UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-32147

GREENHILL & CO., INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		51-0500737
(State or Other Jurisdiction		(I.R.S. Employer
of Incorporation or Organization)		Identification No.)
300 Park Avenue
New York, New York		10022
(Address of Principal Executive Offices)		(ZIP Code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” ”accelerated filer” and ”smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller Reporting Company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 27, 2010, 29,472,387shares of the Registrant’s common stock were outstanding.

 

 

TABLE OF CONTENTS

Item No.				Page
Part I. Financial Information					4
1.		Condensed Consolidated Financial Statements			4
		Condensed Consolidated Statements of Financial Condition as of June 30, 2010 (unaudited) and December 31, 2009			4
		Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010 and 2009 (unaudited)			5
		Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2010 and 2009 (unaudited)			6
		Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2010 (unaudited) and year ended December 31, 2009			7
		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)			8
		Notes to Condensed Consolidated Financial Statements (unaudited)			9
2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
3.		Quantitative and Qualitative Disclosures About Market Risk			44
4.		Controls and Procedures			44
Part II. Other Information					45
1.		Legal Proceedings			45
1A.		Risk Factors			45
2.		Unregistered Sales of Equity Securities and Use of Proceeds			45
3.		Defaults Upon Senior Securities			45
4.		Other Information			45
5.		Exhibits			46
Signature					S-1
Exhibits
Ex-31.1
Ex-31.2
Ex-32.1
Ex-32.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

AVAILABLE INFORMATION

     Greenhill & Co., Inc. files current, annual and quarterly reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), with the SEC. You may read and copy any document the company files at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov. Copies of these reports, proxy statements and other information can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, U.S.A.

     Our public internet site is http://www.greenhill.com. We make available free of charge through our internet site, via a link to the SEC’s internet site at http://www.sec.gov, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Also posted on our website in the ‘‘Corporate Governance’’ section, and available in print upon request of any stockholder to the Investor Relations Department, are charters for our Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee, our Corporate Governance Guidelines, Related Party Transaction Policy and Code of Business Conduct & Ethics governing our directors, officers and employees. You may need to have Adobe Acrobat Reader software installed on your computer to view these documents, which are in PDF format.

Part I. Financial Information

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition

		As of
		June 30,
		2010				December 31,
		(unaudited)				2009
Assets
Cash and cash equivalents		$	37,585,819			$	74,473,459
Financial advisory fees receivable, net of allowance for doubtful accounts of $0.1 million and $0.0 million as of June 30, 2010 and December 31, 2009, respectively			26,434,106				26,021,124
Other receivables			7,005,462				4,980,749
Property and equipment, net			12,574,214				12,794,680
Investments in affiliated merchant banking funds			76,703,084				71,844,438
Other investments			111,237,014				78,516,718
Due from affiliates			502,470				233,617
Goodwill			135,812,748				18,721,430
Deferred tax asset			50,336,742				40,101,916
Other assets			7,839,345				701,352
Total assets		$	466,031,004			$	328,389,483
Liabilities and Equity
Compensation payable		$	18,000,705			$	31,855,992
Accounts payable and accrued expenses			9,299,074				7,295,857
Bank loan payable			55,425,000				37,150,000
Deferred tax liability			26,727,131				18,141,138
Due to affiliates			—				393,288
Total liabilities			109,451,910				94,836,275
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 35,037,017 and 33,254,271 shares issued as of June 30, 2010 and December 31, 2009, respectively; 29,434,740 and 27,977,623 shares outstanding as of June 30, 2010 and December 31, 2009, respectively			350,370				332,543
Contingent convertible preferred stock, par value $0.01 per share; 20,000,000 shares authorized, 1,099,877 shares issued and outstanding as of June 30, 2010			46,950,226				—
Restricted stock units			76,735,413				81,219,868
Additional paid-in capital			366,427,698				237,716,672
Exchangeable shares of subsidiary; 257,156 shares issued as of June 30, 2010 and December 31, 2009; 110,191 and 132,955 shares outstanding as of June 30, 2010 and December 31, 2009, respectively			6,578,403				7,937,414
Retained earnings			197,303,787				206,974,630
Accumulated other comprehensive loss			(23,429,678	)			(8,737,728	)
Treasury stock, at cost, par value $0.01 per share; 5,602,277 and 5,276,648 shares as of June 30, 2010 and December 31, 2009, respectively			(318,541,628	)			(293,391,405	)
Stockholders’ equity			352,374,591				232,051,994
Noncontrolling interests			4,204,503				1,501,214
Total equity			356,579,094				233,553,208
Total liabilities and equity		$	466,031,004			$	328,389,483

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Revenues
Financial advisory fees		$	61,921,454			$	45,511,600			$	98,518,763			$	110,656,294
Merchant banking and other investment revenues			21,498,748				8,345,598				33,737,401				4,954,843
Interest income			108,401				243,538				128,367				316,278
Total revenues			83,528,603				54,100,736				132,384,531				115,927,415
Expenses
Employee compensation and benefits			38,368,345				25,215,512				70,523,357				53,655,786
Occupancy and equipment rental			3,680,902				3,022,834				6,830,191				5,572,830
Depreciation and amortization			1,663,639				1,277,820				2,415,796				2,431,581
Information services			1,434,404				1,256,388				3,173,481				2,745,994
Professional fees			1,988,670				1,552,136				4,232,536				2,984,252
Travel related expenses			2,908,794				1,984,481				5,126,524				3,896,168
Interest expense			584,340				341,958				1,112,382				695,604
Other operating expenses			2,653,160				2,301,531				5,551,658				4,402,035
Total expenses			53,282,254				36,952,660				98,965,925				76,384,250
Income before taxes			30,246,349				17,148,076				33,418,606				39,543,165
Provision for taxes			11,358,643				6,854,759				11,679,098				15,531,376
Consolidated net income			18,887,706				10,293,317				21,739,508				24,011,789
Less: Net income (loss) allocated to noncontrolling interests			1,337,676				509				3,677,582				(179,134	)
Net income allocated to common stockholders		$	17,550,030			$	10,292,808			$	18,061,926			$	24,190,923
Average shares outstanding:
Basic			30,708,263				29,508,520				30,301,144				29,495,056
Diluted			30,768,603				29,623,249				30,372,089				29,572,969
Earnings per share:
Basic		$	0.57			$	0.35			$	0.60			$	0.82
Diluted		$	0.57			$	0.35			$	0.59			$	0.82
Dividends declared and paid per share		$	0.45			$	0.45			$	0.90			$	0.90

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Consolidated net income		$	18,887,706			$	10,293,317			$	21,739,508			$	24,011,789
Currency translation adjustment, net of tax			(11,479,009	)			8,749,379				(14,691,950	)			6,930,836
Comprehensive income			7,408,697				19,042,696				7,047,558				30,942,625
Less: Net income (loss) allocated to noncontrolling interests			1,337,676				509				3,677,582				(179,134	)
Comprehensive income allocated to common stockholders		$	6,071,021			$	19,042,187			$	3,369,976			$	31,121,759

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

		Six Months Ended
		June 30,				Year Ended
		2010				December 31,
		(unaudited)				2009
Common stock, par value $0.01 per share
Common stock, beginning of the year		$	332,543			$	328,304
Common stock issued			17,827				4,239
Common stock, end of the period			350,370				332,543
Contingent convertible preferred stock, par value $0.01 per share
Contingent convertible preferred stock, beginning of the year			—				—
Contingent convertible preferred stock issued			46,950,226				—
Contingent convertible preferred stock, end of the period			46,950,226				—
Restricted stock units
Restricted stock units, beginning of the year			81,219,868				59,525,357
Restricted stock units recognized			26,009,375				40,526,780
Restricted stock units delivered			(30,493,830	)			(18,832,269	)
Restricted stock units, end of the period			76,735,413				81,219,868
Additional paid-in capital
Additional paid-in capital, beginning of the year			237,716,672				213,365,812
Common stock issued			121,172,211				23,603,749
Tax benefit from the delivery of restricted stock units			7,538,815				747,111
Additional paid-in capital, end of the period			366,427,698				237,716,672
Exchangeable shares of subsidiary
Exchangeable shares of subsidiary, beginning of the year			7,937,414				12,442,555
Exchangeable shares of subsidiary delivered			(1,359,011	)			(4,505,141	)
Exchangeable shares of subsidiary, end of the period			6,578,403				7,937,414
Retained earnings
Retained earnings, beginning of the year			206,974,630				189,357,441
Dividends			(27,732,769	)			(53,622,825	)
Net income allocated to common stockholders			18,061,926				71,240,014
Retained earnings, end of the period			197,303,787				206,974,630
Accumulated other comprehensive loss
Accumulated other comprehensive loss, beginning of the year			(8,737,728	)			(17,408,714	)
Currency translation adjustment, net			(14,691,950	)			8,670,986
Accumulated other comprehensive loss, end of the period			(23,429,678	)			(8,737,728	)
Treasury stock, at cost; par value $0.01 per share
Treasury stock, beginning of the year			(293,391,405	)			(259,361,550	)
Repurchased			(25,150,223	)			(9,645,599	)
Sale of certain merchant banking assets			—				(24,384,256	)
Treasury stock, end of the period			(318,541,628	)			(293,391,405	)
Total stockholders’ equity			352,374,591				232,051,994
Noncontrolling interests
Noncontrolling interests, beginning of the year			1,501,214				1,817,595
Net income (loss) allocated to noncontrolling interests			3,677,582				(82,451	)
Contributions from noncontrolling interests			151,387				34,406
Distributions to noncontrolling interests			(1,125,680	)			(268,336	)
Noncontrolling interests, end of period			4,204,503				1,501,214
Total equity		$	356,579,094			$	233,553,208

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

		For the Six Months Ended
		June 30,
		2010				2009
Operating activities:
Consolidated net income		$	21,739,508			$	24,011,789
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities:
Non-cash items included in net income:
Depreciation and amortization			2,415,796				2,431,581
Net investment (gains) losses			(25,123,956	)			3,999,083
Restricted stock units recognized and common stock issued			26,113,171				20,458,261
Deferred taxes			10,108,315				(3,341,370	)
Recognition of the deferred gain from the sale of certain merchant banking assets			(549,864	)			—
Changes in operating assets and liabilities:
Financial advisory fees receivable			1,734,201				269,179
Due from affiliates			(662,141	)			(813,290	)
Other receivables and assets			421,242				(711,709	)
Compensation payable			(25,829,526	)			(14,460,963	)
Accounts payable and accrued expenses			(1,711,868	)			(4,931,471	)
Taxes payable			(10,010,085	)			(6,893,617	)
Net cash (used in) provided by operating activities			(1,355,207	)			20,017,473
Investing activities:
Purchases of merchant banking investments			(11,536,627	)			(7,635,270	)
Purchases of investments			(208,026	)			(525,000	)
Caliburn acquisition, net of cash received			534				—
Distributions from investments			5,898,387				7,889,307
Purchases of property and equipment			(1,221,214	)			(1,743,880	)
Net cash used in investing activities			(7,066,946	)			(2,014,843	)
Financing activities:
Proceeds of revolving bank loan			58,275,000				62,875,000
Repayment of revolving bank loan			(40,000,000	)			(56,000,000	)
Contributions from noncontrolling interests			151,387				18,000
Distributions to noncontrolling interests			(1,125,680	)			(124,699	)
Dividends paid			(27,732,769	)			(27,730,323	)
Purchase of treasury stock			(25,150,223	)			(7,725,034	)
Net tax benefit from the delivery of restricted stock units and payment of dividend equivalents			7,538,815				1,227,519
Net cash used in financing activities			(28,043,470	)			(27,459,537	)
Effect of exchange rate changes on cash and cash equivalents			(422,017	)			1,656,953
Net decrease in cash and cash equivalents			(36,887,640	)			(7,799,954	)
Cash and cash equivalents, beginning of period			74,473,459				62,848,655
Cash and cash equivalents, end of period		$	37,585,819			$	55,048,701
Supplemental disclosure of cash flow information:
Cash paid for interest		$	1,196,420			$	663,181
Cash paid for taxes, net of refunds		$	3,733,140			$	25,764,840

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 — Organization

     Greenhill & Co., Inc., a Delaware corporation, together with its subsidiaries (collectively, the “Company”), is an independent investment banking firm. The Company acts for clients located throughout the world from offices located in New York, London, Frankfurt, Sydney, Tokyo, Toronto, Chicago, Dallas, Houston, Los Angeles, Melbourne, and San Francisco.

     The Company’s activities as an investment banking firm constitute a single business segment, with two principal sources of revenue:

	•		Financial advisory, which includes engagements relating to mergers and acquisitions, financing advisory and restructuring, and private equity and real estate capital advisory services; and
	•		Merchant banking, which includes the management of outside capital invested in affiliated merchant banking funds and other similar vehicles, primarily Greenhill Capital Partners (“GCP I”), Greenhill Capital Partners II (“GCP II”), Greenhill Capital Partners Europe (“GCP Europe”), and Greenhill SAV Partners (“GSAVP” together with GCP I, GCP II and GCP Europe, the “Greenhill Funds”), and the Company’s principal investments in the Greenhill Funds, Iridium Communications Inc. (“Iridium”), other merchant banking funds and other investments.

     The Company’s U.S. and international wholly-owned subsidiaries include Greenhill & Co., LLC (“G&Co”), Greenhill Capital Partners, LLC (“GCPLLC”), Greenhill Venture Partners, LLC (“GVP”), Greenhill Aviation Co., LLC (“GAC”), Greenhill & Co. Europe Holdings Limited (“GCE”), Greenhill & Co. Holding Canada Ltd (“GHC”), Greenhill & Co. Japan Ltd. (“GCJ”) and Greenhill & Co. Australia Holdings Pty Ltd. (“GHA”). The Company also owns a majority of the interests in Greenhill Capital Partners II, LLC (“GCPII LLC”). See “Note 4 – Investments – Affiliated Merchant Banking Investments”.

     G&Co is a registered broker-dealer under the Securities Exchange Act of 1934, as amended, and is registered with the Financial Industry Regulation Authority. G&Co is engaged in the investment banking business principally in North America.

     GCE is a U.K.-based holding company. GCE controls Greenhill & Co. International LLP (“GCI”), Greenhill & Co. Europe LLP (“GCEI”) and Greenhill Capital Partners Europe LLP (“GCPE”), through its controlling membership interests. GCI and GCEI are engaged in investment banking activities, principally in Europe, and are subject to regulation by the U.K. Financial Services Authority (“FSA”). GCPE is also regulated by the FSA and provides investment advisory services to GCP Europe, an affiliated U.K.-based private equity fund that invests in a diversified portfolio of private equity and equity-related investments in mid-market companies located primarily in the United Kingdom and Continental Europe. The majority of the investors in GCP Europe are unaffiliated third parties; however, the Company and its employees have also made investments in GCP Europe.

     The Company, through Greenhill & Co. Canada Ltd., a wholly-owned Canadian subsidiary of GHC, engages in investment banking activities in Canada. The Company, through GCJ, engages in investment banking activities in Japan.

     On April 1, 2010, Greenhill acquired all the outstanding capital stock of Caliburn Partnership Pty Limited. (“Caliburn”, which was renamed Greenhill Caliburn Pty Limited, “Greenhill Caliburn”), an Australian-based independent financial advisory firm. The Company, through Greenhill Caliburn, a wholly-owned Australian subsidiary of GHA, engages in investment banking activities in Australia and New Zealand. See “Note 3 – Acquisition”. Greenhill Caliburn is licensed and subject to regulation by the Australian Securities and Investment Commission (“ASIC”).

     GCPLLC is an investment adviser, registered under the Investment Advisers Act of 1940 (“IAA”). GCPLLC provides investment advisory services to GCP I and GCP II, our U.S. based private equity funds

that invest in a diversified portfolio of private equity and equity-related investments. GCPII LLC acts as manager for GCP I, GCP II and GSAVP. The majority of the investors in GCP I and GCP II are unaffiliated third parties; however, the Company and its employees have also made investments in GCP I and GCP II.

     GVP is an investment adviser registered under the IAA. GVP provides investment advisory services to GSAVP, our venture fund that invests in early growth stage companies in the tech-enabled and business information services industries. The majority of the investors in GSAVP are unaffiliated third parties; however, the Company and its employees have also made investments in GSAVP.

     GAC owns and operates an aircraft, which is used for the exclusive benefit of the Company’s employees and their immediate family members.

     The Company owns an interest in Iridium Communications Inc. (“Iridium”), formerly GHL Acquisition Corp., a blank check company (“GHLAC”). See “Note 4 – Investments – Affiliated Merchant Banking Investments”.

Note 2 — Summary of Significant Accounting Policies

     These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted (“GAAP”) in the United States, which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and these footnotes, including investment valuations, compensation accruals and other matters. Management believes that the estimates used in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates.

     The condensed consolidated financial statements of the Company include all consolidated accounts of Greenhill & Co., Inc. and all other entities in which the Company has a controlling interest, including GCI, GCEI, GCPE, and GCPII LLC, after elimination of all significant inter-company accounts and transactions. In accordance with the accounting pronouncements on the consolidation of variable interest entities, the Company consolidates the general partners of its merchant banking funds in which it has a majority of the economic interest. The general partners account for their investments in their merchant banking funds under the equity method of accounting. As such, the general partners record their proportionate shares of income (loss) from the underlying merchant banking funds. As the merchant banking funds follow investment company accounting, and generally record all their assets and liabilities at fair value, the general partners’ investment in merchant banking funds represents an estimation of fair value. The Company does not consolidate the merchant banking funds since the Company, through its general partner and limited partner interests, does not have a majority of the economic interest in such funds and the limited partners have certain rights to remove the general partner by a simple majority vote of unaffiliated third-party investors.

     These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2009 filed with the Securities and Exchange Commission. The condensed consolidated financial information as of December 31, 2009 has been derived from audited consolidated financial statements not included herein. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Noncontrolling Interests

     The Company records the noncontrolling interests of other consolidated entities as equity in the condensed consolidated statements of financial condition. Additionally, the condensed consolidated statements of income separately present income allocated to both noncontrolling interests and common stockholders.

     The portion of the consolidated interests in the general partners of the Company’s merchant banking funds, which are held directly by employees of the Company, are presented as noncontrolling interests in

equity. Additionally, the portion of the consolidated interests in GCP II LLC, which accrues to the benefit of GCP Capital Partners Holdings LLC (“GCP Capital”), an entity not controlled by the Company, is presented as noncontrolling interest in equity. See “Note 4 – Investments – Affiliated Merchant Banking Investments”.

Revenue Recognition

  Financial Advisory Fees

     The Company recognizes financial advisory fee revenue for mergers and acquisitions or financing advisory and restructuring engagements when the services related to the underlying transactions are completed in accordance with the terms of the engagement letters. The Company recognizes fund placement advisory fees at the time of the client’s acceptance of capital or capital commitments in accordance with the terms of the engagement letter. Retainer fees are recognized as financial advisory fee revenue over the period in which the related service is rendered.

     The Company’s clients reimburse certain expenses incurred by the Company in the conduct of financial advisory engagements. Expenses are reported net of such client reimbursements. Client reimbursements totaled $1.2 million and $1.1 million for the three months ended June 30, 2010 and 2009 and $2.0 million and $1.5 million for the six months ended June 30, 2010 and 2009, respectively.

  Merchant Banking and Other Investment Revenues

     Merchant banking revenues consist of (i) management fees on the Company’s merchant banking activities, (ii) gains (or losses) on the Company’s investments in merchant banking funds and other principal investment activities, and, if any, (iii) merchant banking profit overrides. See “Note 4 – Investments – Affiliated Merchant Banking Investments”.

     Management fees earned from the Company’s merchant banking activities are recognized over the period of related service.

     The Company recognizes revenue on its investments in merchant banking funds based on its allocable share of realized and unrealized gains (or losses) reported by such funds. Investments held by merchant banking funds and certain other investments are recorded at estimated fair value. The value of merchant banking fund investments in privately held companies is determined by the general partner of the fund after giving consideration to the cost of the security, the pricing of other sales of securities by the portfolio company, the price of securities of other companies comparable to the portfolio company, purchase multiples paid in other comparable third-party transactions, the original purchase price multiple, market conditions, liquidity, operating results and other qualitative and quantitative factors. Discounts may be applied to the funds’ privately held investments to reflect the lack of liquidity and other transfer restrictions. Investments in publicly traded securities are valued using quoted market prices discounted for any legal or contractual restrictions on sale. Because of the inherent uncertainty of valuations as well as the discounts applied, the estimated fair values of investments in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed. The values at which the Company’s investments are carried on its condensed consolidated statements of financial condition are adjusted to estimated fair value at the end of each quarter and the volatility in general economic conditions, stock markets and commodity prices may result in significant changes in the estimated fair value of the investments from period to period.

     When certain financial returns are achieved over the life of the fund, the Company recognizes merchant banking profit overrides. Profit overrides are generally calculated as a percentage of the profits over a specified threshold earned by each fund on investments managed on behalf of unaffiliated investors except the Company. When applicable, the profit overrides earned by the Company are recognized on an accrual basis throughout the year. In accordance with the guidance for accounting for formula-based fees, the Company records as revenue the amount that would be due pursuant to the fund agreements at each period end as if the fund agreements were terminated at that date. Overrides are generally calculated on a deal-by-deal basis but are subject to investment performance over the life of each merchant banking fund.

We may be required to repay a portion of the overrides paid to the limited partners of the funds in the event a minimum performance level is not achieved by the fund as a whole (we refer to these potential repayments as “clawbacks”). The Company would be required to establish a reserve for potential clawbacks if it were to determine that the likelihood of a clawback is probable and the amount of the clawback can be reasonably estimated. As of June 30, 2010, the Company believes it is more likely than not that the amount of profit overrides recognized as revenue will be realized and accordingly, the Company has not reserved for any clawback obligations under applicable fund agreements. See “Note 4 — Investments – Affiliated Merchant Banking Investments” for further discussion of the merchant banking revenues recognized.

Investments

     The Company’s investments in its merchant banking funds are recorded under the equity method of accounting based upon the Company’s proportionate share of the fair value of the underlying merchant banking fund’s net assets. The Company’s other investments, which consider the Company’s influence or control of the investee, are recorded at estimated fair value or under the equity method of accounting based, in part, upon the Company’s proportionate share of the investee’s net assets.

Financial Advisory Fees Receivables

     Receivables are stated net of an allowance for doubtful accounts. The estimate for the allowance for doubtful accounts is derived by the Company by utilizing past client transaction history and an assessment of the client’s creditworthiness. The Company recorded bad debt expense of approximately $0.1 million for the six months ended June 30, 2010 and released previously recorded bad debt expense of $0.3 million during the six months ended June 30, 2009.

Restricted Stock Units

     The Company accounts for its share-based compensation payments under which the fair value of restricted stock units granted to employees with future service requirements is recorded as compensation expense and generally amortized over a five-year service period following the date of grant. Compensation expense is determined at the date of grant. As the Company expenses the awards, the restricted stock units recognized are recorded within equity. The restricted stock units are reclassed into common stock and additional paid-in capital upon vesting. The Company records dividend equivalent payments, net of estimated forfeitures, on outstanding restricted stock units as a dividend payment and a charge to equity.

Earnings per Share

     The Company calculates earnings per share (‘‘EPS’’) by dividing net income allocated to common stockholders by the weighted average number of shares outstanding for the period. Diluted EPS includes the determinants of basic EPS plus the dilutive effect of the common stock deliverable pursuant to restricted stock units for which future service is required as a condition to the delivery of the underlying common stock.

     Under the treasury method, the number of shares issuable upon the vesting of restricted stock units included in the calculation of diluted earnings per share is the excess, if any, of the number of shares expected to be issued, less the number of shares that could be purchased by the Company with the proceeds to be received upon settlement at the average market closing price during the reporting period. The denominator for basic EPS includes the number of shares deemed issuable due to the vesting of restricted stock units for accounting purposes.

     Effective on January 1, 2009, the Company adopted the accounting guidance for determining whether instruments granted in share-based payment transactions are participating securities. Under that guidance, the Company evaluated whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore need to be included in the earnings allocation in calculating EPS. Additionally, the two-class method requires unvested share-based payment awards that have non-forfeitable rights to dividend or dividend equivalents to be treated as a separate class of securities in

calculating earnings per share. The adoption of this pronouncement did not have a material effect in calculating earnings per share.

Foreign Currency Translation

     Foreign currency assets and liabilities have been translated at rates of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Income and expenses transacted in foreign currency have been translated at average monthly exchange rates during the period. Translation gains and losses are included in the foreign currency translation adjustment included as a component of other comprehensive income (loss) in the condensed consolidated statements of changes in equity. Foreign currency transaction gains and losses are included in the condensed consolidated statements of income.

Goodwill

     Goodwill is the cost in excess of the fair value of identifiable net assets at acquisition date. The Company tests its goodwill for impairment at least annually. An impairment loss is triggered if the estimated fair value of an operating unit is less than estimated net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value.

     Goodwill is translated at the rate of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Any translation gain or loss is included in the foreign currency translation adjustment included as a component of other comprehensive income (loss) in the condensed consolidated statement of changes in equity.

Property and Equipment

     Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the life of the assets. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the life of the asset or the term of the lease. Estimated useful lives of the Company’s fixed assets are generally as follows:

     Aircraft – 7 years

     Equipment – 4 years

     Furniture and fixtures – 7 years

     Leasehold improvements – the lesser of 10 years or the remaining lease term

Provision for Taxes

     The Company accounts for taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), “Income Taxes (Topic 740),” which requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities.

     The Company follows the guidelines, pursuant to FASB ASC Topic 740-10, in recognizing, measuring, presenting and disclosing in its financial statements uncertain tax positions taken or expected to be taken on its income tax returns. Income tax expense is based on pre-tax accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The recognition or derecognition of income tax expense related to uncertain tax positions is determined under the guidance as prescribed by FASB ASC Topic 740-10. Deferred tax assets and liabilities are recognized for the future tax attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period of change. Management applies the ‘‘more-likely-than-not criteria’’ included in FASB ASC Topic 740-10 when determining tax benefits.

Cash and Cash Equivalents

     The Company held cash on deposit with financial institutions of $24.8 million and $31.8 million as of June 30, 2010 and December 31, 2009, respectively. The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents. At June 30, 2010 and December 31, 2009, the carrying value of the Company’s cash equivalents amounted to $12.8 million and $42.7 million, respectively, which approximated fair value. Cash equivalents primarily consist of money market funds and overnight deposits. At June 30, 2010 and December 31, 2009, $0.9 million and $0.0 million, respectively, was held by certain financial institutions as compensating balances for outstanding letters of credit.

     The Company maintains its cash and cash equivalents with financial institutions with high credit ratings. The Company maintains deposits in federally insured financial institutions in excess of federally insured (FDIC) limits and in institutions in which deposits are not insured. However, management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Financial Instruments and Fair Value

     The Company accounts for financial instruments measured at fair value in accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”. FASB ASC Topic 820 provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the pronouncement are described below:

     Basis of Fair Value Measurement

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 — Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

     A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to FASB ASC Topic 820. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.

Derivative Instruments

     The Company accounts for warrants under the guidance for accounting for derivative instruments and hedging activities. In accordance with that guidance, the Company records warrants at estimated fair value in the condensed consolidated statements of financial condition with changes in estimated fair value during the period recorded in merchant banking and other investment revenue in the condensed consolidated statements of income.

Subsequent Events

     The Company evaluates subsequent events through the date on which financial statements are issued, in accordance with ASU No. 2010-09, “Topic 855 – Amendments to Certain Recognition and Disclosure Requirements”.

Accounting Developments

     In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities. The guidance affects the overall consolidation analysis and requires enhanced disclosures on involvement with variable interest entities. The guidance was effective for fiscal years beginning after November 15, 2009; however, in January 2010, the FASB confirmed its decision to defer the effective date of this guidance for certain reporting enterprises in the asset management industry, including mutual funds, hedge funds, mortgage real estate investment funds, private equity funds and venture capital funds. The deferral is applicable to the Company and will apply until the completion of a joint project between the FASB and the International Accounting Standards Board (“IASB”) on consolidation accounting, which is expected to be completed in 2010. Accordingly, the deferral resulted in no changes to the Company’s financial reporting. The Company will assess the impact of the joint project when completed.

Note 3 — Acquisition

     On April 1, 2010, pursuant to the Share Sale Agreement the Company acquired 100% ownership of Caliburn from its founding partners (“the Acquisition”) in exchange for (i) 1,099,874 shares of Greenhill common stock, with an Acquisition date fair value of $90.2 million and (ii) 1,099,877 shares of contingent convertible preferred stock (“Performance Stock”) that pays no dividend and, if certain revenue levels are achieved on the third or fifth anniversary of the Acquisition, will convert into additional shares of Greenhill common stock. If those revenue levels are not achieved, the Performance Stock will be cancelled for each such period as of the third and fifth anniversaries of closing, respectively. The fair value of the Performance Stock on the Acquisition date was $47.0 million and has been recorded as a component of equity in accordance with ASC 805.

     The Acquisition has been accounted for using the purchase method of accounting and the results of operations for Greenhill Caliburn have been included in the condensed consolidated statement of income from the date of acquisition. The total purchase price of $137.2 million has been allocated to the assets acquired and liabilities assumed based on their estimated fair values as of April 1, 2010, the date of the acquisition, as follows (in thousands, unaudited):

Assets acquired and liabilities assumed:
Assets:
Cash		$	4,712
Other current assets			3,887
Property and equipment			643
Deferred compensation plan investments			11,295
Deferred tax assets			3,756
Identifiable intangible assets			8,568
Goodwill			127,972
Total assets			160,833
Liabilities:
Other current liabilities			5,438
Deferred compensation payable			11,295
Due to affiliates			6,861
Total liabilities			23,594
Purchase price		$	137,239

     The fair value of the identifiable intangible assets acquired, which consist of the trade name, the backlog of investment banking client assignments that existed at the time of the closing, and customer relationships, is based, in part, on a valuation using an income approach, market approach or cost approach, as appropriate, and has been included in other assets on the condensed consolidated statement of financial

condition. The estimated fair value ascribed to the identifiable intangible assets will be amortized on a straight-line basis over the estimated remaining useful life of each asset over periods ranging between 2 to 3 years. For the three months and six months ended June 30, 2010, the Company recorded $0.7 million of amortization expense in respect of these assets. The excess of the purchase price over the fair value of net assets acquired has been recorded as goodwill.

     In addition to the equity consideration provided to the sellers, under the terms of the Share Sale Agreement, the selling shareholders and certain other non-founding partners will receive a post closing distribution of accrued profits prior to the acquisition date of approximately $6.9 million. At June 30, 2010 approximately $2.8 million had not been distributed and is recorded as an accrued liability in the condensed consolidated statement of financial condition.

     In connection with the Acquisition the Company assumed Caliburn’s deferred compensation plan and acquired a corresponding amount of investments of approximately $11.3 million. Under this plan a portion of certain employees’ compensation was deferred and invested in cash or, at the election of each respective employee, in certain mutual fund investments. The cash and mutual fund investments will be distributed to those employees of Greenhill Caliburn, who were employed on the date of acquisition, over the period 2010 to 2016. Both the invested assets and the deferred compensation liability relating to this plan have been recorded on the consolidated statement of financial condition as components of other investments and compensation payable, respectively. Subsequent to the Acquisition the Company has discontinued future participation in the plan. See “Note 4 – Investments – Other Investments”.

     In conjunction with the Acquisition, the Company granted at closing 275,130 restricted stock units to current employees of Greenhill Caliburn. These awards will vest ratably over five years from the date of grant subject to continued employment and will amortize over the service period. In addition, the Company granted at closing 212,625 performance based restricted stock units (“Performance RSUs”). The Performance RSUs will vest on the third and fifth anniversaries of the closing subject to the achievement of the same revenue targets as the Performance Stock. Amortization of each tranche of the Performance RSUs will begin at the time it is deemed probable that the revenue targets will be achieved and the value of the award at that date will be amortized over the remaining vesting period of each award. If the performance requirements for the Performance RSUs are not achieved the Performance RSUs will be cancelled and no amount will be expensed.

     Set forth below are the Company’s summary unaudited pro forma results of operations for the three and six months ended June 30, 2010 and 2009. The unaudited pro forma results of operations for the six months ended June 30, 2010 include the historical results of the Company and give effect to the Acquisition if it had occurred on January 1, 2010. The unaudited results of operations for the three and six months ended June 30, 2009 include the historical results of the Company and give effect to the Acquisition if it had occurred on January 1, 2009. See “Note 7 – Equity” and “Note 8 – Earnings per Share”.

     The unaudited pro forma results of operations do not purport to represent what the Company’s results of operations would actually have been had the Acquisition occurred as of January 1, 2010 or January 1, 2009, as the case may be, or to project the Company’s results of operations for any future period. Actual future results may vary considerably based on a variety of factors beyond the Company’s control.

		For the Three Months Ended
		June 30,
		2010				2009
		(in millions, unaudited)
		(actual)				(pro forma)
Revenues		$	83.5			$	65.6
Income before taxes			30.2				20.5
Net income allocated to common stockholders			17.6				12.6
Diluted earnings per share		$	0.57			$	0.41

		For the Six Months Ended
		June 30,
		2010				2009
		(in millions, unaudited)
		(pro forma)
Revenues		$	136.7			$	132.9
Income before taxes			33.5				44.9
Net income allocated to common stockholders			18.1				28.0
Diluted earnings per share		$	0.60			$	0.91

     The pro forma results include (i) an adjustment of Caliburn’s compensation expense to Greenhill’s historical ratio of compensation expense to revenue for each period presented, (ii) the elimination of professional fees incurred by Caliburn in connection with the Acquisition in the three months ended March 31, 2010, and (iii) the recording of income tax expense resulting from the pro forma adjustments before tax at the Australian effective rate of 30 percent. The calculation of pro forma diluted earnings per share includes 1,099,874 common shares issued to the selling shareholders. The calculation of pro forma diluted shares does not include the contingent convertible preferred shares which may be converted in aggregate to 1,099,877 common shares in the event that Greenhill Caliburn achieves the three and five year revenue thresholds. See “Note 8 – Earnings Per Share”.

Note 4 — Investments

Affiliated Merchant Banking Investments

     In connection with its plan to separate from the merchant banking business, in December 2009 the Company sold certain assets related to the merchant banking business, including the right to raise subsequent merchant banking funds and a 24% ownership interest in GCPII LLC, to GCP Capital, an entity not controlled by the Company. The Company retained a 76% interest in GCPII LLC. Under the terms of the separation agreement, our affiliated general partner delegated to GCPII LLC its obligation to manage and administer the merchant banking funds during a transition period, which is expected to end in December 2010.

     As a result of this transaction, GCPII LLC remained a controlled and consolidated subsidiary of the Company; however, effective in 2010 GCP Capital has a direct non-controlling ownership interest with a preferred economic interest in the first $10 million of profits of GCPII LLC. During the transition period, the excess of GCPII LLC’s management fee revenue over amounts incurred for compensation and other operating expenses that accrues to the benefit of GCP Capital is presented as noncontrolling interest. During the three and six months ended June 30, 2010 the allocable amounts earned by GCPII LLC were $1.3 million and $3.7 million, respectively, which fell within the amount of profit threshold that was fully allocable to GCP Capital and has been recorded as noncontrolling interest.

     Although the Company will no longer manage the Greenhill Funds after the transition period, the Company retained its existing investments in the Greenhill Funds and will continue to act as the general partner of Greenhill Funds. In addition to recording its direct investments in the affiliated funds, the Company consolidates each general partner in which it has a majority economic interest.

     The Company’s management fee income consists of fees paid by its merchant banking funds and other transaction fees paid by the portfolio companies.

     Investment gains or losses from merchant banking and other investment activities are comprised of investment income, realized and unrealized gains or losses from the Company’s investment in the Greenhill Funds, Iridium, certain other investments, and the consolidated earnings of the general partner in which it has a majority economic interest, offset by allocated expenses of the funds. That portion of the earnings or losses of the general partner which is held by employees and former employees of the Company is recorded as net income (loss) allocated to noncontrolling interests.

     As the general partner, the Company makes investment decisions for the Greenhill Funds and is entitled to receive an override of the profits realized from the funds. When financial returns are achieved over the life of the funds, the Company includes in consolidated merchant banking and other investment revenues all realized and unrealized profit overrides it earns from the Greenhill Funds.

     As consideration for the sale of the merchant banking business, the Company received 289,050 shares of its common stock with a value of $24.4 million. The Company recognized a gain of $21.8 million in 2009 and deferred $2.6 million of gain on the sale related to non-compete and trademark licensing agreements, which will be amortized over the period 2010 to 2014.

     The Company’s merchant banking and other investment revenues, by source, are as follows:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
		(in thousands, unaudited)
Management fees		$	3,666			$	4,490			$	8,064			$	8,954
Net realized and unrealized gains (losses) on investments in merchant banking funds			(969	)			898				521				(6,233	)
Net realized and unrealized merchant banking profit overrides			—				700				91				400
Net unrealized gain on investment in Iridium			18,943				3,029				24,902				2,605
Other realized and unrealized investment income (loss)			(141	)			(771	)			159				(771	)
Total merchant banking and other investment revenues		$	21,499			$	8,346			$	33,737			$	4,955

     The carrying value of the Company’s investments in affiliated merchant banking funds is as follows:

		As of				As of
		June 30,				December 31,
		2010				2009
		(in thousands,				(in thousands,
		unaudited)				audited)
Investment in GCP I		$	3,141			$	3,147
Investment in GCP II			52,626				51,189
Investment in GSAVP			3,993				3,867
Investment in GCPE			16,943				13,641
Total investments in affiliated merchant banking funds		$	76,703			$	71,844

     At June 30, 2010 and December 31, 2009, the investment in GCP I included $0.2 million and $0.3 million, respectively, related to the noncontrolling interests in the managing general partner of GCP I held directly by various employees of the Company. At both June 30, 2010 and December 31, 2009, the investment in GCP II included $1.2 million related to the noncontrolling interests in the general partner of

GCP II held directly by various employees of the Company. Additionally, at June 30, 2010, GCP Capital’s undistributed noncontrolling interest was $2.8 million.

     Approximately $0.2 million of the Company’s compensation payable related to profit overrides for unrealized gains of the Greenhill Funds at both June 30, 2010 and December 31, 2009. This amount may increase or decrease depending on the change in the fair value of the Greenhill Funds’ portfolio, and is payable, subject to clawback, at the time the funds realize cash proceeds.

     At June 30, 2010, the Company had unfunded commitments of $31.0 million to certain of the Greenhill Funds, At June 30, 2010, the Company had unfunded commitments to GCP II of $8.2 million, which may be drawn down for follow-on investments through June 2012. The Company has unfunded commitments to GSAVP of $4.0 million which may be drawn through September 2011, and unfunded commitments to GCP Europe of $18.8 million (or £12.5 million) which may be drawn through December 2012.

     Summarized financial information for the combined GCP I funds, in their entirety, is as follows:

		As of				As of
		June 30,				December 31,
		2010				2009
		(in thousands,				(in thousands,
		unaudited)				audited)
Cash		$	8,096			$	6,047
Portfolio investments			14,320				15,756
Total assets			22,416				21,803
Total liabilities			1,308				151
Partners’ capital			21,108				21,652

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
		(in thousands, unaudited)
Net realized and unrealized gains (losses) on investments		$	(61	)		$	4,913			$	(369	)		$	4,544
Investment income			2				3				3				22
Expenses			(82	)			(181	)			(178	)			(328	)
Net income (loss)		$	(141	)		$	4,735			$	(544	)		$	4,238

     Summarized financial information for the combined GCP II funds, in their entirety, is as follows:

		As of				As of
		June 30,				December 31,
		2010				2009
		(in thousands,				(in thousands,
		unaudited)				audited)
Cash		$	10,541			$	25,762
Portfolio investments			494,871				506,773
Total assets			505,476				532,864
Total liabilities			589				46,943
Partners’ capital			504,887				485,921

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
		(in thousands, unaudited)
Net realized and unrealized gains (losses) on investments		$	1,731			$	(4,257	)		$	13,315			$	(63,656	)
Investment income			4,150				4,045				6,221				4,574
Expenses			(3,055	)			(2,138	)			(5,958	)			(4,313	)
Net income (loss)		$	2,826			$	(2,350	)		$	13,578			$	(63,395	)

Other Investments

     The Company has other principal investments including investments in Iridium, other merchant banking funds and other investments. The Company’s other investments are as follows:

		As of				As of
		June 30,				December 31,
		2010				2009
		(in thousands,				(in thousands,
		unaudited)				audited)
Iridium Common Stock (formerly GHLAC Common Stock)		$	89,597			$	68,077
Iridium $11.50 Warrants			10,280				8,015
Barrow Street Capital III, LLC			2,243				2,425
Deferred compensation plan investments			9,117				—
Total other investments		$	111,237			$	78,517

     In November 2007, the Company purchased 11,500,000 units of GHLAC for $25,000. In February 2008, the Company completed the initial public offering of units in GHLAC, and in conjunction therewith, forfeited 3,130,437 units. Each unit consisted of one share of GHLAC’s common stock (“GHLAC Common Stock”) and one warrant (the “Founder Warrants”). At the time of the public offering, the Company purchased 8,000,000 private placement warrants for a purchase price of $8.0 million (the “GHLAC Private Placement Warrants”, together with the Founder Warrants, the “GHLAC Warrants”). In October 2008, GCE invested $22.9 million in Iridium Holdings LLC in the form of a convertible subordinated note (the “Iridium 5% Convertible Note”), which was unsecured and accrued interest at the rate of 5% per annum starting six months after the date of issuance and had a maturity date of October 24, 2015. On September 29, 2009, GHLAC completed its acquisition of Iridium Holdings LLC. The combined company was renamed Iridium Communications Inc. (“Iridium”), and in October 2009, the Company converted the Iridium 5% Convertible Note into 1,995,629 common shares of Iridium (“Iridium Common Stock”) (NASDAQ: IRDM).

     Prior to the completion of the acquisition of Iridium by GHLAC, the Company’s fully diluted ownership in GHLAC was approximately 17%. Effective upon the closing of the acquisition of Iridium by GHLAC, the Company agreed to (1) forfeit 1,441,176 shares of GHLAC common stock, (2) forfeit 8,369,563 Founder Warrants, (3) forfeit 4,000,000 GHLAC Private Placement Warrants, and (4) exchange 4,000,000 GHLAC Private Placement Warrants for restructured warrants with a strike price of $11.50 per share and an expiration date of
February 15, 2015.

     At June 30, 2010 and December 31, 2009, the Company owned 8,924,016 shares of Iridium Common Stock and warrants to purchase 4,000,000 additional shares of Iridium Common Stock at $11.50 per share (“Iridium $11.50 Warrants”) (NASDAQ : IRDMZ) and the Company’s fully diluted ownership in Iridium was approximately 12%. Both the Iridium Common Stock and the Iridium $11.50 Warrants were restricted from sale until March 29, 2010.

     At December 31, 2009, the carrying value of the investments in Iridium Common Stock was valued at its closing market price discounted at 5% for legal and contractual restrictions on the sale of securities held by the Company.

     During the period March 30, 2010 through September 29, 2010, the Company is permitted to sell its investment in Iridium as part of a registered secondary offering if authorized by Iridium’s board of directors. As a result, at June 30, 2010, the Company has recorded its investment in Iridium at current fair value without a market discount. As of September 29, 2010, all contractual restrictions on the sale of the Company’s investments in Iridium will lapse.

     Prior to the acquisition of Iridium, the Company’s interest in GHLAC Common Stock was accounted for under the equity method as the Company maintained and exercised significant influence over the entity as defined by ASC 323. Upon closing of the acquisition of Iridium by GHLAC, the Company relinquished certain GHLAC board and management positions to Iridium. As such, the Company is no longer deemed to maintain or exercise significant influence over GHLAC and therefore changed its method of accounting for its investment in GHLAC from the equity method to fair value as trading securities under ASC 320. Since the closing of the acquisition of Iridium, an active trading market has not existed for the Iridium $11.50 Warrants and accordingly at June 30, 2010 and December 31, 2009, the Company used an internally developed model to value such warrants which takes into account various standard option valuation methodologies, including Black Scholes modeling. Selected inputs for the Company’s model include: (1) the terms of the warrants, including exercise price, exercisability threshold and expiration date; and (2) externally observable factors including the trading price of Iridium shares, yields on U.S. Treasury obligations and various equity volatility measures, including historical volatility of broad market indices. At June 30, 2009, the Company used an internally developed model to value the GHLAC Warrants which used the same inputs as the model used to value the Iridium $11.50 Warrants and also included inputs for the Company’s weighted average cost of capital and the probability of a GHLAC acquisition closing.

     At June 30, 2009, the Company determined the value of the Iridium 5% Convertible Note based upon Iridium’s financial position, liquidity, operating results and the terms of the note and other qualitative and quantitative factors.

     The Company committed $5.0 million to Barrow Street Capital III, LLC (“Barrow Street III”), a real estate investment fund, of which $0.3 million remains unfunded at June 30, 2010. The unfunded amount may be called at any time prior to the expiration of the fund in 2013 to preserve or enhance the value of existing investments.

     The deferred compensation plan investments are related to Greenhill Caliburn’s legacy deferred compensation plan acquired in the Acquisition. The amounts are invested in cash and mutual fund investments managed by a third party and will be distributed to the participants during the period 2010 to 2016. Subsequent to the Acquisition the Company has discontinued future participation in this deferred compensation plan. See “Note 3 – Acquisition”.

Fair Value Hierarchy

     The following tables set forth by level assets and liabilities measured at fair value on a recurring basis. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Assets Measured at Fair Value on a Recurring Basis as of June 30, 2010

		Quoted Prices in
		Active Markets				Significant Other				Significant				Balance as
		for				Observable				Unobservable				of
		Identical Assets				Inputs				Inputs				June 30,
		(Level 1)				(Level 2)				(Level 3)				2010
		(in thousands, unaudited)
Assets
Iridium Common Stock		$	89,597			$	—			$	—			$	89,597
Iridium $11.50 Warrants			—				—				10,280				10,280
Deferred compensation plan investments			—				9,117				—				9,117
Total investments		$	89,597			$	9,117			$	10,280			$	108,994

Assets Measured at Fair Value on a Recurring Basis as of December 31, 2009

		Quoted Prices in
		Active Markets				Significant Other				Significant				Balance as
		for				Observable				Unobservable				of
		Identical Assets				Inputs				Inputs				December 31,
		(Level 1)				(Level 2)				(Level 3)				2009
		(in thousands, unaudited)
Assets
Iridium Common Stock		$	—			$	68,077			$	—			$	68,077
Iridium $11.50 Warrants			—				—				8,015				8,015
Total investments		$	—			$	68,077			$	8,015			$	76,092

     At June 30, 2010, the Company carried its investment in Iridium Common Stock at its quoted market value. At December 31, 2009, the Company valued the Iridium Common Stock at its quoted market price, discounted for legal and contractual restrictions on sale, and accordingly it was recorded as a level 2 investment.

     The value of the deferred compensation plan investments assumed in the Acquisition consists of cash and mutual fund investments, which have been recorded at net asset value, and has been recorded as a level 2 investment.

Level 1 Gains and Losses

     The following table sets forth a summary of changes in the fair value of the Company’s level 1 investments for the three months ended June 30, 2010.

														Purchases,
		Beginning												Sales, Other				Net
		Balance				Realized				Unrealized				Settlements				Transfers				Ending
		March 31,				Gains				Gains or				and				in and/or				Balance
		2010				or (Losses)				(Losses)				Issuances, net				out of Level 1				June 30, 2010
		(in thousands, unaudited)
Assets
Iridium Common Stock		$	72,374			$	—			$	17,223			$	—			$	—			$	89,597
Total investments		$	72,374			$	—			$	17,223			$	—			$	—			$	89,597

     The following table sets forth a summary of changes in the fair value of the Company’s level 1 investments for the six months ended June 30, 2010.

														Purchases,
		Beginning												Sales, Other				Net
		Balance				Realized				Unrealized				Settlements				Transfers				Ending
		January 1,				Gains				Gains or				and				in and/or				Balance
		2010				or (Losses)				(Losses)				Issuances, net				out of Level 1				June 30, 2010
		(in thousands, unaudited)
Assets
Iridium Common Stock		$	—			$	—			$	17,223			$	—			$	72,374			$	89,597
Total investments		$	—			$	—			$	17,223			$	—			$	72,374			$	89,597

     The Company did not hold any level 1 investments during the three and six months ended June 30, 2009.

Level 2 Gains and Losses

     The following table sets forth a summary of changes in the fair value of the Company’s level 2 investments for the three months ended June 30, 2010.

														Purchases,
		Beginning												Sales, Other				Net
		Balance				Realized				Unrealized				Settlements				Transfers				Ending
		January 1,				Gains				Gains or				and				in and/or				Balance
		2010				or (Losses)				(Losses)				Issuances, net				out of Level 2				June 30, 2010
		(in thousands, unaudited)
Assets
Deferred compensation plan investments		$	—			$	—			$	—			$	9,117			$	—			$	9,117
Total investments		$	—			$	—			$	—			$	9,117			$	—			$	9,117

     The following table sets forth a summary of changes in the fair value of the Company’s level 2 investments for the six months ended June 30, 2010.

														Purchases,
		Beginning												Sales, Other				Net
		Balance				Realized				Unrealized				Settlements				Transfers				Ending
		January 1,				Gains				Gains or				and				in and/or				Balance
		2010				or (Losses)				(Losses)				Issuances, net				out of Level 2				June 30, 2010
		(in thousands, unaudited)
Assets
Iridium Common Stock		$	68,077			$	—			$	4,297			$	—			$	(72,374	)		$	—
Deferred compensation plan investments		$	—			$	—			$	—			$	9,117			$	—			$	9,117
Total investments		$	68,077			$	—			$	4,297			$	9,117			$	(72,374	)		$	9,117

     The Company did not hold any level 2 investments during the three and six months ended June 30, 2009.

Level 3 Gains and Losses

     The following tables set forth a summary of changes in the fair value of the Company’s level 3 investments for the three and six months ended June 30, 2010, respectively.

														Purchases,				Net
		Beginning				Realized				Unrealized				Sales, Other				Transfers				Ending
		Balance				Gains				Gains or				Settlements and				in and/or				Balance
		March 31, 2010				or (Losses)				(Losses)				Issuances, net				out of Level 3				June 30, 2010
		(in thousands, unaudited)
Assets
Iridium $11.50 Warrants		$	8,760			$	—			$	1,520			$	—			$	—			$	10,280
Total investments		$	8,760			$	—			$	1,520			$	—			$	—			$	10,280

														Purchases,
		Beginning												Sales, Other				Net
		Balance				Realized				Unrealized				Settlements				Transfers				Ending
		January 1,				Gains				Gains or				and				in and/or				Balance
		2010				or (Losses)				(Losses)				Issuances, net				out of Level 3				June 30, 2010
		(in thousands, unaudited)
Assets
Iridium $11.50 Warrants		$	8,015			$	—			$	2,265			$	—			$	—			$	10,280
Total investments		$	8,015			$	—			$	2,265			$	—			$	—			$	10,280

     The following tables set forth a summary of changes in the fair value of the Company’s level 3 investments for the three and six months ended June 30, 2009, respectively.

														Purchases,
		Beginning												Sales, Other				Net
		Balance				Realized				Unrealized				Settlements				Transfers				Ending
		March 31,				Gains				Gains or				and				in and/or				Balance
		2009				or (Losses)				(Losses)				Issuances, net				out of Level 3				June 30, 2009
		(in thousands, unaudited)
Assets
Iridium 5% Convertible Note		$	22,900			$	—			$	—			$	—			$	—			$	22,900
GHLAC Warrants			7,872				—				5,877				—				—				13,749
Total investments		$	30,772			$	—			$	5,877			$	—			$	—			$	36,649

														Purchases,
		Beginning												Sales, Other				Net
		Balance				Realized				Unrealized				Settlements				Transfers				Ending
		January 1,				Gains				Gains or				and				in and/or				Balance
		2009				or (Losses)				(Losses)				Issuances, net				out of Level 3				June 30, 2009
		(in thousands, unaudited)
Assets
Iridium 5% Convertible Note		$	22,900			$	—			$	—			$	—			$	—			$	22,900
GHLAC Warrants			8,295				—				5,454				—				—				13,749
Total investments		$	31,195			$	—			$	5,454			$	—			$	—			$	36,649

Note 5 — Related Parties

     At June 30, 2010, the Company had receivables of $0.5 million due from the Greenhill Funds relating to expense reimbursements, which are included in due from affiliates. At December 31, 2009, the Company had receivables of $0.2 million and payables of $0.4 million due to the Greenhill Funds relating to accrued management fees and expense reimbursements, which are included in due to affiliates. See “Note 1 – Organization”.

     Included in accounts payable and accrued expenses are $0.3 million at June 30, 2010 and December 31, 2009, respectively, of interest payable on the undistributed earnings to the U.K. members of GCI. See “Note 1 – Organization”.

     Under the terms of the Share Sale Agreement the selling shareholder and certain non-founding partners of Caliburn are due approximately $2.8 million as of June 30, 2010. See “Note 3 – Acquisition”.

     In conjunction with the sale of certain assets of the merchant banking business, the Company agreed to sublease to GCP Capital office space for a period of three to five years beginning in December 2010. The Company did not recognize any revenue related to the sublease during the six months ended June 30, 2010. See “Note 4 – Investments – Affiliated Merchant Banking Investments”.

Note 6 — Revolving Bank Loan Facility

     At June 30, 2010, the Company had a $75.0 million revolving loan facility from a U.S. banking institution to provide for working capital needs, facilitate the funding of investments, and for other general corporate purposes. The revolving loan facility is secured by all management fees earned by GCPLLC, GCPII LLC and GVP, any cash distributed in respect of its partnership interests in GCP I and GCP II or GSAVP, as applicable, and cash distributions from Greenhill & Co. LLC, and is subject to a borrowing base limitation. The maturity date of the facility is April 30, 2011. Effective December 31, 2010 the commitment amount will be reduced to $60.0 million. Interest on borrowings are based on the higher of Prime Rate or 4.0% and is payable monthly. In addition, the revolving loan facility has a prohibition on the incurrence of additional indebtedness without the prior approval of the lenders and the Company must comply with certain financial and liquidity covenants. The weighted average daily borrowings outstanding under the loan facility were approximately $54.7 million and $33.5 million for the six months ended June 30, 2010 and 2009, respectively. The weighted average interest rates were 4.0% for both periods ended June 30, 2010 and 2009. At June 30, 2010, the Company was compliant with all loan covenants.

Note 7 —Equity

     In connection with the acquisition of Caliburn on April 1, 2010 the Company issued 1,099,874 shares of its common stock and 1,099,877 contingent convertible preferred shares. The contingent convertible preferred shares do not pay dividends and will convert to shares of the Company’s common stock if certain revenue targets are achieved. If the performance targets are not achieved the contingent convertible preferred shares will be cancelled. See “Note 3 – Acquisition” and “Note 8 – Earnings Per Share”.

     On June 16, 2010, a dividend of $0.45 per share was paid to shareholders of record on June 2, 2010. During the six months ended June 30, 2010 and 2009, dividend equivalents of $2.5 million and $2.2 million, respectively, were paid on the restricted stock units that are expected to vest.

     During the six months ended June 30, 2010, 658,829 restricted stock units vested and were issued as common stock of which the Company is deemed to have repurchased 283,629 shares at an average price of $79.05 per share in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units. In addition, during the six months ended June 30, 2010, the Company repurchased in open market transactions 42,000 shares of its common stock at an average price of $65.02.

     During the six months ended June 30, 2009, 287,331 restricted stock units vested and were issued as common stock of which the Company is deemed to have repurchased 114,860 shares at an average price of $67.26 per share in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units.

Note 8 — Earnings Per Share

     The computations of basic and diluted EPS are set forth below:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
		(in thousands, except per share amounts, unaudited)
Numerator for basic and diluted EPS — net income allocated to common stockholders		$	17,550			$	10,293			$	18,062			$	24,191
Denominator for basic EPS — weighted average number of shares			30,708				29,509				30,301				29,495
Add — dilutive effect of:
Weighted average number of incremental shares issuable from restricted stock units			61				114				71				78
Denominator for diluted EPS — weighted average number of shares and dilutive potential shares			30,769				29,623				30,372				29,573
Earnings per share:
Basic		$	0.57			$	0.35			$	0.60			$	0.82
Diluted		$	0.57			$	0.35			$	0.59			$	0.82