As brokers we are often asked by clients about the difference in pricing among funders. While we cannot discuss the specifics of live cases, we can highlight some key features of a recent deal which illustrates just how variable the third party funding market can be. The case in question is a very substantial commercial dispute where the client required litigation finance for their legal fees and expenses.
Following an initial filtering of the market, TheJudge, narrowed the negotiations to four funders. After pushing back on their initial offers, we asked each funder to put forward their best indication. Their responses demonstrate the vast variables that exist when funders compete on price.
One funder opted to offer a flat percentage of damages pricing model. Another opted for a large multiple on their capital commitment, and two others based their pricing on a smaller multiple or a percentage of damages whichever is greater.
Each pricing model will have a different financial impact for the client depending on the level of damages recovered. However, assuming the case settled at exactly 40% of the pleaded damages, the range of funders pricing varied by over 400% from one end to another.
Needless to say, the potential damages for the case in question are sizeable, with many hundreds of millions at stake. For the client, the market search and negotiations has resulted in multiple offers which enabled the client to save tens of millions.
As a litigation funding broker we see a large volume of cases and probably routinely close more business than anyone else in the market. But even with our experience it can be difficult sometimes to pre-empt how the market will respond to the given facts or economics of a case. In some cases the price differential between funders is small, leaving a client’s primary purchasing decision to other factors, perhaps even based on which personalities they preferred. However, when the price variance is sizeable the decision becomes an obvious one.
If you have a client who requires litigation funding or insurance contact Matthew Ameyor James Delaney to discuss your requirements.