Filed Pursuant to Rule 424(b)(3)
Registration No. 333-269448
PROSPECTUS SUPPLEMENT NO. 8
(to prospectus dated May 30, 2023)
AlTi Global, Inc.
Shares of Class A Common Stock
Warrants to Purchase Class A Common Stock
This prospectus supplement is being filed to update, amend and supplement the information contained in the prospectus dated May 30, 2023, with respect to our Registration Statement on Form S-1 (File No. 333-269448) (as supplemented to date, the “Prospectus”), with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 14, 2023 (the “Form 10-Q”). Accordingly, we have attached the Form 10-Q to this prospectus supplement.
This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement. Capitalized terms used but not defined in this prospectus supplement will have the meanings given to them in the Prospectus.
Our shares of Class A Common Stock are traded on the Nasdaq Capital Market under the symbol “ALTI”. On November 13, 2023, the closing price of the Class A Common Stock was $7.96 per share.
Investing in our securities involves risks. You should carefully read the discussion in “Risk Factors” beginning on page 7 of the Prospectus and in any applicable prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is November 14, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended September 30, 2023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from _________ to _________
Commission file number 001-40103
AlTi Global, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 92-1552220 | ||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
520 Madison Avenue, 26th Floor New York, New York | 10022 | ||||
(Address of Principal Executive Offices) | (Zip Code) | ||||
(212) 396-5904
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Class A common stock, par value $0.0001 per share | ALTI | Nasdaq Capital Market | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||||||||
| Emerging growth company | ☒ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The registrant had outstanding 64,770,908 shares of Class A Common Stock (as defined herein) and 53,219,713 shares of Class B Common Stock (as defined herein) as of November 14, 2023.
Table of Contents
| 77 | |||||
3
Defined Terms
Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed to them in the Amended and Restated Business Combination Agreement, a copy of which is attached to our Annual Report on Form 10-K filed April 17, 2023 (the “Annual Report”).
•“Alvarium” means AlTi Asset Management Holdings 2 Limited, formerly known as Alvarium Investments Limited, an English private limited company.
•“Alvarium Contribution” means the contribution by Cartesian of all the issued and outstanding shares that it holds of AlTi Global Topco to Umbrella.
•“Alvarium Contribution Agreement” means the Contribution Agreement, dated as of January 3, 2023, by and among Cartesian and Umbrella.
•“Alvarium Exchange” means the exchange by each shareholder of AlTi Global Topco of his, her or its (a) ordinary shares of AlTi Global Topco and (b) class A shares of AlTi Global Topco for Class A Common Stock.
•“AlTi” or “Successor” means AlTi Global, Inc., together with its consolidated subsidiaries.
•“Alvarium Shareholders” means the shareholders of Alvarium.
•“Alvarium Tiedemann” means the Company, prior to being renamed “AlTi Global, Inc.”
•“AlTi Global Topco” means AlTi Global Topco Limited, formerly known as Alvarium Topco, an Isle of Man entity which was established by Alvarium and owned by the Alvarium Shareholders.
•“Asset Management” means the Segment that includes the Company's alternatives platform, public and private real estate and co-investment businesses.
•“AUA” means assets under advisement.
•“AUM” means assets under management.
•“Business Combination” means the transactions contemplated by the Business Combination Agreement.
•“Business Combination Agreement” means the Amended and Restated Business Combination Agreement, dated as of October 25, 2022, by and among Cartesian, Umbrella Merger Sub, TWMH, TIG GP, TIG MGMT, Alvarium and Umbrella.
•“Business Combination Earn-out” means the contingent additional equity consideration issued by the Company to the Sponsor and the Target Companies’ legacy equityholders.
•“Business Combination Earn-out Period” means the five years immediately after the Closing Date.
•“Business Combination Earn-out Securities” means the earn-out shares of Class A Common Stock in the Company and Class B Common Units that may be issued or become tradeable upon the achievement of certain stock price-based vesting conditions in accordance with the terms of the Business Combination Agreement.
•“Cartesian” means Cartesian Growth Corporation, a Cayman Islands exempted company, prior to the Business Combination.
•“Cayman Islands Companies Act” means the Cayman Islands Companies Act (as revised) of the Cayman Islands, as the same may be amended from time to time.
4
•“Charter” means the certificate of incorporation of the Company.
•“Class A Common Stock” means the Class A Common Stock, par value $0.0001 per share, of the Company, including any shares of such Class A Common Stock issuable upon the exercise of any warrant or other right to acquire shares of such Class A Common Stock.
•“Class B Common Stock” means the Class B Common Stock, par value $0.0001 per share, of the Company, including any shares of such Class B Common Stock issuable upon the exercise of any warrant or other right to acquire shares of such Class B Common Stock.
•“Class B Units” means the limited liability company interests in Umbrella designated as Class B Common Units in the Umbrella LLC Agreement.
•“Closing” means the closing of the Business Combination.
•“Closing Date” means January 3, 2023, the date on which the Closing occurred.
•“Common Stock” refers to shares of the Class A Common Stock and the Class B Common Stock, collectively.
•“Company,” “our,” “we” or “us” means, prior to the Business Combination, Cartesian, as the context suggests, and, following the Business Combination, AlTi.
•“Condensed Consolidated Statement of Financial Position” refers to the consolidated balance sheet of AlTi Global, Inc.
•“Condensed Consolidated Statement of Operations” refers to the consolidated income statement of AlTi Global, Inc.
•“DGCL” refers to the Delaware General Corporation Law, as amended.
•“dollars” or “$” refers to U.S. dollars.
•“Domestication” means the continuation of Cartesian by way of domestication into a Delaware corporation, with the ordinary shares of Cartesian becoming shares of common stock of the Delaware corporation under the applicable provisions of the Cayman Islands Companies Act and the DGCL; the term includes all matters and necessary or ancillary changes in order to effect such Domestication, including the adoption of the Charter consistent with the DGCL and changing the name and registered office of Cartesian.
•“Employee Stock Purchase Plan” means the AlTi Global, Inc. 2023 Employee Stock Purchase Plan.
•“Equity Incentive Plan” means the AlTi Global, Inc. 2023 Stock Incentive Plan.
•“EU” means European Union.
•“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
•“External Strategic Managers” means global alternative asset managers with whom we partner by making strategic investments in which we actively participate in seeking to leverage the collective resources and synergies of the businesses to facilitate their growth.
•“Federal Reserve” means the Board of Governors of the Federal Reserve System.
•“FOS” means Family Office Service.
•“HNWI” means high net worth individual, being an individual having investable assets of $1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.
5
•“Holbein” means Holbein Partners, LLP.
•“Impact Investing” means investment practices seeking to generate various levels of financial performance together with the generation of positive measurable environmental and social impacts.
•“Managed Funds” means mutual funds, exchange traded funds, hedge funds, private equity, real estate or other funds.
•“Nasdaq” means The Nasdaq Capital Market.
•“NAV” means net asset value.
•“PIPE Investors” means the subscribers that agreed to purchase shares of Class A Common Stock at the Closing pursuant to the private placements, including without limitation, as reflected in the subscription agreements between Cartesian and each of the PIPE Investors.
•“SEC” means the United States Securities and Exchange Commission.
•“Segment” means collectively, or individually, how the Company manages its business including products and services.
•“Sponsor” means CGC Sponsor LLC, a Cayman Islands limited liability company.
•“Target Companies” means, collectively, TWMH, TIG GP, TIG MGMT, and Alvarium.
•“Tax Receivable Agreement” or “TRA” means that certain Tax Receivable Agreement, dated as of January 3, 2023, by and among the Company and the TWMH Members, the TIG GP Members, and the TIG MGMT Members.
•“TIG” means, collectively, the TIG Entities and their subsidiaries and their predecessor entities where applicable.
•“TIG Entities” means, collectively, TIG GP and TIG MGMT and their predecessor entities where applicable.
•“TIG GP” means TIG Trinity GP, LLC, a Delaware limited liability company.
•“TIG GP Members” means the former members of TIG GP.
•“TIG MGMT” means TIG Trinity Management, LLC, a Delaware limited liability company.
•“TIG MGMT Members” means the former members of TIG MGMT.
•“TIH” means Tiedemann International Holdings, AG.
•“TRA Exchange” means the series of transactions in which certain holders of Class B shares exchanged a portion of such Class B units to the Company, in exchange for Class A shares.
•“TRA Recipients” means the TWMH Members, the TIG GP Members and the TIG MGMT Members (including certain of our directors and officers) party to the Tax Receivable Agreement.
•“TWMH” means, collectively, Tiedemann Wealth Management Holdings, LLC, a Delaware limited liability company, and its subsidiaries, and their predecessor entities where applicable.
•“TWMH Members” means the former members of TWMH.
6
•“Warrants” means the warrants, which were initially issued in Cartesian’s initial public offering of its units pursuant to its registration statement on Form S-1 declared effective by the SEC on February 23, 2021, entitling the holder thereof to purchase one of Cartesian’s Class A ordinary shares at an exercise price of $11.50, subject to adjustment.
•“Wealth Management” means the Segment that consists of the Company’s investment management and advisory services, trusts and administrative services, and family office services.
•“Umbrella” means AlTi Global Capital, LLC (formerly known as Alvarium Tiedemann Capital, LLC), a Delaware limited liability company.
•“Umbrella LLC Agreement” means the Third Amended and Restated Limited Liability Company Agreement of AlTi Global Capital, LLC, effective as of July 31, 2023.
•“Umbrella Merger Sub” means Rook MS, LLC, a Delaware limited liability company.
•“US GAAP” means United States generally accepted accounting principles, consistently applied.
7
Available Information
We file annual, quarterly and current reports, proxy statements and other information required by the Exchange Act with the SEC. We make available free of charge on our website (www.alti-global.com) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other filings as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. We also use our website to distribute company information, including assets under management and performance information, and such information as may be deemed material. Accordingly, investors should monitor our website, in addition to our press releases, SEC filings and public conference calls and webcasts.
Also posted on our website in the “Investor Relations” section are the charters for our Audit, Finance and Risk Committee, Environmental, Social, Governance and Nominating Committee, and Human Capital and Compensation Committee, as well as our Corporate Governance Guidelines and Code of Business Conduct governing our directors, officers, and employees. Information on or accessible through our website is not a part of or incorporated into this Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Quarterly Report”) or any other SEC filing. Copies of our SEC filings or corporate governance materials are available without charge upon written request to the Company at its principal place of business. Any materials we file with the SEC are also publicly available through the SEC’s website (www.sec.gov).
No statements herein, available on our website, or in any of the materials we file with the SEC constitute or should be viewed as constituting an offer to sell, or a solicitation of an offer to buy, securities in any jurisdiction.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act, which reflect our current views with respect to, among other things, future events, operations and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “projects,” “intends,” “plans,” “estimates,” “anticipates,” “target” or the negative version of those words, other comparable words or other statements that do not relate to historical or factual matters. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Such forward-looking statements are subject to various risks, uncertainties (some of which are beyond our control) or other assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Some of these factors are described under the headings “Part II. Item 1A. Risk Factors” and “Part 1. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These factors should not be construed as exhaustive and should be read in conjunction with the risk factors and other cautionary statements that are included in this Quarterly Report and in our other periodic filings. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Therefore, you should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
8
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
AlTi Global, Inc.
Condensed Consolidated Statement of Financial Position (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| (Dollars in Thousands, except share data) | As of September 30, 2023 (Successor) | As of December 31, 2022 (Predecessor) | ||||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ | 12,196 | $ | 7,131 | ||||||||||
| Fees receivable, net | 32,098 | 19,540 | ||||||||||||
| Other receivable, net | — | 5,167 | ||||||||||||
| Investments at fair value | 164,660 | 145 | ||||||||||||
| Equity method investments | 27,927 | 52 | ||||||||||||
| Intangible assets, net of accumulated amortization | 501,190 | 20,578 | ||||||||||||
| Goodwill | 409,432 | 25,464 | ||||||||||||
| Operating lease right-of-use assets | 28,184 | 10,095 | ||||||||||||
| Other assets | 47,192 | 3,817 | ||||||||||||
| Assets held for sale | 10,901 | — | ||||||||||||
| Total assets | $ | 1,233,780 | $ | 91,989 | ||||||||||
| Liabilities | ||||||||||||||
| Accounts payable and accrued expenses | $ | 36,914 | $ | 8,073 | ||||||||||
| Accrued compensation and profit sharing | 20,056 | 15,660 | ||||||||||||
| Accrued member distributions payable | 8,049 | 11,422 | ||||||||||||
| Earn-out liability, at fair value | 45,549 | — | ||||||||||||
| TRA liability | 18,042 | — | ||||||||||||
| Delayed share purchase agreement | 1,818 | 1,818 | ||||||||||||
| Earn-in consideration payable | 1,708 | 1,519 | ||||||||||||
| Operating lease liabilities | 29,560 | 10,713 | ||||||||||||
| Debt, net of unamortized deferred financing cost | 172,804 | 21,187 | ||||||||||||
| Deferred tax liability, net | 25,812 | 82 | ||||||||||||
| Deferred income | 323 | — | ||||||||||||
| Other liabilities | 25,207 | 3,662 | ||||||||||||
| Liabilities held for sale | 2,178 | — | ||||||||||||
| Total liabilities | $ | 388,020 | $ | 74,136 | ||||||||||
| Commitments and contingencies (Note 19) | ||||||||||||||
| Shareholders' Equity | ||||||||||||||
Common stock, Class A, $0.0001 par value, 875,000,000 authorized 64,770,908 outstanding | 6 | 3 | ||||||||||||
Common Stock, Class B, $0.0001 par value, 150,000,000 authorized 53,219,713 outstanding | — | 18,607 | ||||||||||||
| Additional paid-in capital | 519,996 | — | ||||||||||||
| Retained earnings (accumulated deficit) | (141,965) | — | ||||||||||||
| Accumulated other comprehensive income (loss) | 3,988 | (1,077) | ||||||||||||
| Total AlTi Global, Inc. shareholders' equity | 382,025 | 17,533 | ||||||||||||
| Non-controlling interest in subsidiaries | 463,735 | 320 | ||||||||||||
| Total shareholders' equity | 845,760 | 17,853 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 1,233,780 | $ | 91,989 | ||||||||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
9
AlTi Global, Inc.
Condensed Consolidated Statement of Operations (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| For the Period | For the Period | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | July 1, 2023 – September 30, 2023 (Successor) | July 1, 2022 – September 30, 2022 (Predecessor) | January 3, 2023 – September 30, 2023 (Successor) | January 1, 2022 – September 30, 2022 (Predecessor) | |||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||
| Management/advisory fees | $ | 45,062 | $ | 18,583 | $ | 138,972 | $ | 57,445 | |||||||||||||||||||||
| Incentive fees | 885 | — | 1,931 | — | |||||||||||||||||||||||||
| Distributions from investments | 2,596 | — | 14,829 | — | |||||||||||||||||||||||||
| Other income/fees | 701 | — | 3,440 | — | |||||||||||||||||||||||||
| Total income | 49,244 | 18,583 | 159,172 | 57,445 | |||||||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||
| Compensation and employee benefits | 38,585 | 12,048 | 134,393 | 37,468 | |||||||||||||||||||||||||
| Systems, technology and telephone | 3,812 | 1,719 | 11,751 | 4,577 | |||||||||||||||||||||||||
| Sales, distribution and marketing | 658 | 241 | 1,752 | 678 | |||||||||||||||||||||||||
| Occupancy costs | 3,223 | 1,295 | 9,755 | 3,399 | |||||||||||||||||||||||||
| Professional fees | 14,398 | 2,397 | 52,741 | 5,480 | |||||||||||||||||||||||||
| Travel and entertainment | 1,082 | 297 | 4,334 | 1,134 | |||||||||||||||||||||||||
| Depreciation and amortization | 3,676 | 583 | 11,848 | 1,790 | |||||||||||||||||||||||||
| General, administrative and other | 7,455 | 381 | 11,426 | 1,044 | |||||||||||||||||||||||||
| Total operating expenses | 72,889 | 18,961 | 238,000 | 55,570 | |||||||||||||||||||||||||
| Total operating income (loss) | (23,645) | (378) | (78,828) | 1,875 | |||||||||||||||||||||||||
| Other Income (Expenses) | |||||||||||||||||||||||||||||
| Impairment loss on goodwill and intangible assets | (153,589) | — | (182,982) | — | |||||||||||||||||||||||||
| Loss on investments | (1,959) | (45) | (3,663) | (20) | |||||||||||||||||||||||||
| Gain (loss) on TRA | 761 | — | (1,331) | — | |||||||||||||||||||||||||
| Loss on warrant liability | — | — | (12,866) | — | |||||||||||||||||||||||||
| Gain on earnout liability | 9,335 | — | 46,212 | — | |||||||||||||||||||||||||
| Interest expense | (3,668) | (131) | (10,300) | (310) | |||||||||||||||||||||||||
| Other expenses | (91) | (60) | (738) | (58) | |||||||||||||||||||||||||
| Income (loss) before taxes | (172,856) | (614) | (244,496) | 1,487 | |||||||||||||||||||||||||
| Income tax (expense) benefit | 1,782 | (82) | 12,578 | (385) | |||||||||||||||||||||||||
| Net income (loss) | (171,074) | (696) | (231,918) | 1,102 | |||||||||||||||||||||||||
| Net loss attributed to non-controlling interests in subsidiaries | (82,353) | (22) | (117,899) | (87) | |||||||||||||||||||||||||
| Net income (loss) attributable to AlTi Global, Inc. | $ | (88,721) | $ | (674) | $ | (114,019) | $ | 1,189 | |||||||||||||||||||||
| Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments | (10,035) | (519) | 7,873 | (1,481) | |||||||||||||||||||||||||
| Other comprehensive income (loss) | 72 | — | (610) | — | |||||||||||||||||||||||||
| Total comprehensive loss | (181,037) | (1,215) | (224,655) | (379) | |||||||||||||||||||||||||
| Other loss attributed to non-controlling interests in subsidiaries | (87,124) | (22) | (114,625) | (87) | |||||||||||||||||||||||||
| Comprehensive loss attributable to AlTi Global, Inc. | (93,913) | (1,193) | (110,030) | (292) | |||||||||||||||||||||||||
| Net Income (Loss) Per Share | |||||||||||||||||||||||||||||
| Basic | $ | (1.40) | $ | (96.19) | $ | (1.89) | $ | 169.69 | |||||||||||||||||||||
| Diluted | $ | (1.40) | $ | (96.19) | $ | (1.89) | $ | 169.69 | |||||||||||||||||||||
| Weighted Average Shares of Class A Common Stock Outstanding | |||||||||||||||||||||||||||||
| Basic | 63,568,646 | 7,007 | 60,174,678 | 7,007 | |||||||||||||||||||||||||
| Diluted | 63,568,646 | 7,007 | 60,174,678 | 7,007 | |||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
10
AlTi Global, Inc.
Condensed Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| (Dollars in Thousands, except share data) | Class A Common Stock | Class B Common Stock | Additional paid-in-capital | Retained earnings (accumulated deficit) | Accumulated other comprehensive income | Non-controlling interest in subsidiaries | Total Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 (Successor) | 62,957,671 | $ | 6 | 55,032,961 | $ | — | $ | 515,000 | $ | (53,244) | $ | 9,182 | $ | 550,857 | $ | 1,021,801 | ||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | (88,721) | — | (82,353) | (171,074) | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | (5,223) | (4,812) | (10,035) | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | 29 | 43 | 72 | |||||||||||||||||||||||||||||||||||||||||||||||
| Share based compensation | — | — | — | — | 2,964 | — | — | — | 2,964 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for business combination | — | — | — | — | 1,377 | — | — | — | 1,377 | |||||||||||||||||||||||||||||||||||||||||||||||
| TRA Exchange | — | — | — | — | — | — | 655 | — | — | — | 655 | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B shares | 1,813,248 | — | (1,813,248) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares - exercise of warrants | (11) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 (Successor) | 64,770,908 | $ | 6 | 53,219,713 | $ | — | $ | 519,996 | $ | (141,965) | $ | 3,988 | $ | 463,735 | $ | 845,760 | ||||||||||||||||||||||||||||||||||||||||
11
AlTi Global, Inc.
Condensed Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| (Dollars in Thousands, except share data) | Class A Common Stock | Class B Common Stock | Additional paid-in-capital | Retained earnings (accumulated deficit) | Accumulated other comprehensive income | Non-controlling interest in subsidiaries | Total Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 3, 2023 (Successor) | 55,388,023 | $ | 6 | 55,032,961 | $ | — | $ | 434,620 | $ | (27,946) | $ | — | $ | 606,973 | $ | 1,013,653 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares to Alvarium Employee Benefit Trust | 2,100,000 | — | — | — | 21,000 | — | — | — | 21,000 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | (114,019) | — | (117,899) | (231,918) | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | 4,323 | 3,550 | 7,873 | |||||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of AHRA call option | — | — | — | — | — | — | — | 154 | 154 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | (335) | (275) | (610) | |||||||||||||||||||||||||||||||||||||||||||||||
| Payment for partner’s tax | — | — | — | — | (998) | — | — | — | (998) | |||||||||||||||||||||||||||||||||||||||||||||||
| AHRA deconsolidation | — | — | — | — | 28,768 | — | — | (28,768) | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Share based compensation | — | — | — | — | 5,095 | — | — | — | 5,095 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for business combination | — | — | — | — | 1,377 | — | — | — | 1,377 | |||||||||||||||||||||||||||||||||||||||||||||||
| TRA Exchange | — | — | — | — | — | — | 655 | — | — | — | 655 | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B shares | 1,813,248 | — | (1,813,248) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares - exercise of warrants | 5,469,637 | — | — | — | 29,479 | — | — | — | 29,479 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 (Successor) | 64,770,908 | $ | 6 | 53,219,713 | $ | — | $ | 519,996 | $ | (141,965) | $ | 3,988 | $ | 463,735 | $ | 845,760 | ||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
12
AlTi Global, Inc.
Condensed Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| (Dollars in Thousands, except share data) | Class A | Class B | Total Members' Capital | Accumulated other comprehensive income (loss) | Non-controlling interest | Total Equity | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 (Predecessor) | $ | 4 | $ | 33,201 | $ | 33,205 | $ | (962) | $ | 368 | $ | 32,611 | ||||||||||||||||||||||||||
| Member capital distributions | — | (2,000) | (2,000) | — | — | (2,000) | ||||||||||||||||||||||||||||||||
| Member tax distributions | — | (1,215) | (1,215) | — | — | (1,215) | ||||||||||||||||||||||||||||||||
| Reallocation of book capital as a result of member transactions | — | 591 | 591 | — | — | 591 | ||||||||||||||||||||||||||||||||
| Net income (loss) for the period | — | (674) | (674) | — | (22) | (696) | ||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for the period | — | — | — | (519) | — | (519) | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 (Predecessor) | $ | 4 | $ | 29,903 | $ | 29,907 | $ | (1,481) | $ | 346 | $ | 28,772 | ||||||||||||||||||||||||||
| (Dollars in Thousands, except share data) | Class A | Class B | Total Members' Capital | Accumulated other comprehensive income (loss) | Non-controlling interest | Total Equity | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | 6 | $ | 39,582 | $ | 39,588 | $ | — | $ | 433 | $ | 40,021 | ||||||||||||||||||||||||||
| Member capital distributions | (1) | (6,299) | (6,300) | — | — | (6,300) | ||||||||||||||||||||||||||||||||
| Member tax distributions | (1) | (6,343) | (6,344) | — | — | (6,344) | ||||||||||||||||||||||||||||||||
| Reallocation of book capital as a result of member transactions | — | 1,774 | 1,774 | — | — | 1,774 | ||||||||||||||||||||||||||||||||
| Net income (loss) for the period | — | 1,189 | 1,189 | — | (87) | 1,102 | ||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for the period | — | — | — | (1,481) | — | (1,481) | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 (Predecessor) | $ | 4 | $ | 29,903 | $ | 29,907 | $ | (1,481) | $ | 346 | $ | 28,772 | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
13
AlTi Global, Inc.
Condensed Consolidated Statement of Cash Flows (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| For the Period | ||||||||||||||
| (Dollars in Thousands) | January 3, 2023 – September 30, 2023 (Successor) | January 1, 2022 – September 30, 2022 (Predecessor) | ||||||||||||
| Cash Flows from Operating Activities | ||||||||||||||
| Net income (loss) | $ | (231,918) | $ | 1,102 | ||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||
| Depreciation and amortization | 11,848 | 1,790 | ||||||||||||
| Amortization of debt discounts and deferred financing costs | (4,106) | — | ||||||||||||
| Unrealized (gain) loss on investments | 3,275 | 108 | ||||||||||||
| Impairment loss on goodwill and intangible assets | 182,982 | — | ||||||||||||
| Gain (loss) on TRA | 1,331 | — | ||||||||||||
| Gain (loss) on Earn-in | — | (121) | ||||||||||||
| (Income) loss on equity method investments | 2,439 | (32) | ||||||||||||
| Restricted unit compensation | — | 1,774 | ||||||||||||
| Fair value of warrant liability | 12,866 | — | ||||||||||||
| Fair value of earn-out liability | (46,212) | — | ||||||||||||
| Deferred income tax (benefit) expense | (16,146) | (82) | ||||||||||||
| Equity-settled share-based payments | 35,090 | — | ||||||||||||
| Unrealized foreign currency (gains)/losses | 444 | — | ||||||||||||
| (Gain) loss from retirement of debt | (73) | — | ||||||||||||
| Forgiveness of debt shareholder loan | — | 619 | ||||||||||||
| Forgiveness of debt of notes receivable from members | 196 | 205 | ||||||||||||
| Fair value of interest rate swap | 33 | (299) | ||||||||||||
| Cash flows due to changes in operating assets and liabilities | ||||||||||||||
| Fees receivable | 7,132 | 2,318 | ||||||||||||
| Other assets | (4,110) | (3,064) | ||||||||||||
| Operating cash flow from operating leases | 838 | 631 | ||||||||||||
| Accounts payable and accrued expenses | (17,654) | 1,521 | ||||||||||||
| Accrued compensation and profit sharing | (4,288) | (3,628) | ||||||||||||
| Other liabilities | (14,718) | 364 | ||||||||||||
| Other operating activities | (250) | — | ||||||||||||
| Net cash provided by (used in) operating activities | (81,001) | 3,206 | ||||||||||||
| (Continued on the following page) | ||||||||||||||
14
AlTi Global, Inc.
Condensed Consolidated Statement of Cash Flows (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| (Continued from the previous page) | For the Period | |||||||||||||
| (Dollars in Thousands) | January 3, 2023 – September 30, 2023 (Successor) | January 1, 2022 – September 30, 2022 (Predecessor) | ||||||||||||
| Cash Flows from Investing Activities | ||||||||||||||
| Cash acquired from consolidation of variable interest entity | — | 471 | ||||||||||||
| Cash payment for acquisition of TWMH and TIG historical equity | (99,999) | — | ||||||||||||
| Receipt of payments of notes receivable from members | 226 | 345 | ||||||||||||
| Loans to members | — | (301) | ||||||||||||
| Cash receipts from the repayment of advances and loans | 305 | — | ||||||||||||
| Purchases of investments | (15,499) | (184) | ||||||||||||
| Distributions from investments | — | 4 | ||||||||||||
| Purchase of TIH shares | — | (382) | ||||||||||||
| Purchase of Holbein | — | (8,097) | ||||||||||||
| Payment of Payout Right | (760) | — | ||||||||||||
| Acquisition of AIMS, net of cash acquired | (3,783) | — | ||||||||||||
| Acquisition of AL Wealth Partners, net of cash acquired | (14,430) | — | ||||||||||||
| Sales of investments | 1,818 | 922 | ||||||||||||
| Sale of fixed assets | 8 | — | ||||||||||||
| Purchases of fixed assets | (269) | (55) | ||||||||||||
| Net cash provided by (used in) investing activities | (132,383) | (7,277) | ||||||||||||
| Cash Flows from Financing Activities | ||||||||||||||
| Member contribution (distribution) | (8,494) | (9,644) | ||||||||||||
| Payments on term notes and lines of credit | (155,489) | (2,170) | ||||||||||||
| Borrowings on term notes and lines of credit | 206,660 | 12,300 | ||||||||||||
| Increase (decrease) in distributions due to former TIG members | (13,419) | — | ||||||||||||
| Cash payment for purchase of shares to be transferred as part of Alvarium share compensation | (4,215) | — | ||||||||||||
| Cash receipts from exercise of Warrants | 5,836 | — | ||||||||||||
| Net cash provided by (used in) financing activities | 30,879 | 486 | ||||||||||||
| Effect of exchange rate changes on cash | 2,782 | 22 | ||||||||||||
| Net increase (decrease) in cash | (179,723) | (3,563) | ||||||||||||
| Cash and cash equivalents at beginning of the period | 194,086 | 8,040 | ||||||||||||
| Cash and cash equivalents at end of the period | $ | 14,363 | $ | 4,477 | ||||||||||
| Reconciliation of balance sheet cash and cash equivalents to cash flows: | ||||||||||||||
| Cash and cash equivalents on balance sheet | $ | 12,196 | $ | 4,477 | ||||||||||
| Cash and cash equivalents included in Assets held for sale (Note 3) | 2,167 | $ | — | |||||||||||
| Cash and cash equivalents, including cash in Assets held for sale | $ | 14,363 | $ | 4,477 | ||||||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||||
| Cash Paid During the Period for: | ||||||||||||||
| Income taxes | 797 | $ | 514 | |||||||||||
| Interest payments on term notes and lines of credit | 10,145 | 370 | ||||||||||||
The accompanying notes are an integral part of these condensed unaudited financial statements.
15
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
(1)Description of the Business
AlTi Global, Inc. is a multi-disciplinary financial services business, with a diverse array of investment, advisory, and administrative capabilities. The Company is a global organization that manages or advises approximately $68.2 billion in combined assets as of September 30, 2023. The Company provides holistic solutions for Wealth Management clients through a full spectrum of Wealth Management services, including discretionary investment management services, non-discretionary investment advisory services, trust services, administration services, and family office services. It also structures, arranges, and provides a network of investors with co-investment opportunities in a variety of alternative assets which are either managed intra-group or by carefully selected managers in the relevant asset class. The Company manages and advises both public and private investment funds.
Amounts disclosed throughout this document for the three and nine month period ended September 30, 2023, relate to AlTi Global, Inc, the Successor company in the business combination. Amounts disclosed throughout this document for the three and nine month period ended September 30, 2022 relate to TWMH, the predecessor company. Due to the Business Combination and the conforming of significant accounting policies, the results of operations, cash flows, and other financial information for the Successor Period are not comparable to the Predecessor periods.
Business Combination
The Registrant was initially incorporated in the Cayman Islands as Cartesian Growth Capital, a special purpose acquisition company. In anticipation of the Business Combination:
•The holders of the equity of the TIG Entities contributed their TWMH and TIG equity to Umbrella making TWMH and the TIG wholly owned subsidiaries of Umbrella.
•Alvarium reorganized such that it became the wholly owned indirect subsidiary of AlTi Global Topco.
•Cartesian SPAC formed Umbrella Merger Sub.
Pursuant to the Business Combination on January 3, 2023:
•The Registrant was redomiciled as a Delaware corporation and changed its name to Alvarium Tiedemann Holdings, Inc. Effective April 19, 2023, Alvarium Tiedemann Holdings, Inc. changed its name to AlTi Global, Inc.
•The Registrant acquired all the outstanding share capital of AlTi Global Topco.
•Umbrella Merger Sub, LLC merged into Umbrella with AlTi Global Capital, LLC, formerly known as Alvarium Tiedemann Capital, LLC as the surviving entity.
•The Company acquired 51% of the equity interests of Umbrella, while the existing TWMH and TIG rollover shareholders hold a 49% economic interest in Umbrella. Umbrella holds 100% of the equity interests of TWMH, TIG, and Alvarium.
16
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
•Through a series of intercompany transactions, AlTi was restructured to reflect the final structure depicted below:
Capital Structure
The Registrant has the following classes of shares and other instruments outstanding:
•Class A Common Stock – Shares of Class A Common Stock that are publicly traded. Class A shareholders are entitled to declared dividends from shares of Class A Common Stock. As of September 30, 2023, the shares of Class A Common Stock represent 55% of the total voting power of all shares.
•Class B Common Stock – Shares of Class B Common Stock that are not publicly traded. Class B shareholders are entitled to distributions declared by the Company’s board of directors. The distributions are paid by Umbrella. As of September 30, 2023, the shares of Class B Common Stock represent 45% of the total voting power of all shares.
•Prior to the Business Combination, the Company issued warrants to purchase shares of Class A Common Stock at a price of $11.50 per share. Throughout the period from January 3, 2023 to March 31, 2023, 428,626 Warrants were exercised. On April 3, 2023, 78,864 Warrants were exercised. On June 7, 2023, the Company closed an offer and consent solicitation and entered into a warrant amendment, pursuant to which the remaining 19,892,387 Warrants were exchanged for 4,864,275 shares of Class A Common Stock. The exercises and exchanges throughout the period from January 3,
17
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
2023 to June 30, 2023 resulted in an increase in Additional Paid-in-Capital amount of $29.5 million. Following the exchanges, none of the Warrants were outstanding as of September 30, 2023.
The following table presents the number of shares of the Registrant that were outstanding as of September 30, 2023:
| As of September 30, 2023 (Successor) | |||||
| Class A Common Stock | 64,770,908 | ||||
| Class B Common Stock | 53,219,713 | ||||
Segments
Our business is organized into two operating segments: Wealth Management and Asset Management. Described below are the segments and the revenue generated by each, which broadly fall into three categories: recurring management, advisory, or administration fees; performance or incentive fees; and transaction fees.
Wealth Management
Within our Wealth Management segment, services provided principally consist of investment management and advisory services, trusts and administrative services, and family office services. The Wealth Management client base includes high net worth individuals, families, single family offices, foundations, and endowments globally. Investment management or advisory fees are the primary source of revenue in our Wealth Management segment. These fees are generally calculated based on a percentage of the value of each client’s billable AUM or AUA (as applicable). As of September 30, 2023, this segment had $48.5 billion in AUM/AUA.
Investment Management and Advisory Services
In our investment management and advisory services teams, we diversify our clients’ portfolios across risk factors, geographies, traditional asset classes such as money markets, equities and fixed income, and alternative asset classes including private equity, private debt, hedge funds, real estate, and other assets through highly experienced third-party managers.
Trusts and Administration Services
The trust and administration services that we provide include entity formation and management, creating or modifying trust instruments and/or administrative practices to meet beneficiary needs, full corporate, trustee-executor, and fiduciary services. We also offer provision of directors and company secretarial services, administering entity ownership of intellectual property rights, advice and administration services in connection with investments in marine and aviation assets, and administering entity ownership of fine art and collectibles.
Family Office Services (FOS)
Family office services are tailored outsourced family office solutions and administrative services which we provide primarily to our larger clients. These services include bookkeeping and back-office services, private foundation management and grantmaking, oversight of trust administration, financial tracking and reporting, cash flow management and bill pay, and other financial services.
18
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
Asset Management
Asset Management services include the alternatives platform and public and private real estate (including co-investment) businesses.
Alternatives Platform
The alternatives platform embodies our legacy TIG business, which is an alternative asset manager and includes our TIG Arbitrage strategy and funds managed by our External Strategic Managers, predominantly for institutional investors. The TIG Arbitrage strategy is an event-driven strategy fund that earns management fees and incentive fees based on the performance of its underlying funds and accounts. The investment strategies of the External Strategic Managers include Real Estate Bridge Lending, European Equities and Asian Credit and Special Situations. Distributions are received from the External Strategic Managers through profit or revenue sharing arrangements that are generated through management and incentive fees based on the performance of the underlying investments. As of September 30, 2023, this platform had $7.7 billion in AUM/AUA.
Co-Investment
Real estate co-investment oversees deal origination, documentation, and structuring from inception to exit for a variety of strategies, including development, income, value-add, and planning. Investors are typically HNWIs, single family offices, and institutional investors. Fees earned include private market, incentive fees, management and advisory fees, and placement and brokerage fees. As of September 30, 2023, our real estate co-investment platform had deployed more than $7.5 billion of capital (inclusive of capital raised for our public and private real estate funds), of which approximately 14% has been invested by legacy Alvarium shareholders and senior employees.
Real Estate - Public and Private
The real estate business includes fund management services as well as co-investment solutions. As of September 30, 2023, this business had approximately $12.0 billion of AUM/AUA.
Fund Management
Our real estate fund management business manages two funds based in the United Kingdom, LXi REIT plc (“LXi”), a publicly traded real estate investment trust, and Home Long Income Fund (“HLIF”) a private fund. Fees from our real estate fund management business are earned from management and advisory services.
Exit from management of Home REIT PLC
Prior to the Business Combination, AlTi RE Limited, formerly known as Alvarium RE Limited (“ARE”), an indirect wholly owned subsidiary of Alvarium, entered into an agreement to sell 100% of the equity of Alvarium Home REIT Advisors Ltd. (“AHRA”), the advisor to the publicly-traded fund Home REIT Plc (“Home REIT”), to a newly formed entity (“NewCo”) owned by the management of AHRA, for aggregate consideration approximately equal to $29 million. The consideration comprised a promissory note maturing December 31, 2023, subject to extension if mutually agreed upon by the parties thereto. Additionally, ARE was granted a call option pursuant to which ARE had the right to repurchase AHRA prior to the repayment of the note for a purchase price equal to the note balance then outstanding thereunder.
Subsidiaries are companies over which a company has the power indirectly and/or directly to control the financial and operating policies so as to obtain benefits. In assessing control for accounting purposes, potential voting rights that are presently exercisable or convertible (including rights which may arise on the exercise of an option) are taken into account. With respect to the AHRA, the above arrangements resulted in AHRA continuing to be consolidated by AlTi after its legal disposal to NewCo. Due to this consolidation, after the
19
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
Business Combination, an intangible asset was recognized related to the investment advisory agreement between AHRA and Home REIT.
On June 30, 2023, the Company entered into a series of agreements that resulted in the deconsolidation of AHRA from the Asset Management segment with immediate effect. The agreements removed ARE’s potential controlling voting rights in AHRA (previously ascertainable on the exercise of the option), and terminated other residual contractual relationships between AHRA and ARE. As a result, these agreements removed AlTi’s control of AHRA from an accounting perspective. AHRA’s results are included in the Company’s Condensed Consolidated Statement of Operations for the period from January 3, 2023 to June 30, 2023, and its accounts were removed from the Consolidated Statement of Financial Position as of June 30, 2023. The deconsolidation resulted in an intangible asset impairment charge of $29.4 million, which is recorded in Impairment loss on goodwill and intangible assets in the Condensed Consolidated Statement of Operations. Assets managed by AHRA, however, have been excluded from the Company’s AUM/AUA metrics since January 3, 2023.
(2)Summary of Significant Accounting Policies
(a)Basis of Presentation
The accompanying unaudited condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries for the period from January 3, 2023 to September 30, 2023 and the Condensed Consolidated Statement of Financial Position of TWMH and its subsidiaries as of December 31, 2022 and the Condensed Consolidated Statement of Operations of TWMH for the period from January 1, 2022 to September 30, 2022. The condensed consolidated financial statements have been prepared under the accrual basis of accounting in accordance with U.S. GAAP and conforms to prevailing practices within the financial services industry, as applicable to the Company. The notes are an integral part of the Company’s condensed consolidated financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the Company’s condensed consolidated financial statements have been included and are of a normal and recurring nature.
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period presentations and disclosures, while not required to be recast, may be reclassified to ensure comparability with current period classifications.
(b)Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make assumptions and estimates that affect the amounts reported in the condensed consolidated financial statements of the Company. The most critical of these estimates are related to (i) the fair value of the investments included in the Billable Assets within AUM/AUA, as this impacts the amount of revenues the Company recognizes each period; (ii) the fair values of the Company’s investments and liabilities with respect to the TRA, Warrants, and Earn-out Securities, as changes in these fair values have a direct impact on the Company’s consolidated net income (loss); (iii) the estimate of future taxable income, which impacts the realizability and carrying amount of the Company’s deferred income tax assets; (iv) the qualitative and quantitative assessments of whether impairments of equity method investments, carried interest vehicles, acquired intangible assets, and goodwill exist; and (v) the determination of whether to consolidate a variable interest entity (“VIE”); and (vi) fair value of assets acquired and liabilities assumed in business combinations, including assumptions with respect to future cash inflows and outflows, discount rates, assets useful lives, market multiples, the allocation of purchase price consideration in the business combination valuation of acquired assets and liabilities, the estimated useful lives of intangible assets, goodwill impairment testing, assumptions used to calculate equity-based compensation, and the realization of deferred tax assets. Inherent in such estimates are judgements relating to future cash flows,
20
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
which include the Company’s interpretation of current economic indicators and market valuations, and assumptions about the Company’s strategic plans with regard to its operations. While management believes that the estimates utilized in preparing the condensed consolidated financial statements are reasonable and prudent, actual results could differ materially from those estimates.
(c)Consolidation
The Company consolidates those entities in which it has a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. The Company determines whether an entity should be consolidated by first evaluating whether it holds a variable interest in the entity. Entities that are not VIEs are further evaluated for consolidation under the voting interest model (“VOE” model).
An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.
Fees that are customary and commensurate with the level of services provided by the Company, and where the Company does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, are not considered a variable interest. The Company factors in all economic interests, including proportionate interests through related parties, to determine if fees are considered a variable interest. Where the Company’s interests in funds are primarily management fees and insignificant direct or indirect equity interests through related parties, the Company is not considered to have a variable interest in such entities.
The Company consolidates all VIEs for which it is the primary beneficiary. An entity is determined to be the primary beneficiary if it holds a controlling financial interest, which is defined as having (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company does not consolidate any of the products it manages as it does not hold any direct or indirect interests in such entities that could expose the Company to an obligation to absorb losses of an entity or the right to receive benefits from an entity that could potentially be significant to such entities.
The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and continuously reconsiders that conclusion. In evaluating whether the Company is the primary beneficiary, the Company evaluates its direct and indirect economic interests in the entity. The consolidation analysis is generally performed qualitatively, however, if the primary beneficiary is not readily determinable, a quantitative analysis may also be performed. This analysis requires judgment, including: (1) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (2) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, (3) determining whether two or more parties’ equity interests should be aggregated, (4) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity and (5) evaluating the nature of relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE and therefore would be deemed the primary beneficiary.
21
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
Under the voting interest model, the Company consolidates those entities it controls through a majority voting interest. The Company will generally not consolidate those voting interest entities where a single investor or simple majority of third-party investors with equity have the ability to exercise substantive kick-out or participation rights.
(d)Revenue Recognition
Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. A five-step framework is utilized that requires an entity to: (i) identify the contract(s) with a customer, which includes assessing the collectability of the consideration to which it will be entitled in exchange for the goods or services transferred to the customer, (ii) identify the performance obligation in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligation in the contract, and (v) recognize revenue when the entity satisfies a performance obligation.
Management/Advisory Fees
Revenues from contracts with customers consist of investment management, trustee, and custody fees. The Company recognizes revenue at the time of transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue recognized is calculated based on contractual terms, including the transaction price, whether a distinct performance obligation has been satisfied and control is transferred to the customer, and when collection of the revenue is assessed as probable.
Investment management, trustee and custody fees are recognized over the period in which the investment management services are performed, using a time-based output method to measure progress. The amount of revenue varies from one reporting period to another as levels of AUA change (from inflows, outflows, and market movements) and the number of days in the reporting period change.
For services provided to each client account, the Company charges an investment management fee, inclusive of custody and/or trustee fees, based on the fair value of the AUA of such account representing a single performance obligation. For assets for which valuations are not available on a daily basis, the most recent valuation provided to the Company is used as the fair value for the purpose of calculating the quarterly fee. In certain circumstances, fixed fees are charged to customers on a monthly basis. The nature of the Company’s performance obligation is to provide a series of distinct services in which the customer receives the benefits of the services over time. The Company’s performance obligation is satisfied at the end of each month or quarter, as applicable to the contract with the customer.
Fees are charged on a mixture of methodologies that include quarterly in arrears based upon the market value at the end of the quarter, quarterly based on the average daily balance, or monthly. Receivable balances from contracts with customers are included in the fees receivable line in the Condensed Consolidated Statement of Financial Position. There were no write-offs of such fees receivable as of September 30, 2023, and December 31, 2022.
Our FOS business is also included in this line item. FOS fees are generally structured to reflect an annual agreed upon fee or they can be structured on a project/time-based fee. FOS fees are typically billed quarterly in arrears. We also generate FOS project/time-based fees arising from accounting,
22
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
administration fees, set up, the Foreign Account Tax Compliance Act (“FATCA”), and other non-investment advisory services.
Incentive Fees
The Company is entitled to incentive fees if targeted returns have been achieved in accordance with customer contracts. Incentive fees are calculated using a percentage of net profit from the amount the customers earn. Incentive fees are variable consideration that is generally calculated as applicable to the contract with the customer. We recognize our incentive fees when it is no longer probable that a significant reversal of revenue will occur. Our incentive fees are not subject to clawback provisions.
Distributions from Investments
The Company has equity interests in three entities pursuant to which it is entitled to distributions based on the terms of the respective arrangements. Distributions from each investment will be recorded upon receipt of the distribution. These distributions are recurring under investment agreements and are structured as either a profit or revenue share of the investment’s management and incentive fees.
The Company generates arrangement fees in its co-investment division by arranging private debt or equity financing, generally in connection with an acquisition or an investment. Arrangement fees are typically 50 to 100 basis points of equity value contributed into a transaction. Acquisition fees are typically payable where there are no agency fees or where there is an off-market transaction sourced by the team. Such acquisition fees are usually in the range of 50 to 100 basis points of the purchase price of the relevant acquisition. The equity structures are long-term (five to ten years) closed-ended structures with fees normally ranging between 50 and 175 basis points of the equity value committed or drawn. The debt structure terms are generally between 12 and 36 months. The investment adviser, general partner or other entity entitled to fees in respect of each of our co-investments receives such fees either monthly, quarterly or annually.
(e)Cash and Cash Equivalents
Cash and cash equivalents primarily consist of cash and money market funds. Cash balances maintained by consolidated VIEs are not considered legally restricted and are included in cash and cash equivalents on the Condensed Consolidated Statement of Financial Position.
Cash was held across our US and international markets. A majority of cash in the U.S. was held in checking accounts within the credit facility bank group, including at a major global financial institution which management believes is creditworthy.
(f)Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents consist of balances that are restricted as to withdrawal or usage.
As of September 30, 2023 restricted cash and cash equivalents amounted to $3.4 million and are included in the line item Cash and cash equivalents on the Condensed Consolidated Statement of Financial Position. These amounts represent the level of liquidity to be maintained by Company’s certain subsidiaries to meet regulatory requirements. Failing to meet the requirement could lead to censure, fines and ultimately a loss of license.
23
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
(g)Compensation and Employee Benefits
Cash-Based Compensation
Compensation and benefits consist of salaries, bonuses, commissions, benefits and payroll taxes. Compensation is accrued over the related service period.
Equity-Based Compensation
Equity-based compensation awards are reviewed to determine whether such awards are equity-classified or liability-classified. Compensation expense related to equity-classified awards is equal to their grant-date fair value and generally recognized on a straight-line basis over the awards’ requisite service period. When certain settlement features require an award to be liability-classified, compensation expense is recognized over the service period, and such amount is adjusted at each statement of financial position date through the settlement date to the then current fair value of such award.
The Company recognizes equity-based award forfeitures in the period they occur as a reversal of previously recognized compensation expense. The reduction in compensation expense is determined based on the specific awards forfeited during that period. Furthermore, the Company recognizes all excess tax benefits and deficiencies as income tax benefit or expense in the Condensed Consolidated Statement of Operations.
(h)Foreign Currency and Transactions
The Company has multiple functional currencies across various consolidated entities. All functional currencies that are not the U.S. dollar are converted upon consolidation at the reporting date. Monetary assets and liabilities denominated in foreign currency are remeasured into U.S. dollars at the closing rates of exchange on the date of the Condensed Consolidated Statement of Financial Position. Non-monetary assets and liabilities denominated in foreign currencies are remeasured into U.S. dollars using the historical exchange rate. The profit or loss arising from foreign currency transactions is remeasured using the rate in effect on the date of the relevant transaction. Gains and losses on transactions denominated in foreign currencies due to changes in exchange rates are recorded within Foreign currency translation adjustments. Gains and losses on certain financing transactions which the Company intends to repay in the foreseeable future are recorded in net income.
(i)Income Taxes
The Company accounts for income taxes under the asset and liability method in accordance with ASC 740. Under this method, deferred tax assets and liabilities are determined based on differences between the condensed consolidated financial statement carrying amounts and tax bases of assets and liabilities and operating loss and tax credit carryforwards and are measured using the enacted tax rates that are expected to be in effect when the differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Condensed Consolidated Statement of Operations in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to an amount that, in the opinion of management, is more likely than not to be realized, meaning the likelihood of realization is greater than 50%.
The Company accounts for uncertain tax positions by reporting a liability for unrecognizable tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
24
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
(j)Other assets
Other assets include prepaid expenses, miscellaneous receivables, current income taxes receivable, fixed assets, and software licenses. The Company amortizes assets over their respective useful lives, as applicable.
(k)Investments
Investments in Debt Securities. The Company classifies debt investments as held-to-maturity or trading based on the Company’s intent and ability to hold the debt security to maturity or its intent to sell the security. The Company does not have any held-to-maturity debt investments.
Trading securities are those investments that are purchased principally for the purpose of selling them in the near term. Trading securities are carried at fair value on the Condensed Consolidated Statement of Financial Position with changes in fair value recorded in nonoperating income (expense) on the Condensed Consolidated Statement of Operations.
Investments in Equity Securities. Equity securities are generally carried at fair value on the Condensed Consolidated Statement of Financial Position in accordance with ASC 321, “Investments – Equity Securities.” Changes in fair value are recorded in net gains (losses) in the Condensed Consolidated Statement of Operations.
Equity Method. The Company applies the equity method of accounting for equity investments where the Company does not consolidate the investee but can exert significant influence over the financial and operating policies of the investee. The evaluation of whether the Company exerts control or significant influence over the financial and operational policies of its investees is based on the facts and circumstances surrounding each individual investment. The Company’s share of the investee’s underlying net income or loss is recorded as net gain (loss) on investments within current period earnings. The Company’s share of net income of the investee is recorded based upon the most current information available at the time, which may precede the date of the Condensed Consolidated Statement of Financial Position. Due to the nature and size of its investees, the Company has adopted a lag in reporting for certain equity method investees for which the Company cannot reliably obtain financial information on a regular basis. Distributions received reduce the Company’s carrying value of the investee and the cost basis if deemed to be a return of capital. For certain investments, the Company may apply the alternative fair value option to the investment at initial measurement. The fair value measurement of investments in which the option is elected will be measured in accordance with ASC 825.
For equity method investments and nonmarketable investments, impairment evaluation considers qualitative factors, including the financial conditions and specific events related to an investee, which may indicate the fair value of the investment is less than the carrying value. For held-to-maturity investments, impairment is evaluated using market values, when available, or the expected cash flows of the investment.
(l)Leases
The Company accounts for its leases in accordance with ASC 842, Leases and recognizes a lease liability and right-of-use asset in the Condensed Consolidated Statement of Financial Position for contracts that it determines are leases or contain a lease. The Company evaluates leases at their inception to determine if they are to be accounted for as an operating lease or a finance lease. A lease is accounted for as a finance lease if it meets one of the following five criteria: (i) the lease has a purchase option that is reasonably certain of being exercised, (ii) the present value of the future cash flows is substantially all of the fair market value of the underlying asset, (iii) the lease term is for a significant portion of the remaining
25
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
economic life of the underlying asset, (iv) the title to the underlying asset transfers at the end of the lease term, or (v) if the underlying asset is of such a specialized nature that it is expected to have no alternative uses to the lessor at the end of the term. Leases that do not meet the finance lease criteria are accounted for as an operating lease. At the inception of a finance lease, an asset and finance lease obligation are recorded at an amount equal to the lesser of the present value of the minimum lease payments and the property’s fair market value. Finance lease obligations are classified as either current or long-term based on the due dates of future lease payments, net of interest. The Company’s lease portfolio primarily consists of operating leases for office space in various countries around the world. The Company also has operating leases for office equipment and vehicles, which are not significant. The Company does not separate non-lease components from lease components for its office space and equipment operating leases and instead accounts for each separate lease component and its associated non-lease component as a single lease component. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. The Company’s right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term. Lease right-of-use assets include initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives. Absent an implicit interest rate in the lease, the Company uses its incremental borrowing rate, adjusted for the effects of collateralization, based on the information available at commencement in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
The Company does not recognize a lease liability or right-of-use asset on the balance for short-term leases. Instead, the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option in the same manner as all other leases.
(m)Intangible assets other than goodwill, net
The Company recognized certain finite-lived intangible assets as a result of the Business Combination. The Company’s finite-lived intangible assets consist of Trade Names, Customer Relationships, Investment Management Agreements, and Backlog. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives.
The Company tests finite-lived intangible assets for impairment if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. The Company evaluates impairment by comparing the estimated fair value attributable to the intangible asset with its carrying amount. If an impairment exists, the Company adjusts the carrying value to equal the fair value by taking a charge through earnings.
The Company also recognized certain indefinite-lived intangible assets as a result of the Business Combination consisting of certain investment management agreements. These indefinite-lived intangibles are not subject to amortization, but are evaluated for impairment at least annually. In assessing its indefinite-lived intangible assets for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is unlikely that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is unlikely that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company is not required to perform any additional tests in assessing the
26
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
asset for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine if the fair value of an indefinite-lived intangible asset is less than its carrying value. If through this quantitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired. If the Company concludes that the fair value of an indefinite-lived intangible asset is less than its carrying value, an impairment loss will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.
(n)Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of the tangible and intangible assets acquired and the liabilities assumed. Under ASC 350, Intangibles—Goodwill and Other, goodwill is not amortized, but rather is subject to an annual impairment test. Goodwill represents the excess of consideration over identifiable net assets of an acquired business. Goodwill is allocated at a reporting unit level. The Company has two reporting units, Asset Management and Wealth Management, and tests goodwill annually for impairment at each reporting unit. If, after assessing qualitative factors, the Company believes that it is more-likely-than-not that the fair value of the reporting unit inclusive of goodwill is less than its carrying amount, the Company will perform a quantitative assessment to determine whether an impairment exists. If an impairment exists, the Company adjusts the carrying value of goodwill so that the carrying value of the reporting unit is equal to its fair value by taking a charge through earnings. The Company also tests goodwill for impairment in other periods if an event occurs or circumstances change such that it is more-likely-than-not to reduce the fair value of the reporting unit below its carrying amount. As of September 30, 2023, the Company recognized goodwill impairment charges of $153.6 million for the Asset Management segment in Impairment loss on goodwill and intangible assets in the Condensed Consolidated Statement of Operations. The Company concluded that the estimated fair value of the Wealth Management reporting unit was greater than its carrying value, and as such, no impairment charge was required. See Note 13 (Goodwill, net).
(o)Fixed Assets, Net
Fixed assets are recorded at cost, less accumulated depreciation and amortization, and are included in the “Other assets” line item in the Company’s Condensed Consolidated Statement of Financial Position. Fixed assets are depreciated or amortized on a straight-line basis, with the corresponding depreciation and amortization expense included within general, administrative and other expenses in the Company’s Condensed Consolidated Statement of Operations. The estimated useful life for leasehold improvements is the lesser of the remaining lease term and the life of the asset, while other fixed assets are generally depreciated over a period of two to seven years. Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
(p)Debt Obligations, Net
The Company’s debt obligations are recorded at amortized cost, net of any debt issuance costs, discounts and premiums. Debt issuances costs are deferred and along with discounts and premiums are amortized to interest expense in the Condensed Consolidated Statement of Operations over the life of the related debt instrument using the effective interest method. Unamortized debt issuance costs, discounts and premiums are written off to net losses on retirement of debt in the Condensed Consolidated Statement of Operations when the Company prepays borrowings prior to maturity.
27
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
(q)Tax Receivable Agreement
The TRA liability represents amounts payable to certain pre-Business Combination equity holders of the Company. The portion of the TRA liability related to the Business Combination is deemed contingent consideration payable to the previous owners and is carried at fair value, with changes in fair value reported within other gain (loss) in the Condensed Consolidated Statement of Operations. Future exchanges of Class B Units for shares of Class A Common Stock may increase the TRA liability. Those increases will be carried at a value equal to the expected future payments due under the TRA. On August 31, 2023, holders of shares of Class B Common Stock exchanged a portion of such Class B Units to the Company, in exchange for shares of Class A Common Stock on a 1:1 basis totaling an amount equal to $7.31 multiplied by the total number of shares of Class B Common Stock exchanged at the time of the transaction. For future increases due to exchanges the Company will record an initial estimate of future payments under the TRA portion as a decrease to additional paid-in capital in the Condensed Consolidated Statement of Financial Position. Subsequent adjustments to the liability for future payments under the TRA related to changes in estimated future tax rates or state income tax apportionment are recognized through current period earnings in the Condensed Consolidated Statement of Operations.
(r)Warrant Liability
The Company evaluated the Warrants in accordance with ASC 815-40 and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative, the Warrants are recorded as derivative liabilities on the balance sheet and measured at fair value at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in Other Income/(Expenses) in the Condensed Consolidated Statement of Operations in the period of change. Prior to the Business Combination the Sponsor held private warrants that were contributed to the Company and legally cancelled. The contribution and cancellation of these warrants resulted in derecognition of the private warrants and accounted for in additional paid in capital as of January 3, 2023. The Company subsequently issued new warrants with terms identical to those of the public warrants to the Target Companies’ selling shareholders classified as derivative liabilities. On June 7, 2023, the Company closed an offer and consent solicitation and entered into a warrant amendment, pursuant to which the remaining Warrants were exchanged. In total, the Warrants were exchanged for approximately 4,962,221 shares of Class A Common Stock. See Note 1 (Description of the Business). Following the exchange, none of the Warrants remain outstanding as of September 30, 2023.
(s)Business Combination Earn-out Liability
The Business Combination Earn-out Securities, comprised of 3.3 million Class A Shares, 7.1 million shares of Class B Common Stock, and 7.1 million Class B Units (one Class B share and one Class B Unit comprising a Paired Interest, as described in Note 3 (Business Combination)), are payable to the Sponsor and the selling shareholders of TWMH, TIG, and Alvarium upon the achievement of certain vesting conditions in accordance with the terms of the Business Combination Agreement. Upon the Company’s Class A Share price meeting a volume-weighted average price threshold of $12.50 for 20 out of 30 trading days within five years of the Closing, fifty percent of the Business Combination Earn-out Securities will vest and be issued in settlement of the Business Combination Earn-out Liability (or, in the case of the Sponsor, which shares have already been issued, will no longer be subject to forfeiture). Upon the Company’s Class A Share price meeting a volume-weighted average price threshold of $15.00 for 20 out of 30 trading days within five years of the Closing, the remaining fifty percent of the Business Combination Earn-out Securities will vest and be issued. If, within five years of the Closing, a change of control event occurs (as defined in the Business Combination Agreement), any Business Combination Earn-out Securities not previously issued will be deemed to have vested and will be issued (or, in the case of the Sponsor, which shares have already been issued, will no longer be subject to forfeiture). The Company evaluated the terms of the Business Combination earn-out agreement in accordance with ASC 815-40 and concluded that the Business Combination Earn-out Securities are precluded from being
28
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
accounted for as a component of equity. Since the Business Combination earn-out agreement meets the definition of a derivative, the Business Combination Earn-out Securities are recorded in Earn-out liability, at fair value as a derivative liability on the Condensed Consolidated Statement of Financial Position and measured at fair value at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in Gain (loss) on earn-out liability in the Condensed Consolidated Statement of Operations and in Fair value of earn-out liability in the Condensed Consolidated Statement of Cash Flows in the period of change.
(t)AIMS Earn-out Liability
On August 2, 2023, (the “AIMS Acquisition Date”), the Company acquired the remaining 70% of the issued and outstanding ownership and membership interests of Alvarium Investment Managers (Suisse) SA (“AIMS”), increasing its interest from 30% to 100% (the “AIMS Acquisition”). The AIMS Acquisition was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred was $16.8 million. The total purchase consideration transferred consists of cash consideration, equity consideration, deferred cash consideration, earn-out consideration (“AIMS earn-out liability”), and the payment of assumed liabilities. As of September 30, 2023, the AIMS earn-out liability of $2.7 million is reported in Other liabilities in the Condensed Consolidated Statement of Financial Position. Since the AIMS earn-out liability meets the definition of a derivative, it is recorded at fair value as a derivative liability on the Condensed Consolidated Statement of Financial Position and measured at fair value at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value to be recognized in Gain (loss) on earn-out liability in the Condensed Consolidated Statement of Operations and in Fair value of earn-out liability in the Condensed Consolidated Statement of Cash Flows in the period of change. See Note 3 (Business Combinations and Divestiture) for further information.
(u)Delayed share purchase agreement
Prior to the Business Combination, TWMH entered into an agreement to purchase a remaining non-controlling interest in its consolidated subsidiary representing 51.1% of shares in TIH. This arrangement was agreed upon for consideration of $2.1 million in cash and $1.2 million in Class A Common Stock. As of September 30, 2023 and December 31, 2022, the delayed share purchase agreement liability is reported as $1.8 million and $1.8 million, respectively. As of September 30, 2023 and December 31, 2022, the portion of the Delayed share purchase agreement reported in Accrued compensation and profit sharing is $0.3 million and $0.4 million, respectively. The stock purchase price has been recognized in the Condensed Consolidated Statement of Financial Condition as additional paid-in capital. As of September 30, 2023 and December 31, 2022, the portion of the delayed share purchase agreement reported in Additional paid-in capital is reported as $1.2 million and $0.0 million, respectively.
(v)Non-controlling Interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Company’s equity. Non-controlling interests consist of the amount of those interests at the date of the original Business Combination and the minority’s share of changes in equity since the date of the Business Combination. The proportions of profit and loss and changes in equity allocated to the owners of the parent and to the non-controlling interests are determined on the basis of existing ownership interests.
(w)Derivative Financial Instruments
The Company accounts for derivative financial instruments in accordance with ASC 815, Derivatives and Hedging, which requires the Company to recognize all derivative instruments on the Condensed Consolidated Statement of Financial Position as either assets or liabilities and to measure them at fair value each reporting period unless they qualify for a normal purchases and normal sales exception. Normal purchases and normal sales contracts are those that provide for the purchase or sale of something
29
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold by a reporting entity over a reasonable period in the normal course of business.
(x)Segment Reporting
Our business is organized into two operating segments: Wealth Management and Asset Management. Described below are the segments and the revenue generated by each, which broadly fall into three categories: recurring management, advisory, or administration fees; performance or incentive fees; and transaction fees.
Wealth Management
Our Wealth Management services principally consist of investment management and advisory services, trusts and administrative services, and family office services. Our Wealth Management client base includes HNWIs, families, single family offices, foundations, and endowments globally. Investment management or advisory fees are the primary source of revenue in our Wealth Management segment. These fees are generally calculated based on a percentage of the value of each client’s AUM or AUA (as applicable). As of September 30, 2023, this segment had $48.5 billion in AUM/AUA.
Investment Management and Advisory Services
In our investment management and advisory services teams, we diversify our clients’ portfolios across risk factors, geographies, and asset classes including private equity, private debt, hedge funds, real estate, and other assets through highly experienced third-party managers, who may be hard to access.
Trusts and Administration Services
The trusts and administration services that we provide include entity formation and management, creating or modifying trust instruments and/or administrative practices to meet beneficiary needs, full corporate, trustee-executor, and fiduciary services. We also offer provision of directors and company secretarial services, administering entity ownership of intellectual property rights, advice and administration services in connection with investments in marine and aviation assets, and administering entity ownership of fine art and collectibles.
Family Office Services
Our family office services are tailored outsourced family office solutions and administrative services which we provide primarily to our larger clients. These services include bookkeeping and back-office services, private foundation management and grantmaking, oversight of trust administration, financial tracking and reporting, cash flow management and bill pay, and other financial services.
Asset Management
Our Asset Management services include alternatives platform and public and private real estate (including co-investment) businesses.
Alternatives Platform
Our alternatives platform represents our legacy TIG business which is an alternative asset manager. This platform includes our TIG Arbitrage strategy and funds managed by our External Strategic Managers. Our alternatives platform client base is predominantly comprised of institutional investors. The TIG Arbitrage strategy is our event-driven strategy through which management fees and incentive fees based on performance are received from the underlying funds and accounts. The strategies of our External Strategic Managers include Real Estate Bridge Lending, European Equities and Asian Credit and Special Situations. We receive distributions from our External Strategic Managers through our profit or revenue sharing arrangements that are generated through their management and incentive fees based on
30
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
performance of the underlying investments. As of September 30, 2023, this platform had $7.7 billion in AUM/AUA.
Real Estate - Public and Private
Our real estate business includes fund management services as well as co-investment solutions. As of September 30, 2023, this business had approximately $12.0 billion of AUM/AUA.
Fund Management
Our real estate fund management business manages two funds based in the United Kingdom, LXi, a publicly traded REIT, and HLIF, a private fund. The funds are marketed primarily in the United Kingdom to institutional investors, primarily pension funds, as well as to retail investors. Fees from our real estate fund management business are earned from management and advisory fees.
Co-Investment
Our real estate co-investment business, oversees deal origination, documentation, and structuring from inception to exit for a variety of strategies including development, income, value-add, and planning. Investors are typically HNWIs, single family offices, and institutional investors. Fees earned related to our real estate co-investment business include private market, incentive fees, management and advisory fees, and placement and brokerage fees. As of September 30, 2023, our real estate co-investment platform has deployed more than $7.5 billion of capital (inclusive of capital raised for our public and private real estate funds), of which approximately 14% has been invested by legacy Alvarium shareholders and senior employees.
(y)Other Income / Expenses
Other income and expenses is comprised of unrealized gains (losses) on investments, interest and dividend income (expense), income from equity method investees, and other items.
The Company holds investments in common stock, mutual funds, exchange-traded funds, and exchange-traded notes, which represent investments in equity and debt securities. The Company earns realized and unrealized gains and losses which depend on investment performance.
Interest income is earned through its investments in exchange-traded notes. These generally include debt securities held on a short- or medium-term basis when the Company has excess cash. The Company recognizes and records interest income using the effective interest method.
Dividend income is earned through investments in common stock, mutual funds, and exchange-traded funds. Dividend income is recorded on the ex-dividend date.
The Company holds interests in various affiliated limited partnerships and limited liability companies, whose purpose is to achieve capital appreciation through investments in financial instruments and investment vehicles. The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting and may earn income related to its equity in income of equity method investees. The equity method investments are in various fund complexes, including funds focused on infrastructure and utilities, high income yields, and multi-strategy, among others.
(z)Held for Sale Accounting
In circumstances when the Company is evaluating its components, we may establish plans that require us to evaluate whether a component qualifies for held-for-sale accounting under ASC 360, Property, Plant,
31
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
and Equipment. If a sale is deemed probable within a twelve-month period, the component is classified to either the assets held for sale or liabilities held for sale line items on the Consolidated Statement of Financial Position. The disposal group will be measured at the lower of its carrying amount or fair value less cost to sell. Any long-lived assets shall not be depreciated or amortized while classified as held for sale. Subsequently on November 6, 2023, the Company entered into an agreement to sell FOS for a cash consideration of approximately $20.1 million. See Note 21 (Subsequent Events) for more detail.
(aa)Recent Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which modifies ASC 805 to require an acquiring entity in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts. Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. This guidance is effective for annual and interim periods beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance on January 1, 2022 and applied the guidance prospectively to business combinations that occurred after this date. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this update clarify the guidance in ASC 820 when measuring the fair value of an equity security subject to contractual sale restrictions and introduce new disclosure requirements related to such equity securities. The amendments are effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company does not expect the impact of this guidance to be material to its condensed consolidated financial statements.
The Company has considered all newly issued accounting guidance that is applicable to its operations and the preparation of its unaudited condensed consolidated statements, including those it has not yet adopted. The Company does not believe that any such guidance has or will have a material effect on its financial position or results of operations.
(3)Business Combinations and Divestitures
On January 3, 2023, the Company entered into the Business Combination described in Note 1 (Description of the Business). The primary purpose of the Business Combination was to combine established high-growth companies that can benefit from access to capital and public markets and continue value-creation by management.
The Business Combination is a forward merger and is accounted for using the acquisition method of accounting. The Company is the accounting acquirer and Umbrella, including the Target Companies, is the accounting acquiree. The Company has been determined to be the accounting acquirer because Umbrella meets the definition of a VIE, and the Company is the primary beneficiary of Umbrella. ASC 805 requires the primary beneficiary of a VIE to be identified as the accounting acquirer. The Company is the primary beneficiary
32
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
because it controls all activities of Umbrella, and the non-managing members of Umbrella do not have substantive kick-out or participating rights.
The Business Combination met the requirements to be considered a business combination under ASC 805. The assets and liabilities acquired from the Target Companies, affected for preliminary adjustments to reflect fair market values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s condensed consolidated financial statements from the date of acquisition. The Company has allocated the purchase price to the tangible and identifiable intangible assets based on their estimated fair market values at the acquisition date as required under ASC 805. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill and is deductible for tax purposes.
The Business Combination resulted in the Company acquiring 51% of the equity interests of Umbrella which holds 100% of the equity interests of Alvarium, TWMH, and TIG. The remainder of Umbrella is held by the historical equity holders of TWMH and TIG through their ownership of Class B Units, which are presented as non-controlling interest on the Company’s Condensed Consolidated Statement of Financial Position.
As a result of the Business Combination, Umbrella, which represents substantially all of the economic activity of the Company, became a subsidiary of the Company. Since the Company is the sole managing member of Umbrella following the Business Combination, the Class B Units held by the former equity holders of TWMH and TIG are classified as non-controlling interests in the Company’s financial statements. An allocation of net income or loss representing the percentage of ownership of Umbrella not controlled by the Company will be attributed to the non-controlling interests in the Company’s Condensed Consolidated Statement of Operations.
Each Class B Unit of Umbrella is paired with a share of Class B Common Stock (collectively, the “Paired Interests”). Pursuant to the Umbrella LLC Agreement, a Paired Interest is exchangeable on certain dates designated by the Company for a share of Class A Common Stock on a one-for-one basis, subject to equitable adjustments for stock splits, stock dividends and reclassifications. As the holder exchanges the Paired Interests pursuant to the Umbrella LLC Agreement, the shares of Class B Common Stock included in the Paired Interests will automatically be canceled and the Class B Common Units included in the Paired Interests shall be automatically transferred to the Company and converted into and become an equal number of Class A Common Units in Umbrella. Alternatively, if approved by the disinterested members of the board of directors of the Company, such Class B Common Stock can be settled in cash funded from the proceeds of a private sale or a public offering of Class A Common Stock.
The Sponsor, in connection with the Business Combination, purchased 8,625,000 shares of Class B Common Stock (the “Founder Shares”) for $25,000 (approximately $0.03 per share). These shares had no value until the Business Combination completed. At this point, the Founder Shares automatically converted into Class A Common Stock. This conversion was solely contingent upon the completion of the Business Combination and did not include any future service requirements. As such, this cost of 8,625,000 shares at $10.33 per share for $89.1 million will be presented “on the line” and is not reflected in either predecessor or successor financial statement periods. “On the line” describes those expenses triggered by the consummation of a business combination that are not recognized in the Condensed Consolidated Statement of Operations as they are not directly attributable to either period but instead were contingent on the Business Combination.
As part of the Business Combination, the Company incurred $17.8 million of acquisition-related costs during the three months ended March 31, 2023 which are included predominantly in the “Professional fees” line in the Condensed Consolidated Statements of Operations. The Predecessor incurred $1.0 million of acquisition-related costs during the three months ended March 31, 2022. In addition, the Company incurred $4.6 million of debt issuance costs related to debt issued to finance the Business Combination. Of the total debt issuance costs, $1.8 million is related to the Term Loan and drawn amount of the Revolver and is recorded as an offset to the “Debt, net of unamortized deferred financing cost” line item of the Condensed Consolidated Statement of Financial
33
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
Position. $2.8 million of the debt issuance costs related to the undrawn amount of the Revolver were recorded in the “Other assets” line item of the Condensed Consolidated Statements of Financial Position.
The Business Combination was accounted for using the acquisition method of accounting, and the fair value of the total purchase consideration transferred was $1,071.1 million. Included in total purchase consideration is contingent consideration of $85.1 million, which is payable to the selling shareholders upon achievement of certain volume-weighted average price targets for the shares of Class A Common Stock or upon a change of control of the Company occurring between the Closing Date and the fifth anniversary of the Closing Date. The contingent consideration was measured at fair value at the acquisition date and recorded as a liability in the “Earn-out liability” line of the Condensed Consolidated Statement of Financial Position. See Note 2 (Summary of Significant Accounting Policies) for additional information.
| (Dollars in Thousands) | Amount | ||||
| Cash consideration | $ | 99,999 | |||
| Equity consideration: | |||||
| Class A | $ | 294,159 | |||
| Class B | $ | 573,205 | |||
| Warrants | $ | 4,896 | |||
| Earn-out consideration | $ | 85,097 | |||
| Tax Receivable Agreement | $ | 13,000 | |||
| Payment of assumed liabilities | $ | 760 | |||
| Total purchase consideration transferred | $ | 1,071,116 | |||
The consideration transferred is subject to customary closing adjustments in the post-combination period. While the valuation of consideration transferred is substantially completed, fair value estimates related to the consideration transferred are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to adjustment include, but are not limited to, the Tax Receivable Agreement and Business Combination Earn-out consideration as management continues to review the estimated fair values and evaluate the assumed tax position. When the valuation is final, any changes to the preliminary valuation of consideration transferred could result in adjustments to identified intangibles and goodwill. The fair values of consideration transferred is expected to be finalized during the remeasurement period, which ends on December 31, 2023. During the period from January 3, 2023 to September 30, 2023, there were no measurement period adjustments made to purchase consideration transferred.
34
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
The following table sets forth the fair values of the assets acquired and liabilities assumed in connection with the Business Combination (in thousands):
| (Dollars in Thousands) | Business Combination Date Fair Value | ||||
| Cash and cash equivalents | $ | 24,023 | |||
| Management/advisory fees receivable | 42,494 | ||||
| Investments at fair value | 148,674 | ||||
| Equity method investments | 42,307 | ||||
| Property, plant and equipment | 3,996 | ||||
| Intangible assets | 520,161 | ||||
| Goodwill | 543,956 | ||||
| Operating lease right-of-use assets | 28,487 | ||||
| Other assets | 47,251 | ||||
| Total Assets Acquired | $ | 1,401,349 | |||
| Accounts payable and accrued expenses | 75,647 | ||||
| Accrued compensation and profit sharing | 25,051 | ||||
| Accrued member distributions payable | 12,803 | ||||
| Delayed share purchase agreement | 1,818 | ||||
| Earn-in consideration payable | 1,519 | ||||
| Operating lease liabilities | 29,047 | ||||
| Debt | 124,533 | ||||
| Deferred tax liability, net | 43,906 | ||||
| Other liabilities | 15,149 | ||||
| Total Liabilities Assumed | $ | 329,473 | |||
| Total Assets Acquired and Liabilities Assumed | 1,071,876 | ||||
| Non-controlling interest in subsidiaries | (760) | ||||
| $ | 1,071,116 | ||||
For the period from January 3, 2023 to September 30, 2023, cash and cash equivalents at the beginning of the period of $194.1 million included the proceeds from the PIPE Investors related to the private placement issuances, remaining cash held in the trust account, and the beginning balance sheet cash from each of Alvarium, TIG, and TWMH.
While the valuation of acquired assets and liabilities is substantially complete, fair value estimates are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to adjustment include, but are not limited to, equity method investments, intangible assets, and the Tax Receivable Agreement liability, as management continues to review the estimated fair values and evaluate the assumed tax position. The fair values of assets acquired and liabilities assumed is expected to be finalized during the measurement period, which ends no later than December 31, 2023.
During the nine months ended September 30, 2023, the Company made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in an increase to goodwill of $19.2 million. The increase in goodwill was due to a $21.6 million decrease in the fair value of acquired intangible assets, a $5.4 million decrease in the fair value of acquired equity method investments, offset by a $6.4 million decrease to deferred tax liabilities, a $0.8 million increase in Management/advisory fees receivable, a $0.3 million decrease in Other liabilities, a $0.2 million increase in Accounts payable and accrued expenses, and a
35
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
$0.1 million increase in Other assets, that arose from the measurement period adjustments. Additionally, the Company made certain measurement period adjustments to the opening equity balance as a result of the Business Combination, which resulted in a decrease to opening additional paid-in capital of $1.3 million and an immaterial decrease to non-controlling interest in subsidiaries as of January 3, 2023. The measurement period adjustments were a result of the change in net assets described earlier.
The fair values of assets acquired and liabilities assumed are expected to be finalized during the measurement period, which ends no later than December 31, 2023.
There is no income statement impact of the measurement period adjustments during the period from July 1, 2023 to September 30, 2023, because the amortization expense relating to intangible assets was adjusted in the prior quarter, and equity method investments are reported on a lag basis.
Fair Value of Net Assets Acquired and Intangibles
With the exception of operating right-of-use assets and operating lease liabilities accounted for under Topic 842, in accordance with Accounting Standards Codification, or ASC 805, the assets and liabilities were recorded at their respective fair values as of January 3, 2023. The Company developed the fair value of intangible assets, which include trade names, customer relationships, investment management agreements, developed technology and backlog, using various techniques including discounted cash flow, relief from royalty, multi-period excess earnings, and a Monte Carlo simulation approach. The Company developed the fair value of equity method investments using various techniques including discounted cash flow and a guideline public company approach. The investments at fair value and earn-in consideration are carried at fair value and no adjustment was made. For all other major assets and liabilities acquired, the Company determined that book value approximated fair value.
Goodwill is comprised of expected synergies for the combined operations and the assembled workforce acquired in the Business Combination, which does not qualify as a separately recognized intangible asset. Goodwill is allocated between the two reporting segments: Wealth Management and Asset Management. The initial goodwill allocation between Wealth Management and Asset Management at the acquisition date was $293.7 million and $250.2 million, respectively.
Below is a summary of the intangible assets acquired in the Business Combination (in thousands):
| (Dollars in Thousands) | Acquisition Date Fair Value | Estimated Life (Years) | |||||||||
| Trade Names | $ | 14,695 | 11.5 | ||||||||
| Customer Relationships | 163,392 | 27.1 | |||||||||
| Investment Management Agreements (definite life) | 94,575 | 18.4 | |||||||||
Investment Management Agreements (indefinite life) | 245,900 | Indefinite | |||||||||
| Developed Technology | 1,000 | 5 | |||||||||
| Backlog | 599 | 0.5 | |||||||||
| Total Intangible Assets | $ | 520,161 | |||||||||
The intangible assets acquired and subject to amortization have a weighted average useful life of 23.1 years.
AL Wealth Partners Pte. Ltd.
On April 6, 2023, (the “ALWP Acquisition Date”), the Company acquired all of the issued and outstanding ownership and membership interests of AL Wealth Partners Pte. Ltd. (“AL Wealth Partners”) pursuant to the
36
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
terms of the share purchase agreement between the Company and AL Wealth Partners (the “ALWP Acquisition”). The primary purpose of the ALWP Acquisition is to acquire AL Wealth Partners’ extensive business within Southeast Asia to further expand the Company’s global operations.
The ALWP Acquisition met the requirements to be considered a business combination under ASC 805. The assets and liabilities acquired from AL Wealth Partners, affected for preliminary adjustments to reflect the fair market values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s condensed consolidated financial statements from the ALWP Acquisition Date. The Company has allocated the purchase price to the tangible and identifiable intangible assets and liabilities assumed based on their estimated fair market values at the ALWP Acquisition Date as required under ASC 805.
The ALWP Acquisition was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred was $15.5 million, with the total amount paid in cash. The Company will make second and third payments to the sellers of AL Wealth Partners on the third and fifth anniversary of the ALWP Acquisition Date, respectively. Management has determined that these payments are compensatory in nature and will be treated as future compensation expense. There is no contingent consideration as part of the ALWP Acquisition.
The Company incurred $0.3 million of direct acquisition-related expenses, which are recognized in the Professional fees line item of the Condensed Consolidated Statement of Operations.
The following table sets forth the fair values of the assets acquired and liabilities assumed in connection with the ALWP Acquisition:
| (Dollars in Thousands) | ALWP Acquisition Date Fair Value | ||||
| Cash and cash equivalents | $ | 1,092 | |||
| Management/advisory fees receivable | 1,952 | ||||
| Property, plant and equipment | 654 | ||||
| Intangible assets | 12,300 | ||||
Goodwill | 987 | ||||
| Operating lease right-of-use assets | 1,048 | ||||
| Other assets | 484 | ||||
| Total Assets Acquired | 18,517 | ||||
| Accounts payable and accrued expenses | 358 | ||||
| Operating lease liabilities | 1,048 | ||||
| Other liabilities | 1,581 | ||||
| Total Liabilities Assumed | $ | 2,987 | |||
| Total Assets Acquired and Liabilities Assumed | $ | 15,530 | |||
The purchase price allocation is preliminary and subject to change during the measurement period, which is not to exceed one year from the ALWP Acquisition Date. During the period ended September 30, 2023, there were no measurement period adjustments made to the assets acquired or liabilities assumed. When the valuation is final, changes to the valuation of acquired assets and liabilities could result in adjustments to identified intangibles and goodwill.
Fair Value of Net Assets Acquired and Intangibles
37
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
Goodwill is comprised of expected synergies for the combined operations, including employees and customer relationships acquired in a business combination. The total amount of goodwill arising in the transaction was allocated to the Company’s Wealth Management segment. The components of goodwill do not qualify as a separately recognized intangible asset. The Company will test for impairment annually to determine changes in goodwill at the Wealth Management reporting unit. The Company will also test goodwill for impairment in other periods if an event occurs or circumstances change such that it is more-likely-than-not to reduce the fair value of the reporting unit below its carrying amount.
Below is a summary of the intangible assets acquired in the ALWP Acquisition:
| (Dollars in Thousands) | ALWP Acquisition Date Fair Value | Estimated Life (Years) | |||||||||
| Customer Relationships | $ | 12,300 | 10 | ||||||||
| Total Intangible Assets | $ | 12,300 | |||||||||
The fair value for customer relationships was determined using the multi-period excess earnings method. The intangible assets are subject to amortization over a useful life of 10 years.
The results of operations for the ALWP Acquisition have been included in the Company’s Condensed Consolidated Financial Statements from the date of ALWP Acquisition. The ALWP Acquisition did not have a material impact on the Company’s Condensed Consolidated Financial Statements, and, therefore, historical and pro forma disclosures have not been presented.
Alvarium Investment Managers (Suisse) SA
On August 2, 2023, (the “AIMS Acquisition Date”), the Company acquired the remaining 70% of the issued and outstanding ownership and membership interests of Alvarium Investment Managers (Suisse) SA (“AIMS”), increasing its interest from 30% to 100% (the “AIMS Acquisition”).
The AIMS Acquisition met the requirements to be considered a business combination under ASC 805. The assets and liabilities acquired from AIMS, affected for preliminary adjustments to reflect the fair market values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s condensed consolidated financial statements from the AIMS Acquisition Date. The Company has allocated the purchase price to the tangible and identifiable intangible assets and liabilities assumed based on their estimated fair market values at the AIMS Acquisition Date as required under ASC 805.
The AIMS Acquisition was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred was $16.8 million. The total purchase consideration transferred consists of cash consideration, equity consideration, deferred cash consideration, earn-out consideration, and the payment of assumed liabilities. The total purchase consideration consists of the following amounts:
| (Dollars in Thousands) | AIMS Amount | ||||
| Initial Cash consideration | $ | 5,711 | |||
| Equity consideration | 1,459 | ||||
| Deferred cash consideration | 6,695 | ||||
| Earn-out consideration | 2,721 | ||||
| Payment of assumed liabilities | 168 | ||||
| Total purchase consideration transferred | $ | 16,754 | |||
The deferred cash consideration is payable no later than September 30, 2024 and the earn-out consideration is payable no later than December 31, 2024.
38
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
At the AIMS Acquisition Date, as required by ASC 805, the Company’s existing 30% equity interest in AIMS, which was previously recognized as an equity method investment, was revalued to reflect the fair value at this date. The fair value of this existing equity method investment was $7.2 million. This change in fair value has resulted in a gain of $1.7 million being recognized, this amount has been recognized in the Gain (loss) on investments line of the Condensed Consolidated Statement of Operations.
The Company incurred $0.01 million of direct acquisition-related expenses, which are recognized in the Professional fees line item of the Condensed Consolidated Statement of Operations.
The following table sets forth the fair values of the assets acquired and liabilities assumed in connection with the AIMS business combination:
| (Dollars in Thousands) | AIMS Acquisition Date Fair Value | ||||
| Cash and cash equivalents | $ | 1,401 | |||
| Management/advisory fees receivable | 1,057 | ||||
| Equity Method investments | 57 | ||||
| Intangible assets | 9,679 | ||||
Goodwill | 14,299 | ||||
| Operating lease right-of-use assets | 298 | ||||
| Other assets | 323 | ||||
| Total Assets Acquired | 27,114 | ||||
| Accounts payable and accrued expenses | 784 | ||||
| Operating lease liabilities | 298 | ||||
| Other liabilities | 2,097 | ||||
| Total Liabilities Assumed | $ | 3,179 | |||
| Total Assets Acquired and Liabilities Assumed | $ | 23,935 | |||
The purchase price allocation is preliminary and subject to change during the measurement period, which is not to exceed one year from the AIMS Acquisition Date. During the period ended September 30, 2023, there were no measurement period adjustments made to the assets acquired or liabilities assumed. When the valuation is final, changes to the valuation of acquired assets and liabilities could result in adjustments to identified intangibles and goodwill.
Fair Value of Net Assets Acquired and Intangibles
Goodwill is comprised of expected synergies for the combined operations, including employees and customer relationships acquired in a business combination. The total amount of goodwill arising in the transaction was allocated to the Company’s Wealth Management segment. The components of goodwill do not qualify as a separately recognized intangible asset. The Company will test for impairment annually to determine changes in goodwill at the Wealth Management reporting unit. The Company will also test goodwill for impairment in other periods if an event occurs or circumstances change that may indicate impairment.
Below is a summary of the intangible assets acquired in the AIMS business combination:
39
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| (Dollars in Thousands) | AIMS Acquisition Date Fair Value | Estimated Life (Years) | |||||||||
| Customer Relationships | $ | 9,679 | 14 | ||||||||
| Total Intangible Assets | $ | 9,679 | |||||||||
The fair value for customer relationships was determined using the multi-period excess earnings method. The intangible assets are subject to amortization over a useful life of 14 years.
The results of operations for the AIMS Acquisition have been included in the Company’s Condensed Consolidated Financial Statements from the AIMS Acquisition Date. The AIMS Acquisition did not have a material impact on the Company’s Condensed Consolidated Financial Statements, and, therefore, historical and pro forma disclosures have not been presented. Prior to the AIMS Acquisition Date, the results of AIMS were included as a 30% held equity method investment.
Alvarium Home REIT Advisors Ltd
On June 30, 2023, the Company entered into a series of agreements that resulted in the deconsolidation of AHRA from the Asset Management segment with immediate effect. The agreements removed ARE’s potential controlling voting rights in AHRA (previously ascertainable on the exercise of the option), and terminated other residual contractual relationships between AHRA and ARE. As a result, these agreements removed AlTi’s control of AHRA from an accounting perspective. AHRA’s results are included in the Company’s Condensed Consolidated Statement of Operations for the period from January 3, 2023 to June 30, 2023, and its accounts were removed from the Consolidated Statement of Financial Position as of June 30, 2023. The deconsolidation resulted in an intangible asset impairment charge of $29.4 million, which is recorded in Impairment loss on goodwill and intangible assets in the Condensed Consolidated Statement of Operations. Assets managed by AHRA, however, have been excluded from the Company’s AUM/AUA metrics since January 3, 2023.
Assets Held for Sale
FOS is a part of the Company’s international wealth management business. The Company met the criteria required to classify this expected disposal as an asset held for sale. The disposal of FOS is expected to occur within the next twelve months. This disposal represents a strategic shift that will not have a major impact on the Company’s operations, and as such, is not classified as a discontinued operation. The assets and liabilities of FOS are presented separately as held for sale in the Condensed Consolidated Statement of Financial Position as of September 30, 2023. Subsequently on November 6, 2023, the Company entered into an agreement to sell FOS for a cash consideration of approximately $20.1 million. See Note 21 (Subsequent Events) for further discussion of this disposal.
40
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
The carrying amounts of the major classes of assets and liabilities of FOS presented as held for sale at September 30, 2023 is as follows:
| As of | ||||||||
| (in thousands) | September 30, 2023 (Successor) | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 2,167 | ||||||
| Fees receivable, net | 4,482 | |||||||
| Intangible assets, net of accumulated amortization | 3,219 | |||||||
| Operating lease right-of-use assets | 416 | |||||||
| Deferred tax asset, net | 256 | |||||||
| Other assets | 363 | |||||||
| Total assets held for sale | $ | 10,901 | ||||||
| Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | (135) | ||||||
| Operating lease liabilities | (383) | |||||||
| Deferred tax liability, net | (295) | |||||||
| Deferred income | (988) | |||||||
| Other liabilities | (376) | |||||||
| Total liabilities held for sale | $ | (2,178) | ||||||
(4)Revenue
The following table represents the Company’s revenue disaggregated by fee type for the periods presented below:
| For the Period | For the Period | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | July 1, 2023 – September 30, 2023 (Successor) | July 1, 2022 – September 30, 2022 (Predecessor) | January 3, 2023 – September 30, 2023 (Successor) | January 1, 2022 – September 30, 2022 (Predecessor) | |||||||||||||||||||||||||
| Management/Advisory fees | $ | 45,062 | $ | 18,583 | $ | 138,972 | $ | 57,445 | |||||||||||||||||||||
| Incentive fees | 885 | 1,931 | — | ||||||||||||||||||||||||||
| Distributions from investments | 2,596 | 14,829 | — | ||||||||||||||||||||||||||
| Other fees/income | 701 | 3,440 | — | ||||||||||||||||||||||||||
| Total Income | $ | 49,244 | $ | 18,583 | $ | 159,172 | $ | 57,445 | |||||||||||||||||||||
41
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
| (Dollars in Thousands) | As of September 30, 2023 (Successor) | As of December 31, 2022 (Predecessor) | ||||||||||||
| Management/Advisory fees receivable | ||||||||||||||
| Beginning balance | $ | 30,544 | $ | 20,019 | ||||||||||
| Ending balance | 30,258 | 19,540 | ||||||||||||
| Incentive fees receivable | ||||||||||||||
| Beginning balance | $ | 3,540 | $ | — | ||||||||||
| Ending balance | 1,098 | — | ||||||||||||
| Other fees/income receivable | ||||||||||||||
| Beginning balance | $ | 4,106 | $ | — | ||||||||||
| Ending balance | 742 | — | ||||||||||||
| Deferred management/advisory fees | ||||||||||||||
| Beginning balance | $ | (945) | $ | — | ||||||||||
| Ending balance | (73) | — | ||||||||||||
| Deferred other fees/income | ||||||||||||||
| Beginning balance | $ | (422) | $ | — | ||||||||||
| Ending balance | (250) | — | ||||||||||||
(5)Equity-Based Compensation and Earn-in Expenses
In connection with the Business Combination, certain of TWMH’s restricted units vested and the Company granted fully vested shares to Alvarium’s employees, resulting in compensation expense of $4.2 million and $24.6 million, respectively, during the period from January 3, 2023 to September 30, 2023. The $24.6 million consisted of $21.0 million related to the acceleration of 2.1 million of earn-out shares at closing and $3.6 million for 360,485 shares related to another transaction completed in contemplation of and for the benefit of the acquirer under Topic 805. None of these stock awards were outstanding after the Business Combination.
Upon completion of the Business Combination, the Company issued 60,800 shares of Class A Common Stock to employees of the Company. These awards vested in full immediately and had a fair value of $10.00 per share, resulting in compensation expense of $0.6 million during the period from January 3, 2023 to September 30, 2023.
In connection with the Business Combination, the Company granted 65,554 shares of Class A Common Stock to its board of directors on March 23, 2023. These awards vest over an approximate nine month period and had a fair value of $12.56 per share, resulting in compensation expense of $0.5 million during the period from January 3, 2023 to September 30, 2023.
On May 31, 2023, the Company granted 4,693,621 shares of Class A Common Stock with a fair value of $4.35 per share to employees as restricted units, vesting over a three year period. Since the initial grant date, 99,135 shares have been forfeited for a remaining total of 4,594,486 resulting in compensation expense of $1.6 million and $3.1 million for the period from July 1, 2023 to September 30, 2023 and the period from January 3, 2023 to September 30, 2023, respectively, which is included in Compensation and employee benefits in the Condensed Consolidated Statement of Operations. In addition, during the period from January 3, 2023 to September 30,
42
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
2023, the Company granted 107,263 shares of Class A Common Stock with fair values representative of buy-out equity awards to employees as restricted units, vesting generally over a one to three year period, resulting in compensation expense of $0.5 million for both the periods from July 1, 2023 to September 30, 2023 and from January 3, 2023 to September 30, 2023.
In connection with TWMH’s historical acquisition of Holbein Partners, LLP (“Holbein”), certain employees of Holbein are entitled to receive a combination of cash and shares of the Company based on Holbein revenues in 2023 and 2024 (the “Holbein Earn-Ins”). The Holbein Earn-Ins were measured at fair value using estimates of future revenues as of the closing date. The earn-ins are expected to be paid in a combination of 50% cash and 50% in shares of the Company’s Class A Common Stock on the second and third anniversaries of the closing date of January 7, 2022. On July 14, 2023, the Company amended the Holbein purchase agreement related to the Holbein acquisition. The amendment crystallized the contingent earn-in consideration amount by replacing the valuation of the Holbein Earn-Ins consideration of an estimate of future revenue. Additionally, the first payment date and second payment date are agreed as April 1, 2024 and April 1, 2025, respectively, replacing the original share purchase agreement payment dates of 10 business days after the second and third anniversary of the acquisition of Holbein. The agreed upon first and second date payments are $7.1 million and $8.9 million, respectively. The selling shareholders remain required to maintain certain service agreements to receive the compensatory Holbein Earn-ins.
The Company recognized an expense for the earn-ins of $2.4 million and $0.7 million for the period from July 1, 2023 to September 30, 2023 and the period from July 1, 2022 to September 30, 2022, respectively, and $4.5 million and $2.2 million for the period from January 3, 2023 to September 30, 2023 and the period from January 1, 2022 to September 30, 2022, respectively, which is included in Compensation and employee benefits in the Condensed Consolidated Statement of Operations.
Separate from the compensatory Holbein Earn-Ins, the Holbein acquisition consideration included contingent consideration that was measured at fair value using estimates of future revenues as of the closing date. The acquisition consideration was also amended to crystallize the non-compensatory earn-in amount and follows the same fact pattern as the above-described amendment for the compensatory earn-ins. This contingent consideration is recorded as a liability of $1.7 million as of September 30, 2023 and $1.5 million as of December 31, 2022 in the “Earn-in consideration payable” line of the Condensed Consolidated Statement of Financial Condition.
In connection with TWMH’s historical acquisition of TIH, the Delayed Share Purchase Agreement (“TIH SPA”) was amended on July 28, 2023. The TIH SPA was amended to include the Company’s Class A Common Stock as part of the purchase price. On August 1, 2023, the Company granted 152,930 shares of Class A Common Stock with a fair value of $7.70 per share under the terms of the TIH SPA amendment. The amendment to the purchase price is compensatory in nature. The Company recognized an expense for the TIH SPA of $1.2 million for both the periods from July 1, 2023 to September 30, 2023 and from January 3, 2023 to September 30, 2023, which is included in Compensation and employee benefits in the Condensed Consolidated Statement of Operations.
(6)Income Taxes
The computation of the effective tax rate and provision at each interim period requires the use of certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income that is subject to tax, permanent differences between the Company’s GAAP earnings and taxable income, and the likelihood of recovering deferred tax assets existing as of the balance sheet date. The estimates used to compute the provision for income taxes may change throughout the year as new events occur, additional information is obtained or as tax laws and regulations change. Accordingly, the effective tax rate for future interim periods may vary materially.
43
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
The Company is a domestic corporation for U.S. federal income tax purposes and is subject to U.S. federal and state and local corporate-level income taxes on its share of taxable income from the Umbrella Partnership. The Umbrella Partnership is a partnership for U.S. federal income tax purposes and a taxable entity for certain state and local taxes, such as New York City and Connecticut unincorporated business tax (“UBT”). Further, the Company’s income tax provision and related income tax assets and liabilities are based on, among other things, an estimate of the impact of exchanges of Warrants and Class B Units for shares of Class A Common Stock, inclusive of an analysis of tax basis and state tax implications of the Umbrella Partnership and its underlying assets and liabilities. The Company’s estimate is based on the most recent information available. The tax basis and state impact of the Umbrella Partnership and its underlying assets and liabilities are based on estimates subject to finalization of the Company’s tax returns.
The Company had an effective tax rate of 1.0% and 5.1% for the periods from July 1, 2023 to September 30, 2023 and from January 3, 2023 to September 30, 2023, respectively, and 13.3% and 25.9% for the three and nine months ended September 30, 2022, respectively. The effective tax rates differed from the statutory rate primarily due to the portion of income allocated to noncontrolling interests, nondeductible compensation and state and local taxes.
The Company regularly evaluates the realizability of its deferred tax asset and may recognize or adjust any valuation allowance when it is more-likely-than-not that all or a portion of the deferred tax asset may not be realized. As of September 30, 2023, the Company has recorded valuation allowances against a portion of its deferred tax assets generated by its subsidiaries in the United Kingdom. The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the tax years that remain open under the statute of limitations may be subject to examinations by the appropriate tax authorities.
As of September 30, 2023 and September 30, 2022, the Company has evaluated its tax filing positions and has not recorded a reserve for unrecognized tax benefits.
(7)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.
44
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
Level 2 Valuation Techniques
The financial instruments classified within Level 2 of the fair value hierarchy is an interest rate swap. The valuation techniques used to value financial instruments classified within Level 2 of the fair value hierarchy are as follows:
•The interest rate swap is valued based on observable values of underlying interest rates.
Level 3 Valuation Techniques
As the Company exercised significant judgement over unobservable inputs, the fair values of these financial instruments are considered Level 3 measurements:
•The Company utilized a Monte Carlo simulation to measure the Business Combination Earn-out and TRA liabilities. This simulation uses rates to appropriately capture the risk associated with each obligation. The Company adjusts the liabilities to fair value each reporting period based on certain metrics within the respective agreements. Changes in fair value are recognized in Gain (loss) on earn-out liability in the Condensed Consolidated Statement of Operations and in Fair value of earn-out liability in the Condensed Consolidated Statement of Cash Flows in the period of change. Refer to the valuation methodologies table below for further analysis of level 3 valuations.
•The Company utilized a Monte Carlo simulation to measure the earn-out liability associated with the acquisition of AIMS. The valuation of the AIMS earn-out liability captures the risk of the obligation through financial metrics adjusted for market risk. Changes in the fair value are recognized in other expense in the Condensed Consolidated Statement of Operations. Refer to the valuation methodologies table below for further analysis of level 3 valuations.
•The fair value of the Earn-in consideration is based on expected future revenues discounted at the revenue discount rate less the risk-free rate of return. The Company adjusts the liabilities to fair value each reporting period based on certain metrics within the respective agreements. Changes in the fair value are recognized in other expense in the Condensed Consolidated Statement of Operations. Refer to the valuation methodologies table below for further analysis of level 3 valuations.
•The Company utilized a Discounted Cash Flow simulation 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.
45
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
The following is a summary categorization, as of September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022 are presented below:
| As of September 30, 2023 (Successor) | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
| (Dollars in Thousands) | Quoted Prices | Observable Inputs | Unobservable Inputs | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Mutual funds | $ | 51 | $ | — | $ | — | $ | 51 | |||||||||||||||
| Exchange-traded funds | 111 | — | — | 111 | |||||||||||||||||||
| Investments – External Strategic Managers | — | — | 163,125 | 163,125 | |||||||||||||||||||
Investments – Affiliated Funds (1) | — | — | — | 1,373 | |||||||||||||||||||
| Total | $ | 162 | $ | — | $ | 163,125 | $ | 164,660 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Earn-out liability | $ | — | $ | — | $ | 45,549 | $ | 45,549 | |||||||||||||||
AIMS earn-out liability (2) | — | — | 2,721 | 2,721 | |||||||||||||||||||
TRA liability (3) | 3,711 | — | 14,331 | 18,042 | |||||||||||||||||||
| Earn-in consideration payable | 1,708 | — | — | 1,708 | |||||||||||||||||||
| Total | $ | 5,419 | $ | — | $ | 62,601 | $ | 68,020 | |||||||||||||||
(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 Condensed Consolidated Statement of Financial Position.
(2) Included in Other liabilities in the Condensed Consolidated Statement of Financial Position.
(3) The Company carries a portion of its TRA liability at fair value, as it is contingent consideration from the Business Combination.
| As of December 31, 2022 (Predecessor) | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
| (Dollars in Thousands) | Quoted Prices | Observable Inputs | Unobservable Inputs | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Mutual funds | $ | 44 | $ | — | $ | — | $ | 44 | |||||||||||||||
| Exchange-traded funds | 101 | — | — | 101 | |||||||||||||||||||
| Interest rate swap | — | 241 | — | 241 | |||||||||||||||||||
| Total | $ | 145 | $ | 241 | $ | — | $ | 386 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Earn-in consideration payable | $ | — | $ | — | $ | 1,519 | $ | 1,519 | |||||||||||||||
| Payout right | — | — | 3,662 | 3,662 | |||||||||||||||||||
| Total | $ | — | $ | — | $ | 5,181 | $ | 5,181 | |||||||||||||||
46
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
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 loss in the Condensed Consolidated Statement of Operations. During the period from July 1, 2023 to September 30, 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 September 30, 2023 and December 31, 2022:
| Level 3 Liabilities as of September 30, 2023 (Successor) | |||||||||||||||||||||||
| (Dollars in Thousands) | TRA Liability | Earn-out Liability | AIMS earn-out liability | Total | |||||||||||||||||||
| Beginning balance | $ | 13,000 | $ | 91,761 | — | $ | 104,761 | ||||||||||||||||
| Issuances | — | — | 2,721 | 2,721 | |||||||||||||||||||
| Settlements | — | — | — | — | |||||||||||||||||||
| Net gains/(losses) | 1,331 | (46,212) | — | (44,881) | |||||||||||||||||||
| Ending balance | $ | 14,331 | $ | 45,549 | 2,721 | $ | 62,601 | ||||||||||||||||
| Level 3 Liabilities as of December 31, 2022 (Predecessor) | |||||||||||||||||
| (Dollars in Thousands) | Earn-in consideration payable | Payout right | Total | ||||||||||||||
| Transfers into Level 3 | $ | — | $ | — | $ | — | |||||||||||
| Transfers out of Level 3 | — | — | — | ||||||||||||||
| Purchases | — | — | — | ||||||||||||||
| Issuances | 1,519 | 3,662 | 5,181 | ||||||||||||||
| Ending balance | $ | 1,519 | $ | 3,662 | $ | 5,181 | |||||||||||
| Level 3 Assets as of September 30, 2023 (Successor) | |||||||||||
| (Dollars in Thousands) | Investments – External Strategic Managers | Total | |||||||||
| Beginning balance | $ | 146,130 | $ | 146,130 | |||||||
| Realized and Unrealized Gains (Losses) | $ | 1,628 | $ | 1,628 | |||||||
| Purchases | $ | 15,367 | $ | 15,367 | |||||||
| Ending balance | $ | 163,125 | $ | 163,125 | |||||||
47
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
Valuation Methodologies for Fair Value Measurements Categorized within Level 3 as of September 30, 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 | $ | 163,125 | Discounted Cash Flow | Discount rate | 20.0% -31% | Lower | |||||||||||||||||||||||
| Long-term growth rate | 4.0 | % | Higher | ||||||||||||||||||||||||||
| Level 3 Liabilities: | |||||||||||||||||||||||||||||
| TRA liability | $ | 14,331 | Monte Carlo | Volatility | 42.5 | % | Lower | ||||||||||||||||||||||
| Correlation | 22.5 | % | Higher | ||||||||||||||||||||||||||
| Cost of debt range | 5.9% - 7.4% | Lower | |||||||||||||||||||||||||||
| Equity risk premium | 7.3% - 12.9% | Lower | |||||||||||||||||||||||||||
| Earn-out liability | $ | 45,549 | Monte Carlo | Volatility | 45.0 | % | Higher | ||||||||||||||||||||||
| Risk-free rate | 4.7 | % | Higher | ||||||||||||||||||||||||||
| AIMS earn-out liability | $ | 2,721 | Monte Carlo | Revenue Volatility | 12.0 | % | Higher | ||||||||||||||||||||||
| Risk-free rate | 1.1 | % | Higher | ||||||||||||||||||||||||||
| Revenue Discount Rate | 4.0 | % | Lower | ||||||||||||||||||||||||||
| Liability Discount Rate | 5.4 | % | Lower | ||||||||||||||||||||||||||
Valuation Methodologies for Fair Value Measurements Categorized within Level 3 as of December 31, 2022
The fair value of earn-in consideration is based on expected future revenues discounted at the revenue discount rate less the risk-free rate of return, which approximated 6.8% as of December 31, 2022. It is classified as Level 3 within the fair value hierarchy. As of December 31, 2022, carrying value approximates fair value.
The fair value of the payout right is based on expected future payments weighted on the probability of a successful company sale transaction, discounted at the estimated term to transaction closing less the risk-free rate, which approximated 100% as of December 31, 2022.
(8)Equity Method Investments
As of September 30, 2023 and December 31, 2022, the Company had $27.9 million and an immaterial amount of equity method investments, respectively, recorded within equity method investments on the condensed consolidated statements of financial position. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.
For the periods from July 1, 2023 to September 30, 2023 and from January 3, 2023 to September 30, 2023, the Company recognized $0.0 million and $0.3 million, respectively, of impairment on its equity method investments. Additionally, as part of the Business Combination, AlTi acquired the right to carried interest on several projects. These are held as assets at cost less impairment. We therefore assess for indicators of impairment every quarter, and as a result of a number of factors, namely market conditions, we recognized an impairment to these assets of $1.8 million and $3.6 million for the periods from July 1, 2023 to September 30,
48
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
2023 and from January 3, 2023 to September 30, 2023, respectively, in Gain (loss) on investments in the Condensed Consolidated Statement of Operations.
(9)Investments at Fair Value
Investments at fair value consist of investments for which the fair value option has been elected. The primary reasons for electing the fair value option are to:
•Reflect economic events in earnings on a timely basis;
•Mitigate volatility in earnings from using different measurement attributes; and
•Address simplification and cost-benefit considerations
Such election is irrevocable and is applied on an investment-by-investment basis at initial recognition or at other eligible election dates. Changes in the fair value of such instruments are recognized in Investment income (loss) in the Condensed Consolidated Statement of Operations.
The Cost and Fair Value of Investments at fair value as of September 30, 2023 and December 31, 2022 are presented below:
| As of September 30, 2023 (Successor) | As of December 31, 2022 (Predecessor) | |||||||||||||||||||||||||
| (Dollars in Thousands) | Cost | Fair Value | Cost | Fair Value | ||||||||||||||||||||||
| Investments at Fair Value: | ||||||||||||||||||||||||||
| Mutual funds | $ | 75 | $ | 51 | $ | 73 | $ | 44 | ||||||||||||||||||
| Exchange-traded funds | 119 | 111 | 115 | 101 | ||||||||||||||||||||||
| TIG Arbitrage Associates Master Fund | 214 | 223 | — | — | ||||||||||||||||||||||
| TIG Arbitrage Enhanced Master Fund | 297 | 311 | — | — | ||||||||||||||||||||||
| TIG Arbitrage Enhanced | 682 | 725 | — | — | ||||||||||||||||||||||
| Arkkan Opportunities Feeder Fund | 111 | 114 | — | — | ||||||||||||||||||||||
| Arkkan Capital Management Limited | 20,062 | 24,081 | — | — | ||||||||||||||||||||||
| Zebedee Asset Management | 68,913 | 68,309 | — | — | ||||||||||||||||||||||
| Romspen Investment Corporation | 72,523 | 70,735 | — | — | ||||||||||||||||||||||
| Total | $ | 162,996 | $ | 164,660 | $ | 188 | $ | 145 | ||||||||||||||||||
The Company’s Investments at fair value include unrealized gains (losses) and realized gains (losses) in the Condensed Consolidated Statement of Financial Position.
49
AlTi Global, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Prior to January 3, 2023, Tiedemann Wealth Management Holdings)
The breakdown of unrealized gains (losses) and realized gains (losses) for the relevant periods are as follows:
| For the Period | For the Period | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | July 1, 2023 – September 30, 2023 (Successor) | July 1, 2022 – September 30, 2022 (Predecessor) | January 3, 2023 – September 30, 2023 (Successor) | January 1, 2022 – September 30, 2022 (Predecessor) | |||||||||||||||||||||||||
| Gains (Losses) on Investments at FV: | |||||||||||||||||||||||||||||
| Realized losses | $ | — | $ | (41) | $ | — | $ | (65) | |||||||||||||||||||||
| Unrealized gains (losses) | (189) | 353 | 1,675 | 256 | |||||||||||||||||||||||||
| Total gains (losses) on Investments at fair value | $ | (189) | $ | 312 | $ | 1,675 | $ | 191 | |||||||||||||||||||||
(10)Intangible Assets, net
The following table provides a reconciliation of Intangible assets, net reported on the Condensed Consolidated Statement of Financial Position.
| As of September 30, 2023 (Successor) | |||||||||||||||||||||||||||||||||||
| (Dollars in Thousands) | Weighted Average Amortization Period (in years) | Gross Carrying Amount | Impairment | Held for Sale | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||
| Intangible assets | |||||||||||||||||||||||||||||||||||
| Amortizing intangible assets | |||||||||||||||||||||||||||||||||||
| Customer relationships | 25.4 | $ | 184,805 | $ | — | $ | (2,039) | $ | (5,220) | $ | 177,546 | ||||||||||||||||||||||||
Investment management agreements (1) | 18.5 | 97,481 | (29,393) | — | (3,615) | 64,473 | |||||||||||||||||||||||||||||
| Trade names | 10.0 | 14,778 | — | (1,180) | (1,177) | 12,421 | |||||||||||||||||||||||||||||
| Acquired internally developed software | 5.0 | 1,000 | — | — | (150) | 850 | |||||||||||||||||||||||||||||
| Other intangible asset | 0.0 | 622 | — | — | (622) | — | |||||||||||||||||||||||||||||
| Total amortized intangible assets | 298,686 | (29,393) | |||||||||||||||||||||||||||||||||