-term relationships with some major organizations. e
purchase price consisted of an initial payment of $6.0million,
and three contingent payments. e present value of the estimated
total purchase price, including contingent consideration, is
$15.2million as of September30,2011.
Hanley Companies
In July2010, we acquired HGC Trading,LLC; HGC Asset
Management,LLC; HGC Advisory Services,LLC; Hanley
Alternative Trade Group,LLC and HGC Offi ce Services,LLC
(the “Hanley Companies”). e Hanley Companies are engaged
in the business of acting as market makers and dealers in exchange
traded options and futures on soft commodities; executing and
trading derivatives on soft commodities in the OTC market; and
providing related advisory services. e purchase price consisted
of an initial payment of $31.8million, and three contingent
payments. e present value of the estimated total purchase
price, including contingent consideration, is $51.6million as
of September30,2011.
Provident Group
In September2010, the Company acquired certain assets of
Provident Group (“Provident”), a NewYork based investment
banking and advisory fi rm. Under terms of the acquisition
agreement, the Company acquired assets and secured the services
of the individual sellers as set forth in the agreement. Provident
is engaged in the business of providing investment banking and
advisory services. Provident plays a critical role in building out
our comprehensive investment banking and advisory platform,
delivering fi nancing solutions to middle market commercial
customers. e purchase price for the assets and services of the
sellers was capped at $5.0million, which subsequent to closing,
the individual sellers placed into an escrow account and was used
to purchase 214,325outstanding shares of the Company on the
open market. e shares held in escrow for business combinations
will be released to the individual sellers, over a fi ve year period
from the date of closing based on net profi ts, in accordance
with the provisions of the acquisition agreement. However, if
the terms of the agreement are not met, the remaining shares
will be forfeited and the remaining shares and balance in the
shares held in escrow for business combinations balance will be
recorded as treasury stock.
Subsequent Acquisition
On November25,2011, the Company arranged with the trustee
of MF Global’s UK operations to hire more than 50professional
staff from MF Global’s metals trading business based in London.
e Company anticipates that a substantial number of the
customers of this metals trading business will elect to become
customers of the Company. e Company expects to allocate
equity capital to integrate these brokers and their customers into
the Company’s operations, through a combination of increased
regulatory capital to support the accounts of these customers
and increased compensation and related personnel costs for the
brokers. e amount of the required capital will primarily depend
upon the number and balances of the new accounts. As part of
this transaction, INTL FCStone (Europe) has received approval
from the LME to upgrade its LME Category Two membership
to a LME Category One ring dealing membership.
Competition
e international commodities and fi nancial markets are highly
competitive and rapidly evolving. In addition, these markets
are dominated by fi rms with signifi cant capital and personnel
resources that are not matched by the Company’s resources. e
Company expects these competitive conditions to continue in
the future, although the nature of the competition may change