Experience with the independent sponsor model?

February 08, 2025

by a searcher from Harvard University - Harvard Business School in Darien, CT, USA

Hello everyone - I wanted to see if there are any Searchfunders on the platform who have successfully executed a transaction using an independent sponsor model (either committed capital or deal-by-deal).

After spending the last 15 years as a investor in both private and public equities, in early 2024 I turned my professional focus to ETA. I bought my first company with a partner in early 24 in the DTC space and am now pursuing my second deal focused on opportunities in the energy market. I will be targeting a larger deal this time around with the mission of buying a platform company and building it both organically and through bolt-ons.

I am in the process of laying out the roadmap to execute this strategy and as part of that would love to chat with anyone who has experience doing this via the independent sponsor route.

Feel free to DM me on this platform, message me on LinkedIn, reply to this post, or email me directly at redacted Thanks in advance!

Ian

Reply by an investor
from University of Pennsylvania in Charlotte, NC, USA

Ian, I think you're getting few responses here because there is a lot of confusion about what "independent sponsor" really means. There are a few good resources on this platform to better understand what an independent sponsor is and does. Here's one: https://www.searchfunder.com/article/viewarticle/48306 . What's often misunderstood is that unless you have a significant track record of creating value through M&A transactions, it's very difficult to just declare yourself an IS (as classically defined.) You're going to have to persuade sophisticated, M&A-experienced investors - family offices, experienced HNW individuals, PE funds, etc. - that they should invest in the transaction you are "sponsoring", meaning not only have you done sufficient due diligence to validate the attractiveness of the target but also you've priced (valued) and structured the transaction correctly. Investors require all that of an IS and will scrutinize you and the opportunity heavily - this isn't friends and family capital. And, depending on the investor(s), they may be looking to you to raise the needed debt/mezz capital and finally to negotiate the deal to a successful closing. Post closing, an IS usually has a significant minority of board seats (say 2 of 5) - but again, that's if the IS has a track record of driving value growth in a similar operating company - otherwise why would the 80-90% equity owners want to give such power to the IS? Lots to consider here. What is it that you believe may be "better" as an IS, given your objectives?

Reply by a searcher
from University of Notre Dame in Dublin, OH, USA

Ian - I’d be happy to discuss. I previously worked for an independent sponsor, and in my current role I’ve helped finance the debt portion of several independent sponsor deals. I’m at redacted

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