| Subsequent Events |
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The Company has evaluated subsequent events through September 2, 2021 and has concluded that no events have occurred that require disclosure other than the events listed below.
On July 26, 2021, Ryan Specialty Group Holdings, Inc. completed its IPO of
56,918,278 shares, 65,456,020 shares after the underwriters fully exercised their option, of its Class A common stock, $ 0.001 par value per share, at an offering price of $ 23.50 per share. Ryan Specialty Group Holdings, Inc. received net proceeds from the IPO of approximately $ 1.3
billion from the initial offering, approximately $ 1.5
billion after the full exercise of the underwriters’ option, after deducting underwriting discounts and commissions and estimated offering expenses. Immediately following the completion of the IPO and related organizational transactions, the Ryan Specialty Group Holdings, Inc. held an approximately 41.7 %
Founder Group’s Preferred Units Repurchase On July 1, 2021, the Company repurchased the Preferred Units held by the Founder Group. See Note 11, Revolving Credit Facility Upsize
In connection with closing of the IPO, which occurred on July 26, 2021, the Company executed an agreement with its lenders to increase the revolving credit facility commitments from $300.0
$600.0
ARL Long Term Incentive Plan On August 10, 2021, the Board of Directors of Ryan Specialty Group Holdings, Inc. elected to terminate the ARL long-term incentive plans. The decision to terminate the plans will not change the value of, or entitlements to, any benefits thereunder. The benefits accruing under these plans are required to be paid within twelve months of the termination date (i.e., by August 10, 2022). These awards remain subject to the achievement of service conditions. As a result of the termination of the plans, the non-current portion of the liability for these awards will be reclassified to Current Accrued compensation in the third quarter of 2021.
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| Subsequent Events |
On July 26, 2021, the Company, Ryan Specialty Group Holdings, Inc., completed its IPO of
56,918,278
shares, 65,456,020 shares after the underwriters exercised their option in full, of its Class A common stock, $ 0.001
par value per share, at an offering price of $ 23.50
per share. The Company received net proceeds from the IPO of approximately $ 1.3
billion, approximately $1.5 billion after the full exercise of the underwriters’ option, after deducting underwriting discounts and commissions and estimated offering expenses, of which (i) $ 119.9
million was used to acquire 5,889,570
of newly issued LLC Units in Holdings LLC, (ii) $ 343.5 million was used to acquire the outstanding 260,000,000
Class B Preferred Units held by Onex, (iii) $ 795.7 million was used to acquire 35,641,682
outstanding Holdings LLC units from certain existing holders of Holdings LLC, (iv) $76.2 million to purchase an additional 3,415,097 newly issued LLC Units in Holdings LLC, and (v) $114.4 million was used to repurchase and retire 5,122,645 shares of Class A common stock held by Onex. The Company is now a publicly traded company whose Class A common stock is traded on the New York Stock Exchange under the ticker symbol “RYAN”. Prior to the completion of the IPO, Holdings LLC and certain Holdings LLC subsidiaries consummated an internal reorganization. In connection with the IPO, the Company completed the Organizational Transactions. The Organizational Transactions included:
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The adoption of the Sixth Amended and Restated Limited Liability Company Agreement of Holdings LLC (the “LLC Operating Agreement”) to, among other things, appoint Ryan Specialty Group Holdings, Inc. as the sole managing member of Holdings LLC. |
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All Class A common units of Holdings LLC, including existing units with a participation threshold, were reclassified into an aggregate of 213,693,861 LLC Units, and all Class B common units of Holdings LLC were reclassified into an aggregate of 20,680,420 LLC Units. Upon the completion of this reclassification, subject to certain limited exceptions, all existing holders of LLC Units were (i) required to sell 15.0% of their vested interest (inclusive of vested equity grants and purchased equity) in Holdings LLC and (ii) had the option to sell up to (x) an additional 10.0% of their vested interest received as an equity grant under compensatory plans or arrangements and (y) 100% of their remaining purchased interest, in each case, on a pro rata basis, subject to reduction in connection with the IPO and certain other limited exceptions. |
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We amended and restated the certificate of incorporation of Ryan Specialty Group Holdings, Inc. to, among other things, provide for Class A common stock and Class B common stock. |
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An entity through which Onex held its common unit interest in Holdings LLC (the “Common Blocker Entity”) engaged in a series of transactions that resulted in Onex exchanging all of the equity interests in the Common Blocker Entity for 20,680,420 shares of Class A common stock and a right to participate in the Tax Receivable Agreement. |
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The Ryan Parties exchanged an aggregate of 11,540,324 units for 11,540,324 shares of Class A common stock and a right to participate in the Tax Receivable Agreement on account of such shares received. |
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Through a series of internal transactions, certain of our current and past employees and existing investors in Holdings LLC (i) either sold 100% of their LLC Units in connection with the IPO or had their LLC Units (after giving effect to the Participation and excluding the incentive units described in the following item) exchanged into an aggregate of 38,143,990 shares of Class A common stock on a basis and (ii) received TRA alternative payments (“TRA Alternative Payments”). |
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With respect to certain current and former employee holders of incentive units that ceased to be holders of LLC Units and became holders of Class A common stock in connection with the Organizational Transactions, such incentive units (after giving effect to the Participation) were exchanged for an aggregate of 11,426,502 shares of Class A common stock and were additionally granted an aggregate of 4,637,622 options to purchase shares of Class A common stock under the Ryan Specialty Group Holdings, Inc. 2021 Omnibus Incentive Plan ( the “top-up options” or “reload options ”). Each such top-up option issued under the 2021 Plan is exercisable for one share of our Class A common stock at an exercise price equal to the IPO price of $23.50. |
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With respect to the LLC Unitholders who have incentive units and remained as LLC Unitholders after completion of the Organizational Transactions, subject to any reclassification adjustment, such incentive units were exchanged (i) for an aggregate of 27,493,190 LLC Units (after giving effect to the Participation) and (ii) an aggregate of 3,911,482 Management Incentive Units with a participation threshold equal to the IPO price of $23.50, which Management Incentive Units are subject to vesting and will be exchangeable into LLC Units, which will then be immediately redeemed for Class A common stock based on the value of Management Incentive Units and the fair market value of the Class A common stock at the time of the applicable exchange. The Management Incentive Units granted under this paragraph are referred to as the “top-up Management Incentive Units.” |
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The issuance of an aggregate of 8,171,522 equity awards, including (i) an aggregate of 66,667 options to purchase Class A common stock with an exercise price equal to the IPO price of $23.50, (ii) an aggregate of 4,444,911 restricted stock units of Class A common stock, (iii) an aggregate of 2,116,667 Management Incentive Units (exclusive of the top-up Management Incentive Units) with a participation threshold equal to the
IPO price of $23.50, and (iv) an aggregate of 1,543,277 restricted LLC units of Holdings LLC, in each case, were issued to certain employees in connection with the IPO as IPO awards and are subject to vesting. |
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With respect to the Ryan Parties, subject to any reclassification adjustment, their common units with a participation threshold were exchanged (after giving effect to the Participation) for an aggregate of 736,435 LLC Units. |
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Ryan Specialty Group Holdings, Inc. issued shares of Class B common stock to the LLC Unitholders, on a basis with the number of LLC Units each LLC Unitholder owns upon the consummation of the Organizational Transactions, for nominal consideration. Shares of Class B common stock were not issued to the LLC Unitholders with respect to the Management Incentive Units. |
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Pursuant to the LLC Operating Agreement, the LLC Unitholders were entitled to exchange LLC Units for shares of Class A common stock on a basis or, at our election, for cash, from a substantially concurrent public offering or private sale (based on the price of our Class A common stock in such public offering or private sale). The LLC Unitholders were also required to deliver to us an equivalent number of shares of Class B common stock to effectuate such an exchange. Any shares of Class B common stock so delivered were canceled. |
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Ryan Specialty Group Holdings, Inc. entered into a Tax Receivable Agreement with the LLC Unitholders and Onex that will provide for the payment by us to the LLC Unitholders and Onex, collectively, of 85%
of the amount of cash savings, if any, in U.S. federal, state and local income taxes (computed using simplifying assumptions to address the impact of state and local taxes) the Company actually realizes (or, under certain circumstances is deemed to realize in the case of an early termination payment by us, a change in control or a material breach by us of our obligations under the Tax Receivable Agreement, as discussed below) as a result of certain (i) increases in the tax basis of assets of Holdings LLC and its subsidiaries resulting from purchases or exchanges of LLC Units, (ii) tax attributes of Holdings LLC and subsidiaries of Holdings LLC that existed prior to the IPO or to which we succeed as a result of the Common Blocker Mergers, favorable “remedial” partnership tax allocations to which we become entitled (if any), and (iv) other tax benefits related to our entering into the Tax Receivable Agreement, including certain tax benefits attributable to payments that we are required to make under the Tax Receivable Agreement. Additionally, with respect to the holders of LLC Units who either sold 100% of their LLC Units in connection with the IPO or had their LLC Units (after giving effect to the Participation) exchanged for shares of Class A common stock on a basis in the Organizational Transactions, such holders had the right to receive a one-time lump sum payment in an aggregate amount of $72.9 million, comprised of (i) $36.5 million of consideration for certain tax attributes arising as a result of the sale of any of their vested interest in connection with the Participation and (ii) $36.4 million of certain additional consideration related to the exchange of their LLC Units for Class A common stock (in amounts intended to approximate what the holders would have received had their exchange with us been taxable and provided us with additional tax attributes, although these exchanges will not relate to actual tax benefits obtained or to be obtained by us) (collectively, the TRA Alternative Payments). |
In connection with the IPO, the Company became the sole managing member of Holdings LLC and controls the management of Holdings LLC. As a result, the Company will consolidate Holdings LLC’s financial results in its consolidated financial statements and report a non-controlling interest in the economic interest in Holdings LLC held by the remaining LLC Unitholders. |
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