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5 minutes on... monetization capital for companies

Pending legal claims and awards are corporate assets—but finance and in-house legal departments often overlook them because they are highly illiquid and carry significant uncertainty as to timing and outcome. But they are money on the table—and indeed, 70% of in-house lawyers say their companies have unenforced awards valued at $20 million, according to Burford’s 2020 Legal Finance Report.

Amidst ongoing economic uncertainty, many companies are looking for ways to smooth their cash flow and avoid risk. Legal finance offers a solution: Monetization capital—a solution that 70% of in-house lawyers expect use to generate cash in the downturn.

Below, we take 5 minutes to discuss monetization and how it enables companies to realize otherwise invisible assets without delay.

What is monetization?

Monetization is a form of legal finance that allows companies to transform commercial litigation and arbitration claims, judgments and awards into cash. This finance solution gives companies (and their firms) the ability to control the timing and certainty of cash flows back to the business, with the legal finance partner providing capital in a lump sum that would otherwise be captive until the resolution of the pending matter. This can generate significant capital, as in a recent transaction in which Burford monetized a $75 million claim for a Fortune 100 company.

Unlike fees and expenses financing, in which money flows from the finance provider to pay lawyers as costs are incrementally incurred, capital provided through a monetization is provided upon investment directly to the company. This allows CFOs to turn otherwise invisible assets into cash to reinvest in the business, in whatever way makes sense for the business. Further, capital is almost always provided on a non-recourse basis, meaning that the company owes nothing in the event of an unsuccessful resolution.

What are the key benefits of monetization for companies?

  • Mitigate risk: Companies can reduce their exposure to the risk of loss, a reduction of damages or a reversal set aside of a judgment.
  • Control timing: Companies gain access to capital based on their schedule, not the courts.
  • Accelerate access to capital: Companies can secure cash that may be used to invest in the business.

How does monetization benefit in-house lawyers?

Monetization capital can help in-house lawyers elevate their value to the organization. As the Head of Litigation at a Global 500 food company told an interviewer: “When I raised [legal finance] with management, they loved the idea… I am being credited internally because management thinks the legal team is being creative by monetizing its claims.”

Additionally, monetization capital helps the in-house department offset the cost of pursuing meritorious recoveries that will bring still more value to the company. Rather than legal being a cost center, it can generate significant cash for the business.

Conclusion

Traditional capital sources have been historically unable to assign asset value to pending commercial litigation and arbitration claims, but legal finance providers have the experience and expertise in assessing the value of legal assets and enforcing judgments and awards that enable companies to unlock legal asset value. At Burford, monetizations are bespoke to the needs of the client, and thus clients may choose to monetize a portion or the entirety of an award or judgment or ongoing claim.

To learn more about monetizing legal assets, download our Monetization 101 Guide.