CFOs and GCs of Fortune 500 and FTSE350 companies are increasingly turning to legal finance for novel solutions to age-old business problems.
In fact, as of 2020, companies accounted for over half of our commitments. While the use of legal finance has increased over 105% since 2017, we are often asked the question: “Which legal finance solution solves my business need?” Below, we take five minutes to address four common business challenges faced by corporate leadership and how legal finance can help.
1. Manage the cost of pursuing valuable recoveries
Cost remains one of the most persistent obstacles companies face when pursuing meritorious claims. Companies may simply abandon meritorious claims due to costs: 52% of in-house lawyers say their company has chosen to forgo legal claims due to the impact of legal expenses on the bottom line. At the same time, nearly 70% of companies have pending claims worth $20 million or more. That’s money left on the table.
70% of companies have pending claims worth $20 million or more.
Fees and expenses financing solves this problem. Whether your legal department has one claim or many, fees and expenses financing—an arrangement in which we assume the costs of paying lawyers and legal expenses—can fund your recovery program, allowing GCs to pursue opportunities based on merits without the burden of additional cost or risk.
2. Enhance liquidity
Pending claims and awards represent often very significant albeit highly illiquid value. Monetization—an increasingly common legal finance product for large companies—gives CFOs and GCs a tool to unlock capital to reinvest in the legal department and for other general business purposes.
This financing arrangement accelerates the value of a portion of a pending claim or an uncollected judgment or award on a non-recourse basis, which brings money into the business and allows companies to realize the value of claims, judgments or awards without waiting for legal processes to resolve.
3. Eliminate downside risk and increase budget certainty
Litigation and arbitration by definition add risk and uncertainty to corporate portfolios: In addition to the risk of loss, companies face uncertain cash flows (both outgoing costs and incoming recoveries) and timing delays. This uncertainty can be eliminated by monetization and fees and expenses financing.
Monetization enables GCs and CFOs to lock in a guaranteed minimum return from pending claims and awards regardless of the outcome. Cash flows can be timed and allocated as needed to enhance larger budget uncertainties and needs—for example, to offset defense costs or to set a baseline for recoveries. Alternatively, fees and expenses financing shifts costs from the company’s P&L to Burford. In either scenario, if underlying matters lose, we assume the downside risk: We are not lenders but rather provide non-recourse financing that makes our recovery contingent on a successful outcome.
4. Reduce distraction
In some instances, companies may want to remove the hassle and distraction of matters with no remaining litigation risk, particularly when immediate recovery is paramount. Burford can help by monetizing and managing claims and, in some circumstances, buying claims outright. Although extremely rare, this can relieve the claim holder of the burden and resource drain associated with litigation.
Conclusion
Burford helps CFOs and GCs proactively identify and optimize the value of their corporate litigation assets. Our team has reviewed many hundreds of billions of dollars worth of commercial litigation and knows how to find and optimize value, turning what would otherwise be illiquid assets or a drain on corporate budgets into cash for the business—improving earning, strengthening the balance sheet and enhancing the value of a company’s legal portfolio.
Read our case studies to see how we help GCs and CFOs achieve their business goals.
