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.