Smallest EBITDA size ranges for Search and Independent Sponsors?

July 15, 2025

by a searcher from Columbia University - Columbia Business School in Jacksonville, FL, USA

Perhaps I am overanalyzing, but my Search (me as operator) is usually at $750K and my Independent Sponsor threshold is usually around $2M in EBITDA, $5M if a large capital provider is coming in. However, lately I feel these rigid requirements have left me out of deals that were otherwise pretty solid. If I don't need a salary, these seem like arbitrary floors installed by the "conventional wisdom" of others. Thoughts?

Reply by a searcher
from University of Chicago in Philadelphia, PA, USA

For independent sponsors, $3mm EBITDA is the primary floor I see, where most SBICs and other capital providers have a hard stop there. A lot also have a floor of $2mm EBITDA, but sometimes this really means $2.5mm+ or often it's a higher bar for these smaller deals. Even fewer go below $2mm EBITDA, but that's very contingent on having all the attributes that make a strong platform (i.e., management team, growth opportunities, systems in place, maybe add-ons). You could go lower and raise equity, but private debt would be hard to come by. For certain businesses, ABL could be an option. Senior debt seems to want $3mm EBITDA+.

Reply by a searcher
from University of Wisconsin in Milwaukee, WI, USA

We set floors based on the return required to make it worth our time. If you can put less time in a smaller deal and make it worth your time, maybe it makes sense for you.

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