Litigation Finance The Next Big Investment Opportunity
In today’s world, everyone wants to be secured when it comes to litigation. Every person wants the best advice and representation from top-class lawyers. But can everyone afford it? Your case must be perfect on merits but is your lawyer competent enough to fight it against the big listed company? Such opportunities have led claimants to seek finance for their litigations from third-party funders. Also, the global legal services market is expected to grow from $713. 66 billion in 2020 to $734. 56 billion in 2021 at a compound annual growth rate (CAGR) of 2. 9%.
The litigation finance industry has turned into a billion-dollar industry with respect to the multi-million-dollar settlements that boomed even when the courtroom moved to a virtual court during the pandemic. Lawyers and asset managers around the globe are of the opinion that there are billions of dollars at stake which creates a huge playing field of opportunities for institutional investors to invest and gain out of litigations, arbitrations, breach of contract, employer responsibility, and supply-chain related claims, class action suits and other commercial suits, etc. The market for litigation finance is growing due to various aspects which are as follows:
- Awareness – more people and investors are learning about litigation finance and its practice from various players, law firms, and financial experts across the globe.
- Liquidity – Companies, businesses as well as start-ups understand that litigation finance can help with cash flow, budget constraints, and saving money for other resources.
- Expensive Legal Costs – Due to the rise of commercial claims, every person has become resistant to getting the best legal services which come with hefty costs. This gives third-party funders to dwell on meritorious claims and gain extensive profits from such commercial lawsuits.
- Portfolio Financing – Cases of similar nature are being grouped together for better efficiency with respect to cash flow and even for judicial efforts.
Law firms and funders are coming together by mutually setting up long-term relationships to tackle this industry. Such partnerships are already a major game changer in the US and the UK. This two-fold relationship between the two will allow firms to offer a flexible fee to their clients as well as a streamlined due diligence process.
Litigation Finance is attractive for investors from an economic perspective for two major reasons:
- Uncorrelated nature with market cycles: As we all know, the markets are at an all-time low, and litigation finance provides protection against any potential economic downfall, as it does not follow the changes in monetary policy or financial markets.
- High Yielding at lower risk: Litigation finance provides double-digit returns which are relatively high yields for an investment as it carries less risk as most of the cases are taken towards settlements.
LegalPay is India’s only third-party litigation funder and interim financier. LegalPay provides non-recourse funding to corporates of any size, MSMEs, and small businesses in recovering their commercial debts in exchange for a mutually agreed share in the final recovery made by the Litigant. In other words, the litigant has to pay only upon a successful realization of the claim. LegalPay’s business model affords businesses easy access to justice without any fear of the legal costs involved. Litigation Finance provided by LegalPay empowers these businesses, who can now invest their limited capital in revenue-generating businesses instead of getting it wasted in litigations. LegalPay is a VC-backed start-up with support from prominent names such as 9Unicorns, LetsVenture, VentureCatalysts, and Amity Innovation Incubator.
LegalPay has provided litigation finance to various individuals, companies, and start-ups to provide a level playing field when it comes to the quality of legal services provided in India. It has helped claimants take forward their cases in various courts across various jurisdictions by not spending a penny on it. LegalPay also co-funds cases abroad with its network of international funders having exclusive arrangements across the globe.
LegalPay has also emerged as a significant player in providing interim finance to companies that have entered into insolvency under the Insolvency and Bankruptcy Code, 2016. This finance has provided investors an opportunity to invest in non-market related opportunities while providing high-yielding profits where investors gain 20+ IRRs on their investments. An investor can log in into the website and invest as low as 10,000 INR.