COMPANIES need to make the best returns on the assets they have in hand. But what if a company does not know that it has them, or whether it can use them? In some cases a lawsuit could be a valuable earner. A technology company in liquidation might have a patent-infringement suit that the bankruptcy’s administrators lack the time to pursue. There may be money to be made by suing a joint-venture partner, but the prospect of a costly case dissuades managers from going to court.
Enter “third-party funders”. These outside investors offer to pay for a lawsuit, in exchange for a share of the payout: from 30% to 60%. Some lawyers work on contingency (“no win, no fee”) arrangements, but others cannot shoulder the risk. So third-party funders may get involved. Returns are impressive enough to have drawn in both hedge funds and traditional financial companies… (Read the whole article.)
