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Independent Sponsors Overview

Independent sponsors have become an increasingly prominent part of the Private Equity value chain, contributing to the ever evolving relationship between operators, brokers, GPs, and LPs.

Role of an Independent Sponsor:

  • Arranges capital from investor network
  • Conducts due diligence and closes the deal

Key Characteristics of an Independent Sponsor:

  • Deal by deal fundraising
  • Operational expertise
  • Deals in lower middle market and middle market space

Advantages of an Independent Sponsor:

  • Investor’s ability to influence timing of investment entry and exit
  • Offers operational and industry expertise

Disadvantages of an Independent Sponsor:

  • Limited workforce to ensure continual operational support

Independent Sponsor Trends:

  • Difficult fundraising environment, investment constraints and higher reporting requirements resulting in increased deal-by-deal investments
  • Family offices and non-PE capital sources more open to direct investments through Independent Sponsors

Differentiating Factors:

  • Exposure to unrecognized opportunities through extensive relationship development
  • Ability to focus on niche industries and situations

Source of Capital:

  • Family Offices
  • Hedge Funds
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