Legal finance for the food sector

The food industry has faced significant disputes in recent years, including allegations of price fixing, business interruption claims, supply chain contract disputes and food safety litigation. Reduced operating capacity during the pandemic caused cash constraints and business pressures.

As the industry continues to operate on thin profit margins and face consumer price pressures, finance and legal leaders in the sector are continuously seeking solutions to increase liquidity and manage costs, including those related to expensive commercial litigation and arbitration. As a result, the food industry is increasingly using legal finance. 

Insights from recent research into food dispute dynamics

Burford recently conducted research into economic impacts on different industries, their legal departments and their litigation portfolios. For senior in-house lawyers and finance leaders at companies in the food sector, the key takeaways were:

• 50% of finance and legal leaders at food companies expect their organization’s litigation and arbitration spend to increase by more than 25% over the next five years

• 78% of food companies already have or are building an affirmative recovery program, well above the average and significantly ahead of the curve compared to other industries

• Finance and legal leaders at food companies are 54% more likely to say they have used legal finance than the average across industries

• Finance and legal leaders at food companies are more likely than their peers in any other industry to expect increased offers of discounted fees from their law firms over the next 15 years

How legal finance is used in the food sector

Legal finance enables businesses in the food sector to maximize their recoveries in commercial disputes to ensure they can fully leverage their legal assets, as well as increase liquidity and offset costs.

There are numerous ways food companies can leverage legal finance to unlock latent value from their litigation and arbitration assets—without impacting control of their disputes. 

• Manage cash flow: Burford can accelerate expected entitlements from pending claims and awards, providing companies with the flexibility to time cash flows according to their desired schedules, enhancing liquidity and working capital.

• Fund claims and recoveries: Burford takes on the financial burden of paying lawyers to pursue meritorious high-value claims, allowing businesses to pursue meritorious cases without incurring upfront costs. 

• Eliminate downside risk: Legal finance provided by Burford is non-recourse, meaning that the investment and return are contingent on a successful outcome. This allows businesses to lock in guaranteed minimum returns and shift legal risk off their books.

• Identify opportunities: Leveraging proprietary data and industry-leading insights, Burford can assist legal teams in setting priorities for their commercial litigation and arbitration portfolios. This helps businesses identify the most valuable claims and allocate resources effectively.

• Manage exposure: Burford can provide a hedge for litigation risk in the company’s portfolio. This allows businesses to mitigate the potential financial impact of litigation and protect their interests.

• Enforce judgments: Through funded enforcement and asset recovery, Burford can help businesses transform unenforced judgments and non-performing loans into cash.

Case study

A household name Fortune 500 company had a significant meritorious opt-out antitrust claim against producers for anticompetitive collusion. The company was also looking to cut costs due to revenue generation pressures following a brief decline in profits. Without ceding control of the matter, the client was able to monetize a meaningful portion of the expected proceeds from the opt-out claim and Burford provided $29 million in capital.

Burford provided upfront capital for a portion of the opt-out claim, allowing the client to pursue the meritorious litigation without incurring additional downside risk. The company was able to realize the value locked away in the contingent legal assets significantly in advance of a litigation resolution and was able to use the immediate cash injection for strategic business purposes on the company’s schedule when it was needed.