Choosing the right capital partner for independent sponsors is important. Unfortunately, we often hear scary stories from sponsors about capital partners who start the deal again, get back in the last time, or after the closure of the transaction becomes less than the ideal partners.
We often ask our customers: Which capital sources make the best partner for the unfunded sponsors? What should fundless sponsors see in capital partner? What kind of money source would be most suitable for me and my deals?
Here are three characteristics shared by great independent sponsor money sources:
1. They offer fair independent sponsor economics
Proposed independent sponsor economics (transaction fee / incentive, interest or ownership / ongoing management fee) was designed to encourage the sponsor to promote the value and to develop the business to be acquired. is.
If you bring a proprietary deal, on an attractive assessment, with a solid management team and development plan, you should be rewarded with better fundular sponsor economics. Why is something less than reasonable or acceptable?
Be careful not to fall in the trap of accepting below market economics if you can avoid it. Many of the long and well-funded sponsorship capital providers often take advantage of their unexpected counterparts, especially new sponsors or those who are not running a tight capital mobilization process.
Any pushback from Capital Source like “Well, it’s a stretch deal for us” or “That we have we do” means that they are probably not good fit for you or for your deal.
2. They embrace the independent sponsor model
The ideal funding source embraces the independent sponsor model because they want to, not because they want to.
Let’s face it, not every SBIC, family office or private equity fund actually wants to invest with funded sponsors, but as the independent sponsor market has increased, neglecting the viable source of deal flow for private equity firms Has become harder.
You need to ask the right questions – how many independent sponsor deals have they done? In the past, what economics have they sponsored? What are their criteria for fundless sponsor deals? How do they view your role after the transaction is closed? Based on their reactions, you can decide if they really want to work with you …
3. They provide more than debt or equity capital
A great wealth partner brings more in the table than the capital to close its deal.
The best funding sources are strategic – they will enable development by add-on acquisition funding; They have subsidiary industry connections; They have insights on best practices for developing a business.
As an investment bank, especially focusing on raising debt and equity capital for independent sponsors, we’ve spent years in connection with capital providers and know that money for various types of deals and sponsorships The source will be the most complementary. The fit counts in a partnership.