Rosenblatt aims to 'rewrite the rule book' for litigation funding after record UK law firm IPO

Rosenblatt CEO Nicola Foulston

 

Rosenblatt is planning to use the proceeds of its AIM listing to set up a commercial litigation fund as the firm looks to “rewrite the rule book” in the competitive litigation finance market.

The City practice, which became the fourth-ever law firm to float on the London Stock Exchange this morning (8 May), plans to use the proceeds from its listing to fund litigation ‘in-house’, while also acquiring other law firms to fuel its growth.

Rosenblatt raised approximately £43m from the listing, which was significantly oversubscribed, making it the largest UK law firm IPO to date, ahead of Gateley’s 2015 float, which raised £30m, and those of Gordon Dadds and Keystone last year, which raised £20m and £15m respectively.

After deducting costs and fees, the listing has handed Rosenblatt net proceeds of £31.8m, of which about £20m will be used to repay loans and tax liabilities.

Rosenblatt chief executive Nicola Foulston said the remaining funds would be used for ‘in-house’ litigation funding and the acquisition of “high-margin or specialist firms that fit with our profile”.

Foulston added: “We are looking at acquiring litigation boutiques, law firms or teams. We are looking at the high-margin end, and we want to do this before moving into third-party litigation funding.”

In third-party-funded litigation, some or all of the costs of bringing a case to court are funded by a neutral party. Typically, if the case is successful, the funders will receive a share of the financial recovery.

Rosenblatt is aiming to differentiate itself from more costly litigation funders. “We are challenging the model with a view to rewriting the rule book,” Foulston added. “Litigation funders do not have an in-house law firm engine. We can also remove the exorbitant costs by charging lower rates. ”

The firm now plans to spend up to 12 months setting up a fund, with the aim of securing several acquisitions – either of disputes boutiques or teams of litigators – beforehand.

Foulston commented: “One reason for the delay in setting this up is that we must have absolutely the right structures in place. When you do third-party litigation funding, you can’t do it within the law firm itself – there would be a separate entity within the group, owned by the Rosenblatt PLC, which would be separately regulated. There would be a steel curtain between the two entities.”

The firm is targeting the medium-sized claims market, in the region of £10m to £200m. Initially, before launching a separately regulated third-party fund, it will provide litigation funding in-house.

Foulston explained: “We are keen to establish a track record in this area. We are probably the first law firm to have raised money on our own balance sheet to fund litigation cases. We do not yet provide third-party litigation funding in the way Burford Capital does, but we are moving in that direction.

“Our first step will be taking on partial risk in a case. There are big corporates out there who don’t want to take fees on risk and we can put it on our balance sheet. They are asking us to have skin in the game.”

The firm, which said it also plans to make significant investments in its IT and artificial intelligence systems, has used the listing to challenge the limitations of traditional law firm management structures.

In a statement, the firm said: “Many law firms continue to be managed by senior partners, who often have little or no commercial management experience. These firms often suffer from the impact of being run by a management team made up of lawyers who often lack professional business management skills and who are required to forego work on fee-earning transactions to manage the business.

“Rosenblatt has addressed this through the appointment of a professional, experienced and specialist management team, which the directors believe sets the company apart from many of its competitors.”

Rosenblatt is a single-office London practice led by Foulston and senior partner Ian Rosenblatt, who founded the firm in 1989. It has 45 fee earners, primarily focusing on litigation, as well as corporate, finance, construction and projects, employment, financial services, technology, media, real estate and tax.

Foulston sits on a board of directors that also includes former Nabarro partner Brook Land and ex-DAC Beachcroft finance director Patrick Firebrace. Foulston took over the commercial management of the firm in September 2016, having been a client for nearly 30 years.

The firm expects that a first dividend for the period from May to September 2018 will be paid out before the end of the year.