2019 was a big year for litigation finance, with both lawyers and corporate leaders expressing increasing openness towards taking outside capital to help pursue commercial claims.
RK&O partner Paul Haskel recently discussed the state of litigation finance with The American Lawyer, noting that “it’s getting more competitive to get deals done for funders." He also explained that consumers of litigation finance are aware that it’s a buyers market and they are shopping around for the best terms. That heightens the risk of bad bets for funders, as returns on investments are binary. It becomes even more important to cash in on successful bets to offset the losers, and more stringent terms make that more challenging.
Smaller funds, which lack the ability to pull together diversified portfolios, are facing the biggest risks. “There’s a greater risk that one loss will be a catastrophic loss for your business,” Mr. Haskel said.
Litigation Finance Sector Saw Growth—and Growing Pains—in 2019 - The American Lawyer (subscription required)
The Law Firm Disrupted: Who Needs Transparency? - law.com (subscription required)