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Burford Purchases Gerchen Keller for $160M

Dec. 14, 2016, 2:55 PM

Burford Capital LLC, the litigation finance firm, has agreed to acquire its onetime rival Gerchen Keller Capital in a $160 million deal.

The firms are two of the best known in the legal industry for what they do: lending law firm partners money to support their cases.

Burford was co-founded in 2009 by its CEO Chris Bogart, who is the former general counsel of Time Warner, and CIO Jon Molot, who is a professor at Georgetown Law. Earlier this year, its $30 million commitment to the litigation law firm Hausfeld helped it launch a Berlin office.

Gerchen Keller, meanwhile, is younger in the litigation finance industry. It started in 2013 as an investor in commercial litigation, with $100 million in committed capital, according to an announcement at that time.

Gerchen Keller was co-founded by its CEO Adam Gerchen, a former Goldman Sachs investment banker, and Ashley Keller, a managing director who is a former partner of Bartlit Beck Herman Panelchar & Scott LLP.

Bogart, the CEO of Burford, said in an interview that the deal is meant to expand its business and diversify the firm’s financial offerings.

Bogart said that law firm and corporate clients have requested a broader range of financing options, which the Gerchen Keller acquisition provides. The two firms, he explained, get capital from different types of investors: publicly listed Burford has public equity investors such as Fidelity, while the private Gerchen Keller gets capital from funds, such as state pension funds and endowments in what is more of a “low risk, low return” business. Therefore, the combined entity will offer clients a diversity of financial vehicles.

To provide an example, Travis Lenkner, managing director of Gerchen Keller, said that one area his firm specializes in is post-settlement funding.

“We have invested in situations where litigation is settled, or there is a final judgment, but for some reason there is a court process that results in payment delay,” said Lenkner. “What we do in those investment structures is accelerate those dollars to the law firm, but because the litigation is already settled, it’s a lower risk and lower return product, than if we were investing in that litigation before the complaint is filed.”

Lenkner explained that previously, such an opportunity didn’t make sense for Burford, which has traditionally put its capital toward higher risk, higher return financial investment, in individual complaints and whole portfolios of litigation at large law firms.

Now, though, Bogart said that the litigation finance market has evolved to a point where it makes good business sense to expand.

“We both started as quite small firms and we have both grown very rapidly as the market has continued to expand,” said Bogart. “What we are seeing in the market today is this increased velocity in demand for capital — from law firms and corporate clients — and an ever-widening demand for new products and innovation. While each of us were doing our best to meet that demand, we believe that with a broader and more flexible capital base... we will be able to do that.”

Expansion also protects the firm’s business, he said. In 2013, BlackRobe Capital Partners closed after failing to raise enough capital from investors and internal disagreements.

“With scale comes security,” said Bogart.

The new entity will operate under the Burford brand and the three principals at Gerchen Keller will take on senior management roles at Burford. Adam Gerchen, who co-founded Gerchen Keller with Ashley Keller in 2013, will become the president of Burford. Meanwhile, Keller, and Travis Lenkner, who are both managing directors at Gerchen Keller, will join Burford’s investment committee.

“Myself, Adam and Ashley Keller have signed long-term agreements with Burford and a significant portion for the transaction is in shares of Burford stock that vests only upon our success in the future,” said Lenkner. “So, the deal was structured intentionally to incentivize us to play a significant role in the combined organization. And to do so over the long-term.”

Bogart said that he doesn’t expect any staff changes or layoffs.

“We are both about growth,” said Bogart. “This is truly about growing, so my guess is that by the end of next year we will be larger than what we are going into next year. This isn’t a corporate deal that is about cost reduction. Quite the opposite.”

According to the Wednesday announcement, Burford has a market capitalization of $1.24 billion, while Gerchen Keller has $1.3 billion in assets.

Other litigation finance businesses include Bentham IMF, Parabellum Capital, Vinson Litigation Finance and Citi Private Bank’s law firm lending division.

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