Revenue Royalty Investors May Benefit
From Rewarding Transaction Advisors

Investors in revenue royalties aim to profit from a cumulative receipt of royalty payments paid by companies generating increasing revenues.

Those of us involved in the structuring and possible placement of the royalty with investors, do so to benefit the companies issuing the royalty, the investors, and ourselves. The benefit can include receipt of wages, fees, and satisfaction, generally awarded by the company receiving the benefit of the capital which results from the investor’s purchase of the royalty.

I believe that royalty investors could benefit from a partial sharing of the royalty payments received, above an agreed level of return, with those advisors who assisted in the structuring of the creation and distribution of the royalty in order to incentivize their continued oversight of the transaction.

Investors could agree to include terms in the company’s royalty agreement whereby once cumulative royalty payments had reached an agreed level of the investor’s payment for the royalty that a percentage of the royalties to which the investor was contractually entitled be paid to an entity benefiting those who advised in the structuring of the royalty. Such an arrangement would impact the return from the royalty but may enhance the assurance of issuer compliance and fairness of the royalty’s term.

The investors receiving royalty payments of more than an agreed amount could agree to a payment both to independent advisors such as ourselves, and others, some of whom could be employed by the royalty issuer. The mechanics of disbursement and capture of these payments could possibly include the use of a trust structure.

The net result of what is being suggested is that investors would have the additional benefit of those who are in a position of being both company knowledgeable and effective due to having a shared interest.

This is worth considering because both royalty investors and royalty issuers would benefit from the ongoing involvement of advisors.

 

Arthur Lipper, Chairman                          arthurlipper@gmial.com
British Far East Holdings Ltd.