Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

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Acquisitions
 3 Months Ended
Mar. 31, 2024
Business Combination and Asset Acquisition [Abstract]  
Acquisitions
3. Acquisitions
Asset Acquisition
On March 31, 2023, the Company completed the acquisition of the assets and liabilities associated with the AAG Transaction for a total purchase consideration of $215.4 million.
The Company determined that the AAG Transaction should be considered an asset acquisition, because substantially all of the fair value of the acquired assets was concentrated in a single group of similar assets. Under the accounting for asset acquisitions, the acquisition is recorded using a cost accumulation and allocation model under which the cost of the acquisition is allocated on a relative fair value basis to the assets acquired and liabilities assumed. Acquisition-related transaction costs are capitalized as a component of the cost of the assets acquired. Consequently, no goodwill was recognized as part of this transaction.
The following table summarizes the fair value of the consideration transferred and the major classes of assets acquired and liabilities assumed in relation to the March 31, 2023 acquisition (in thousands):
Consideration transferred:
FoA Class B Common Stock(1) (Note 19 - Equity)
$ — 
Cash consideration(2)
3,100 
Notes payable to Seller 4,500 
Pay off indebtedness(2)
136,984 
Initial equity consideration – Class A LLC Units(3) (Note 19 - Equity)
24,419 
Deferred equity consideration – Class A LLC Units(4) (Note 19 - Equity)
13,137 
Other liabilities assumed 8,429 
Buyer transaction expenses(2)
770 
Forgiveness of bridge working capital notes payable 24,034 
Total cost $ 215,373 
Assets acquired:
Loans held for investment, subject to HMBS related obligations $ 5,448,712 
Loans held for investment 138,270 
Fixed assets and leasehold improvements 2,400 
Right-of-use leased assets 491 
Other assets 6,270 
Total assets acquired $ 5,596,143 
Liabilities assumed:
HMBS related obligations $ 5,354,372 
Operating lease liabilities 492 
Payables and other liabilities 25,906 
Total liabilities assumed 5,380,770 
Net identifiable assets acquired $ 215,373 
(1) The Seller owns one share of FoA Class B Common Stock. Class B Common Stock has no economic rights but entitles each holder of at least one such share (regardless of the number of shares held) to a number of votes that is equal to the aggregate number of units of FoA Equity (“Class A LLC Units”) held by the holder on all matters on which Class A Common Stockholders are entitled to vote. The fair value of the Class B Common Stock was determined to be negligible as there are no economic rights associated with the Class B Common Stock.
(2) Amounts represent the cash portion of the consideration paid to acquire the net assets of AAG/Bloom. Total cash consideration was $140.9 million.
(3) At the closing of the AAG Transaction, FoA Equity issued 19,692,990 Class A LLC Units to the Seller, which hold 1:1 conversion rights for Class A Common Stock of FoA. At the closing date, the fair value of these Class A LLC Units were equal to the Class A Common Stock share price of $1.24 per share.
(4) The deferred equity consideration is comprised of two forms of issuable Class A LLC Units; 7,058,416 units with a fair value of $8.7 million that are equity classified and indemnity holdback units totaling up to 7,142,260 units as of the acquisition date with a fair value of $4.4 million that are liability classified. The deferred equity consideration that is liability classified is recorded in payables and other liabilities in the Condensed Consolidated Statements of Financial Condition.
The indemnity holdback units to be issued to the Seller are based on set thresholds and, subject to meeting the control condition, are settled two and three years following the closing date. The amount of units released to the Seller depends on the dollar amount of indemnified claims FoA pays out on behalf of the Seller related to litigation liabilities and indemnifiable loan losses. Two years following the closing date, FoA Equity will issue to the Seller Class A LLC Units equal to the excess of the remaining indemnity holdback units over the threshold of 3,571,130. The remaining Class A LLC Units the Seller is entitled to are issued three years following the closing date. Management has included the fair value of indemnity holdback units, reduced for estimated litigation liabilities and indemnifiable loan losses, above in the consideration given to the Seller.