Victory Capital Holdings, Inc. 10-Q

Item 1A. Risk Factors For a discussion of our potential risks and uncertainties, see the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC and the information contained in this report. The declaration, payment and determination of the amount of our quarterly dividends may change at any time. In making decisions regarding our quarterly dividends, we consider general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions (including under the terms of our 2019 Credit Agreement as amended) and legal, tax, regulatory and such other factors as we may deem relevant. On November 4, 2021, the Company entered into the WestEnd Advisors Purchase Agreement. Risk factors related to the WestEnd Acquisition are discussed below, and should be read together with, the risk factors disclosed in our latest annual report on Form 10-K. The WestEnd Acquisition is subject to closing conditions, including certain conditions that may not be satisfied on a timely basis or may not be satisfied at all. Failure to complete the WestEnd Acquisition could have material and adverse effects on the Company. The completion of the WestEnd Acquisition is subject to a number of closing conditions, including (1) the receipt of client consents representing revenues of at least 80% of a baseline revenue amount, (2) the expiration of the applicable waiting period under the HSR Act, (3) the absence of any material adverse effect (as defined in the WestEnd Purchase Agreement) on the business of WestEnd, (4) certain WestEnd principals not having been terminated and not having resigned (or given notice of resignation) and employment documentation with such principals remaining in full force and effect and (5) other customary closing conditions. In addition, the WestEnd Purchase Agreement contains customary termination rights for WestEnd and the Company, including in the event the WestEnd Acquisition is not consummated on or before May 4, 2022 . If the WestEnd Acquisition is not completed on a timely basis or at all, our ongoing business may be adversely affected. Additionally, in the event that the WestEnd Acquisition is not completed, the Company will be subject to a number of risks without realizing any of the benefits of having completed the WestEnd Acquisition, including the following: • We will be required to pay our costs relating to the WestEnd Acquisition, such as legal, accounting and financial advisory fees; • Time and resources committed by our management to matters relating to the WestEnd Acquisition could otherwise have been devoted to pursuing other beneficial opportunities; and • The market price of our securities could decline to the extent that the current market price reflects a market assumption that the WestEnd Acquisition will not be completed, or to the extent that the WestEnd Acquisition is fundamental to our business strategy. We may not realize the benefits we expect from the WestEnd Acquisition because of integration difficulties and other challenges. The success of the WestEnd Acquisition will depend in large part on the success of integrating the personnel, operations, strategies, technologies and other components of the businesses following the completion of the WestEnd Acquisition. The Company may fail to realize some or all of the anticipated benefits of the WestEnd Acquisition if the integration process takes longer than expected or is more costly than expected. The failure of the Company to meet the challenges involved in successfully integrating the operations of WestEnd or to otherwise realize any of the anticipated benefits of the WestEnd Acquisition could impair the operations of the Company. The increase in indebtedness in connection with the WestEnd Acquisition may expose us to material risks. As of September 30, 2021, we had $646.2 million of outstanding term loans under the Existing Credit Agreement. In connection with the WestEnd Acquisition, we expect to incur a substantial amount of additional indebtedness. On November 4, 2021, the Company secured commitments for a $505.0 million senior secured incremental first lien term loan B facility . Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to 43 Table of Contents prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. Subsequent to the closing of the WestEnd Acquisition, any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations.