In this video blog, Kevin Skrzysowski, Director at Certum Group, provides an overview of Claim Monetization, answering the questions:
WHAT IS CLAIM MONETIZATION?
- Claim monetization, sometimes referred to as Affirmative Asset Monetization, is a way to convert an illiquid asset into non-recourse capital.
- It involves identifying and monetizing a latent litigation asset that one business has against another.
- When a claim is monetized, a third-party funder such as Certum Group advances capital on a non-recourse basis to a company in exchange for a portion of the claims’ potential future recovery.
- Claim monetization is basically providing a company with an immediate cash infusion that otherwise would be unavailable until the claim was successfully resolved.
WHAT TYPES OF CLAIMS CAN BE MONETIZED
- Claims monetization is available for any type of litigation, but it’s usually best applied to commercial matters, contract matters, intellectual property disputes, and antitrust cases.
- Some examples of monetization opportunities include: (1) contract litigation or another type of commercial litigation against a vendor, contractor, or competitor; (2) Patent or other IP litigation against a competitor; (3) participating in a consortium with other companies seeking redress from the same wrongdoer; or (3) “opting out” of pending class action litigation to pursue an individual direct claim, which we often see in antitrust cases.
HOW DOES CLAIM MONETIZATION WORK?
- First, a merits and damages assessment is done on a company’s current or future claim or portfolio of claims.
- Then a customized monetization strategy is developed to meet the client’s legal, business, and financial objectives.
- The third-party funder then provides a capital offer to participate in the claim’s potential future recovery
- A legal agreement is executed, and funds are advanced to the company on a non-recourse basis.
WHAT ARE THE KEY BENEFITS OF CLAIM MONETIZATION
- By pulling forward potential recoveries, companies can obtain immediate revenue without the uncertainty of the actual outcome.
- Cash resources that might have been used to cover legal costs can be redeployed into the company’s core operations.
- While contingent legal assets generally have no ascribed value on a company’s balance sheet, upfront claim monetization can generate cash to help improve the company’s bottom line.
- Simply put, non-recourse, claim monetization reduces the financial and outcome risk of pending or future litigation and provides upside opportunity to monetize litigation assets.