Vannin's IPO setback unlikely to spook buoyant litigation funding market

The year to date has seen an influx of capital into some of the biggest litigation funders in the market. Last week, Burford Capital raised $250m by selling new shares on the London Stock Exchange - its first issuance of equity into the public market since 2010.

In March, Harbour Litigation Funding launched a new £350m fund, almost doubling its current offering, and in July Augusta raised £150m for its new UK and Australia focused fund, while in February Therium also closed its largest fund to date, raising £300m.

This week's news that Vannin Capital has postponed its proposed £70m listing on the London Stock Exchange may have dampened the mood, but many in the market see this as little more than a temporary setback.

In its statement, Vannin said that "volatility" in the equity market in recent weeks had led to "conditions that are not conducive to an IPO".

Stewarts international arbitration partner Matthew Knowles, a former director of litigation funding at Harbour, says the postponement "shouldn't affect the fundamentals" of what Vannin is doing. "Vannin have put a lot of thought into the future, with this year's hires of CEO Richard Hextall, managing director Paul Martenstyn and former Allen & Overy (A&O) senior partner David Morley as chairman, as well as a number of others," he says. "They want to get it right. I suspect it's a counsel of caution and they'll come back to it when things are a bit calmer."

Verity Jackson-Judge, BD director at litigation finance broker TheJudge, agrees: "While some may be quick to assume Vannin's decision is bad news for the firm, I think that would be reading too much into it. It's unlikely to be the case that no IPO equates to no growth for Vannin, and I certainly don't see their decision to postpone as a nod to any concerns over the state of the litigation funding market."

Despite Vannin's hitch, positive results for market leaders such as Burford – which saw income from investments in litigation rise 127% to $318m last year – suggests litigation finance will continue to grow in popularity.

Burford CEO Christopher Bogart says his business has experienced “dramatic” growth in the last couple of years. According to Bogart, the funder committed $1.34bn of new investments in 2017, three times as much as 2016, and has now worked with 70% of the Global 100 and 90% of the Am Law 100, while it also announced yesterday that it had earmarked a $50m fund exclusively for female-led litigation.

Steven Friel, CEO of Woodsford Litigation Funding, told Legal Week: “Our shareholders are very happy with our performance, and have recently made a further $75m commitment to our business. We are actively considering when and how to raise external finance. We have a number of options open to us, including IPO, although I’m not yet convinced that’s the right way to go.”

The general sentiment around third-party litigation finance is that it is an industry on the up, and Vannin's recruitment of ex- A&O chief Morley (pictured) is likely to cement that view among litigators.

Linklaters partner Patrick Robinson agrees: “I’m not at all surprised to see someone like David make that move. Funders are part of the litigation landscape now, it's an established and known thing in the market. Any responsible litigator will know the funders and their potential impact on litigation.”

Jackson-Grant agrees: "When incredibly successful lawyers like David choose to make the leap from law firm to funder it shows that there is a belief that the funding market is sustainable and will continue to grow. I don't think you can attract names like that otherwise."

Litigators are also reporting increasing interaction with funders, and feedback is positive. Mona Vaswani, co-head of A&O’s UK banking, finance and regulatory practice, recently won a $300m fraud case funded by Harbour – her first experience in working with third-party finance. She told Legal Week: “It’s fair to say that A&O are one of those firms which hasn’t had a huge historic exposure to funders. It seemed to me to be a perfect blend of involvement and letting us get on with it. Obviously they were interested in budgets and outcomes, but it was a very positive experience, and I would look to do more funded work.”

As the market develops, many think that new arrangements between law firms and funders will come to the fore as clients become more aware of funding possibilities and begin to raise them in early-stage talks with their lawyers.

Burford managing director Craig Arnott (pictured) explains: "The landscape has changed dramatically in the past two years. The change is driven in part by law firms’ own clients saying, ‘We want funding to be part of the options you present to us.’ Corporate clients are saying to law firms that they want the option of external funding in the mix when they bring their fee proposals or pitch for work. They at least want the option of taking cases off of their own balance sheets."