WHAT IS A FUNDLESS OR INDEPENDENT SPONSOR
Fundless or Independent Sponsors are individuals or groups that seek to acquire, grow and exit one or more businesses for a profit, much like conventionally funded private equity firms. Unlike their traditional private equity counterparts, however, they don't have a dedicated pool of committed capital at their disposal and are usually required to raise debt and equity capital on a deal by deal basis.
The most successful fundless or independent sponsors combine the rigor, sophistication and approach of traditional private equity investors, focusing on proprietary deal sourcing, transaction execution, portfolio company monitoring and often invest invest personal funds along-side other investors.
THE INDEPENDENT SPONSOR MODEL
The Independent Sponsor Model represents the evolution of the traditional private equity model, whereby talented private equity sponsors aim to identify, acquire, grow and exit a business for a profit, while avoiding some of the traditional private equity pitfalls and barriers to entry.
Appeal for Operating Executives and Private Equity Professionals
Many talented operating executives and private equity professionals have gravitated towards becoming independent sponsors because it represents an opportunity to utilize their skill sets with a higher degree of autonomy than acting as an employee, while offering the ability to create an enormous amount of personal wealth, if successful.
For the private equity professional working as an employee of a fund, with either limited upside potential or an unclear view about the path to partnership, the fundless sponsor model presents an opportunity to be rewarded for the value you're creating, without navigating the long and sometimes bureaucratic climb to partnership or setting up a new fund.
Independent Sponsor Compensation
Like traditional private equity firms, independent sponsors are compensated through a combination of fees and profit sharing. In most cases, the independent sponsor is typically compensated through:
A deal fee or transaction fee paid at closing: in many cases, there is an expectation that a portion of this fee will be reinvested into the transaction alongside other investors
Ongoing compensation based on the role of the sponsor: generally, executives stepping into a day-to-day operating role will receive a healthy salary and benefits, while the active board-level advisor will usually receive a management fee
Upside participation: upside participation can be structured through a carried interest or promoted interest vehicle, common equity vested at inception or common equity vested based on timing or performance hurdles; in a successful independent sponsor transaction, the upside participation should represent the largest component of the independent sponsor's economic package
For more information about fundless sponsor compensation, read our guide on Independent Sponsor Economics.
Investors that embrace the independent sponsor model as a source of deal flow, are attracted to the concept of seeing proprietary or non-auctioned deal flow and individually selecting the target companies (vs. investing in a blind fund), while negotiating independent sponsor economics based on the relative value of the sponsor and investment opportunity.
As the independent sponsor model has evolved and become more mainstream, it should be no surprise that many talented individuals with professional investing and operating backgrounds have started venturing out to form independent sponsor groups.
To discuss the path to becoming an independent sponsor or direct investing with independent sponsors, please contact Access Capital Partners:
KEY ELEMENTS OF THE
INDEPENDENT SPONSOR MODEL
ACCELERATING YOUR SUCCESS AS A NEW SPONSOR
In addition to structuring and raising capital for independent sponsors' acquisitions and recapitalizations, we regularly advise both new and long-time independent sponsors on non-capital related matters to better position them for optimal outcomes:
Refining their independent sponsor model and value proposition
What types of businesses are best suited for independent sponsor transactions
Providing guidance on deal structures that help maximize the sponsors economics
Managing seller or advisor expectations
Provide guidance on deal sourcing strategies that maximize transaction viability
Making introductions to law firms and accounting firms that are experienced in the independent sponsor space
SELECT INDEPENDENT SPONSOR CAPITAL RAISES
ADVANTAGES OF WORKING WITH ACP
Save time. Focus on Value Creating Activities
For an independent sponsor, time is your most precious resource. Let us take the burden off of you, so you can focus on deal sourcing and growing existing portfolio companies.
Better Independent Sponsor Economics
Our process delivers results. While no two transactions are alike, historically, ACP clients have achieved above market deal fees, ongoing compensation, management fees and equity participation.
Credibility When Negotiating with Sellers
We'll provide you with visibility up front on likely transaction and capital structure alternatives that have been validated by the capital partners we believe are most likely to get aggressive for your deal.
Leverage Our Network and Relationships
We've spent years building relationships with alternative debt providers, private equity funds and family offices. We deal with the decision makers and often receive preferential treatment because we are a steady stream of deal flow for them.
FOCUSED EXPERTISE PRODUCES BETTER OUTCOMES
WHAT PEOPLE SAY
“ACP was a key part of our successful acquisition- structuring the deal to meet the seller's needs, sourcing attractive capital and providing solutions to the challenges that arose. They are a great partner for independent sponsor acquisitions.”
— Independent Sponsor
FOR INDEPENDENT SPONSORS
ABOUT ACCESS CAPITAL PARTNERS
Access Capital Partners is a middle market investment bank focused exclusively on securing debt and equity capital for independent sponsors, executives and family offices.
Assisting with both new acquisitions, as well as recapitalizations, ACP has become a trusted partner in the independent sponsor community.
In total transaction experience
Years of middle market experience
Relationships with debt and equity capital providers