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Legal finance for the retail sector

June 13, 2024
Liz Bigham
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The retail sector has long faced tight margins and shifting consumer behaviors. More recently, price sensitivity given high rates of inflation and other economic factors have put even more pressure on retail brands.  

Against this background, it’s understandable that finance and legal leaders at retail companies are very concerned with litigation costs. Disputes are often costly and time consuming, distracting management of retail and hospitality businesses from the day-to-day running of the business. 

Given the many challenges facing the retail industry, savvy businesses are looking for innovative solutions to bring money into the business while safeguarding money out the door. Legal finance provides that solution. 

Insights from recent research into retail dispute dynamics  

Burford recently conducted research into economic impacts on different industries and their litigation portfolios. For senior in-house lawyers and finance leaders at companies in the retail sector, the key takeaways were:    

  • Finance and legal leaders at retail companies were the most likely (60%) to say they have seen an increase in discounted rates, possibly reflecting economic pressures on the sector that have trickled down to legal department spend.  

  • Nearly all finance and legal leaders at retail companies (95%) agreed that litigation is expensive and even the largest companies benefit from reducing its impact on the P&L.  

  • Finance and legal leaders at retail companies are the most likely to say they intend to invest heavily in legal technology and AI over the next year.  

  • 73% of finance and legal leaders at retail companies were among the most likely to agree that the more legal departments innovate in the next 15 years, the more value they can contribute to the business.

How legal finance is used in the retail sector 

At its core, legal finance enables businesses in the retail sector to maximize their recoveries in commercial disputes and to ensure they can fully leverage their legal assets.   

There are numerous ways retail businesses can leverage legal finance to generate value from their litigation and arbitration assets—without impacting control of their disputes.   

Fund claims and recoveries: Burford takes on the financial burden of paying lawyers to pursue meritorious high-value claims, allowing businesses to pursue meritorious cases without incurring upfront costs.     

  • Eliminate downside risk: Legal finance provided by Burford is non-recourse, meaning that the investment and return are contingent on a successful outcome. This allows businesses to lock in guaranteed minimum returns and shift legal risk off their books.   

  • Manage cash flow: Burford can accelerate expected entitlements from pending claims and awards, providing companies with the flexibility to time cash flows according to their desired schedules, enhancing liquidity and working capital.    

  • Identify opportunities: Leveraging proprietary data and industry-leading insights, Burford can assist legal teams in setting priorities for their commercial litigation and arbitration portfolios. This helps businesses identify the most valuable claims and allocate resources effectively.   

  • Manage exposure: Burford can provide a hedge for litigation risk in the company’s portfolio. This allows businesses to mitigate the potential financial impact of litigation and protect their interests.  

  • Enforce judgments: Through funded enforcement and asset recovery, Burford can help businesses transform unenforced judgments and non-performing loans into cash.  

Worked example
Helping a retail company move legal costs off-balance sheet 

A large retail company paid out of pocket for the significant legal fees and expenses associated with a litigation claim. Doing so not only diverted funds from other areas of the business; it also reduced its operating profits. The company sought a solution that would help take legal costs off its own balance sheet. 

The solution was $45 million in legal finance, backed by a portfolio of pending litigation matters, which transformed how the company managed litigation expenses and provided multiple corporate benefits. 

The client had the flexibility to use the legal finance capital either to relieve legal expense budget pressure or for corporate purposes unrelated to the litigation matters, without waiting for the result of the underlying litigation matters. And, because the investment was structured around a portfolio of matters as opposed to a single case, the funder was able to offer attractive pricing commensurate with the lower risk profile.