Holdco Vs Independent Sponsor

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February 14, 2024

by a searcher from Louisiana Tech University in Orlando, FL, USA

I have heard both of these terms thrown out there very often with seemingly successful folks describing what they do as very similar but label themselves something different.

Is there a difference here or is it an interchangeable term? If different, would love to understand the differences in day to day as well financial model.

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Reply by a searcher
from University of Notre Dame in Dublin, OH, USA
I can see how these might be used by folks who do similar things, but these are ultimately two different concepts. Brief summary below:

Independent Sponsor: This is a financial sponsor (i.e., a private equity firm) who does not have a committed fund (thus, they are a fundless sponsor or "independent"). An Independent Sponsor will operate very similarly to a PE firm, though without a committed fund. They'll raise capital on a deal-by-deal basis.

HoldCo: In this context, a HoldCo refers to a company with a focus on acquiring and managing multiple companies, typically for the long-term. Berkshire Hathaway is a classic example. HoldCo's are typically contrasted with PE funds given their longer time horizon and the degree of integration between portfolio companies. HoldCos are often unique in structure (again, contrasting with the canonical structure used by PE funds) and thus their source of funds could vary widely.
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Reply by an investor
from Dartmouth College in 80 S Main St, Hanover, NH 03755, USA
This feels like saying Pets vs poodles to me. (Or something) Kelcey covers it above. ETA is also a variant of independent sponsorship. There are many different ways to play private equity. I would define independent sponsor as “not a fund” and “not a permanent pool of your own capital” so raising the majority of the equity for an specific investment from investors. But even that model is starting to hybridize. Holdco can also be done a bunch of ways and could refer to both duration intent and legal ownership/partnership structure. To use in a sentence: “after five years at a middle market PE firm where they invested via co-mingled funds, Troy hung a shingle as an independent sponsor and decided to pursue a Holdco strategy focused on doggy day care investments.”
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