Burford Capital now has full ownership of Firstassist, with no future earn-out payments, after the success of the acquisition led it to make all outstanding payments early.
A trading update for 2012 issued yesterday described last year’s acquisition as “an unqualified financial success in addition to the substantial strategic benefits it has brought to Burford”.
Firstassist, which is best known for its after-the-event insurance but as a result of the acquisition is now also offering third-party funding, generated more than $14m (£9m) in EBITDA (earnings before interest, tax, depreciation and amortisation) during its last financial year, a 35% increase in the previous 12 months.
The statement said: “In addition to growing its leading litigation expenses insurance business, Firstassist launched a UK litigation funding business in 2012 and embarked on a series of initiatives to prepare itself and its clients for the implementation of the Jackson reforms in April 2013.
“The strength of Firstassist’s performance to date and the size of its pool of pending cases made it likely that the earn-out provided for at the time of Burford’s acquisition of Firstassist would be payable. Thus, Burford negotiated an early payment of the earn-out in exchange for a substantial discount – more than $2m – and therefore now owns Firstassist outright with no contingent future payments and no minority shareholders.
Burford, the world’s largest funder, is soon to receive a dividend from the cash generated by Firstassist’s operations to date in an amount in excess of $11m.
More generally 2012 saw Burford generate $18m net of invested capital from 12 investments (the gross recovery was $47m), maintaining its average of recovering a 61% net return. It also made a further $9m in net income from its portfolio financing and cash management activities.
It said: “The acceleration in portfolio activity in 2012 is noteworthy: 2012 alone produced as much in investment recoveries as the two preceding years combined.”
In addition, Burford has seven investments where trial or some initial adjudication has been completed but further proceedings remain, such as an appeal. Pending these, the cases will generate $53m in gross investment recoveries and $19m net of invested capital – a 55% net return on invested capital.
Further, the AIM-listed company sunk $72m into nine new investments during the year, meaning it has 30 live cases with investment of $289m. Since inception, Burford has committed $373m of capital to 46 investments.
The statement said: “Neither Burford nor litigation finance is nascent any longer: Burford has evolved into a full-fledged, internally managed finance and investment business with multiple lines of business, multi-jurisdictional operations and compelling returns.”