“There has to be an industry” – Christopher Bogart, the CEO of the litigation financier Burford Capital
Bogart has a five-year plan. Bogart told Alison Frankel of the Mail Online that he believes the litigation funding industry is about to become well established. Bogart believes the CFO and general counsel of companies considering expensive litigation will engage in financial analysis. It will mimic how companies analyse potential technology investment.
To seize the burgeoning opportunities in this industry, Bogart felt it was key to merge with their biggest competitor. The announcement was made on Tuesday the 13th of December 2016 that Burford Capital had successfully acquired Gerchen Keller Capital. The two companies have so far invested over $2 billion in litigation or arbitration. They are certainly the dominant forces in the industry.
Burford and Gerchen Keller do have different business models. Burford has stated they will continue to operate as they are using these separate models.
Burford’s management team owns 13 percent of its publicly traded equity. Burford’s principals only make money when investors make money. It is essentially a performance-based arrangement.
Gerchen Keller resembles a hedge fund. They have raised over $1 billion from a variety of sources. These range from professional investment funds to public pension funds. Gerchen Keller charges a 1-to-2 percent management fee. Gerchen Keller charges these fees for running the fund and time invested in making the decisions on which litigation to support. Additionally, they charge performance fees of 15 to 50 percent for successful results.
A benefit from the merger for Burford’s shareholders is the collection of ongoing management fees. As a reaction to the merger, the share price jumped 16% for Burford.