At its inaugural annual conference on October 24 in New York, the International Legal Finance Association (ILFA) gathered a group of founding partners and law firm leaders to discuss how to build high value law firm practices.
“Outside investment in terms of growing a firm and in helping you to deliver upon your vision and strategy at times will be really important. For example, if I want to make some star lateral hires it will enable me to do that sooner rather than later, rather than having to wait a number of years. If I want to make a particular investment in technology, again which is really important for a modern law firm, access to capital will be important. And as we touched on already, it's about hedging risk. I look at our cases as a whole, as a portfolio, and it's about how I hedge my risk on some of them. So [equity investment] is important and helpful.”
- Natasha Harrison, Founding Partner, Pallas Partners
As founding partner of Pallas Partners LLP, Harrison highlights the value of equity solutions to law firms. In countries like the UK, where non-lawyers can be equity investors in law firms through ABS structures, passive equity investment is an important tool law firms can use to grow, manage risk and pursue new opportunities without ceding control to external investors.
Distinct from traditional fees and expenses financing, law firm equity arrangements provide an immediate infusion of capital to law firms that isn’t tied to case outcomes. Whereas capital provided in a traditional legal finance arrangement is used most frequently to litigation the underlying claims themselves, capital from an equity financing arrangement is specifically intended for firms to invest in the growth of the firm.
For example, in July 2020 Burford took a minority ownership stake in a boutique UK law firm, PCB Litigation, providing outside equity that enabled the firm to target a new market for its services and incorporate innovative fee structures to better meet its clients' needs. The deal made Burford the first legal financier to provide capital in exchange for law firm equity.
Burford previously conducted an interview with Natasha Harrison about starting her own firm—click here to watch and read the interview.
About the panel
The panel was moderated by Charles Schmerler, Senior Managing Director & Head of Litigation Finance, Pretium, the panel included Natasha Harrison, Partner, Pallas Partners LLP; Phil Iovieno, Partner, Co-Chair Antitrust Litigation Group, Cadwalader and Jennifer Selendy, Founding Partner, Selendy Gay Elsberg.