Investment Funds: Identifying and Valuing New Assets Within Your Holdings.

Legal assets, or “actifs juridiques,” represent an often underestimated but potentially lucrative asset class for investment funds owning companies with such assets.

Definition and Importance of Legal Assets

Legal assets are defined as rights or claims with economic value, typically arising from litigation or judicial proceedings. These can include damage claims, intellectual property rights, favorable yet unenforced judgments, as well as anticipated future claims. For investment funds, these assets offer substantial opportunities for gains when managed and valued prudently.

 

Sectors Often Featuring Legal Assets

  • Healthcare
  • Technology
  • Intellectual Property
  • Insurance
  • Consumer Goods
  • Construction

Valuation of Legal Assets

Valuing legal assets requires a multidimensional approach that integrates legal, economic, and financial analyses. Assessing the likelihood of litigation success is crucial. This involves a thorough examination of evidence, legal precedents, and expert legal opinions. Estimating the potential amount of claims or damages is also essential, using rigorous economic methodologies to project future losses and gains.

The time needed to resolve the litigation is a determining factor, as prolonged timelines can affect the discounted value of the asset due to uncertainty and accumulated costs. Costs associated with litigation, such as legal fees, expert costs, and management expenses, must be meticulously considered. Legal risks, including legislative changes and judicial interpretations, also need evaluation.

Finally, financial techniques such as the discounted cash flow (DCF) method can be employed to estimate the net present value of the asset. This approach considers expected future cash flows, adjusted by an appropriate discount rate, to provide an accurate and current valuation of the asset.

In a nutshell:

At OutMatch, we assist investment funds in monitoring and valuing their portfolios.

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