The leading third-party funder Burford Capital will provide finance to a London litigation boutique in return for a 32% stake in the firm. Burford Capital has taken the unprecedented step of buying a stake in a law firm as part of a deal to provide funding for a series of cases.
The third-party funder has acquired a 32% equity stake in London-based boutique PCB Litigation and will provide capital for a portfolio of cases. Negotiations for the deal began last year and it has received approval from the Solicitors Regulation Authority (SRA). PCB will change to an alternative business structure to accommodate the change.
In a statement, Burford chief executive Christopher Bogart said the investment “takes the legal industry a step closer to conventional financial structures”. “In many other industries, it would be entirely common for a financing provider to take warrants or equity as part of a financing transaction, and Burford and PCB have figured out how to adapt such a structure to the particular needs of the legal industry,” he continued.
Managing partner of PCB, Anthony Riem commented that Burford’s funding structures were a good fit for the firm’s operations, “particularly in fraud and asset recovery, insolvency, and dispute resolution”. “Together with the capital that Burford can deploy in cases, we expect this to fuel the firm’s continued growth,” he added, continuing: “Access to justice is of more importance now than ever given the additional financial challenges that parties may face in bringing claims.”
Although it experienced lower-income and profits during the 2019 financial year, Burford attributed that to the inconsistent nature of the market and expressed confidence that the COVID-19 pandemic will lead to a new wave of litigation, on which it is well-placed to capitalize.
The funder suffered a turbulent past 12 months, facing allegations of poor business practices from investment firm Muddy Waters and made subsequent allegations that its shares had been subject to market manipulation around that report. However, a High Court bid to reveal which parties were trading in its shares around this time failed in May, and the matter appears to now be closed. Fellow funder Litigation Capital Management this year released results which reflected a positive end to 2019 and launched a new third-party fund, it’s first after several years in March.
Topics: COVID-19, Burford Capital,| PCB Litigation, Litigation Capital Management
Work Cited: Andrew Mizner | June 26, 2020