Burford Capital: Business Overview

This is the first of a series of articles in which I will cover the completeness of Burford’s business. I thought it would be better to begin with the company’s history, followed by how the legal process works, what caused legal finance to emerge and a description of Burford’s operations. In the next articles, I will delve into the portfolio’s intricacies, the company’s financials, competitive advantage and accountancy-related matters.

For those who might be interested, I will include the draft I’m working on, which contains 31 pages of unstructured data. The actual write-ups are the articulation of the latter. However, a large amount of information included in the draft does not ultimately make it to these reports, for which it may trigger your interest. The draft will be included after the paywall.

History

Burford Capital is a litigation finance company that was founded in 2009 and incorporated in Guernesy. It began operating in the United Kingdom and the United States. With the passage of time, the company expanded operations throughout the rest of the world. Burford was founded by Cristopher Bogart and Jonathan Molot in response to a common issue that was taking place after the financial crisis, which devastated corporations and law firms.

Cristopher Bogart graduated from Western University with a Juris Doctor degree and exercised as an investment banker at JPM, for two years, focused on project finance and insolvency. He then worked for almost 6 years as a trial lawyer, a litigator, with clients such as IBM, General Electric and Time Warner. Christopher was afterwards hired by Time Warner to serve as General Counsel and manage its legal department. It was there where he first started noticing how inefficiently was the legal industry structured.

Two years later, Bogart was named CEO of Time Warner Cable Ventures, which had 9bn in revenue, and took charge of overseeing activity related to new technology, M&A, and all investments. After two years and a half, he left to work as a Managing Director at Glenavy Capital, former investment adviser to Burford and focused on technology investments. In parallel, he started and managed a tech/media investment fund, which lasted from 2006 until 2009. While Christopher was performing both roles, he started a side-business, which he labeled as mostly a “hobby”.

Bogart was talking to a friend, who had become a partner at Latham and Watkins, a large US law firm, when he realized that his friend was facing the same trouble he did when working at Time Warner. Law firms are structured in a way that makes them largely financially inflexible. This was causing Latham and Watkins to lose several international clients. In response, Christopher, alongside a couple of colleagues, raised a small amount of capital and started financing his friend’s cases.

When the financial crisis hit, a curious thing occurred. Corporations, now facing uncertainty, which triggers a high sense for liquidity protection, started showing reluctance to pay law firms in the same way as before, on a fee per hour basis. The problem is that law firms’ business model is designed in such a way that they require a predictive stream of income. They need to count with lawyers, who charge by the hour. Hence, a large discrepancy made itself present.

Law firms knew about Cristopher’s arrangement with Latham and Watkins. In the need of accessing capital, many of them reached out to Bogart. The latter, after witnessing how much demand there was for a proper litigation finance business, had a conversation with Jonathan Molot. Both of them decided to raise institutional capital. That is the time when Burford was created.

In October of 2009, Burford did its IPO in the Alternative Investment Market of the London Stock Exchange, raising 130M dollars. A year and two months later, Burford announced a secondary placing of 100 million ordinary shares, raising an additional 175M dollars. Both turned Burford into the largest fund of its kind. In the company’s first annual report, filed in March of 2011, Sir Peter Middleton, Burford’s former Chairman, stated that the company had committed 140 million dollars for investments to date.