The rise of Independent Sponsors

What is an independent sponsor and why are they attractive to so many investors?

Happy Friday Founders & Friends!

Given the number of positive reviews on last week’s Net Working Capital article, we have decided to share some more industry insights….. so let’s jump right in.

Independent Sponsors; An attractive alternative to your typical PE fund

Given market forces and a shifting playing field in the PE landscape, a fairly new independent sponsor model has proved to be quite an attractive alternative for industry participants.

What is an independent sponsor and how are they different to a traditional fund?

Before we take a deep dive into this topic let’s cover the basics. Unlike a traditional private equity firm that pulls $$ from a committed fund to invest, an independent sponsor draws on capital raised within their network to invest on a deal-by-deal basis.

Who are your ‘typical’ independent sponsors?

Becoming an independent sponsor is an attractive route for any experienced investor/operator. As an independent sponsor, it is critical to have both the financial and operational abilities in order to properly underwrite deals and effectively execute the day-day running of the businesses that you invest in. Further, independent sponsors tend to have backgrounds in the industries represented by the companies that they target. 

Why are they so attractive to investors?

From an investor perspective, the main advantage of the independent sponsor model is that it gives more control over their investment decisions compared to a traditional fund. The deal-by-deal basis allows investors to decline deals that might not align with their mandate (geography, industry, size, etc.). Additionally, the independent sponsor model avoids the untimely capital calls associated with traditional funds. 

As a leading independent sponsor, we are excited and encouraged by these trends. 🚀

Make sure to check out the following reads on independent sponsors 👇👇

📚 Why Investors Are Choosing Independent Sponsor Models vs. Traditional PE Funds

📚 Structuring a Winning PE-Independent Sponsor Partnership

📚 The case for independent sponsor deals amid COVID-19

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