- Runs global underwriting, portfolio management at legal finance firm
- Burford takes legal costs off balance sheets by financing litigation
- Buys awards, hedges downside risk, monetizes pending cases
The rise of litigation finance has led some to question the wisdom of allowing third parties to fund lawsuits, but the biggest player in the industry has already moved beyond merely investing in court cases.
“We think of ourselves as corporate finance for law,” said Aviva Will, senior managing director at Burford Capital. “We started out with single-case finance, usually the plaintiff, where some company or entity would use us to pay legal fees and expenses. We moved, much in response to demand in the market, to doing that for law firms and then portfolios.” By putting capital against a portfolio of cases, “you reduce risk of loss and thus pricing comes down.”
Founded in 2009, Burford now offers various products and services intended “to help clients manage the high cost and risk of significant litigation. We treat a single litigation or a collection of litigation matters as assets that can be financed like any other asset.”
Will, who runs global underwriting and portfolio management, said Burford doesn’t try to sell off-the-shelf products. “We act more like an investment banker: A client has a problem it’s trying to solve, and we bring to bear our expertise and capital to solve that problem.”
She gave the example of a private equity firm spending money on a series of litigations: “It can, today, unlock some of the value of these matters, either by having Burford instead pay legal expenses or by possibly monetizing a piece of that expected value. … We can value them appropriately, and provide revenue for companies that might otherwise wait for years to see those litigations resolved.”
If a corporation with multiple lawsuits wants to pull legal expenses off its balance sheet, “we can fund a pool of capital that goes to some number of cases. If they win, we take our investment back, plus our return. If the case resolves unfavorably, we lose our money.” Since legal costs hit P&L on a regular basis, handling them in this manner can make a company a more attractive target for potential acquirers.
For one client, a large bank holding illiquid stock in a company facing significant litigation, “we essentially created almost like a synthetic swap”: If the company wins and the stock goes up, the bank pays Burford some premium. If it loses and the stock goes down, Burford pays the bank. “So no money transfers on day one. It’s the kind of hedge that Burford alone can do.”
Will said her previous role, chief antitrust and regulatory counsel for Time Warner, prepared her for assessing and pricing legal risk. “A lot of what I did was managing litigation, managing budgets, knowing what was the right moment to settle. That is both a strategic question but also a pricing question.” Before that, she was a litigator at Cravath, Swaine & Moore.
When a former colleague from that firm asked her, at the end of 2009, how she’d like to try litigation finance, “it was exactly the right idea at the right time.” Businesses were under “extraordinary pressure” as surging volume drove up legal costs. While changing jobs at the start of 2010 was far from ideal, “I thought, if there were a moment to stretch my entrepreneurial wings, it would be that moment.”
Aviva Will, senior managing director, Burford Capital. Photo courtesy of the firm.