3 Characteristics of Terrific Impartial Sponsor Financing Partners
Selecting the proper capital partner is significant for independent sponsors. However, we generally listen to horror stories from sponsors about capital companions that re-trade deals, back out at the past minute or turn out to be considerably less than ideal partners following a transaction closes.
We typically discover our purchasers inquiring us: Which capital resources make the ideal associates for unfunded sponsors? What should fundless sponsors appear for in a capital partner? What form of funding supply would be the very best in good shape for me and my specials?
Below are 3 attributes shared by terrific independent sponsor funding resources:
1. They Supply Truthful Independent Sponsor Economics
The proposed impartial sponsor economics (transaction fee / endorse, carried curiosity or ownership / ongoing management price) are created to reward the sponsor for the value delivered and to incentivize them to grow the business remaining acquired.
If you carry a proprietary deal, at an eye-catching valuation, with a stable management team and growth plan to the desk, you should be rewarded with exceptional fundless sponsor economics. Why is anything at all a lot less than that realistic or satisfactory?
Be mindful not to fall into the trap of accepting beneath market place economics if you can prevent it. Quite a few of the lengthy-time and very well-known fundless sponsor capital companies generally just take advantage of their unfunded counterparts, notably new sponsors or ones that aren’t functioning a tight capital raising method.
Any pushback from a capital resource these as “Effectively, it can be a stretch deal for us” or “That is not what we do” means they are likely not a great healthy for you or your deal.
2. They Embrace the Independent Sponsor Model
The great funding resource embraces the impartial sponsor model because they want to, not since they have to.
Let’s deal with it, not just about every SBIC, spouse and children office environment or private equity fund really would like to make investments with fundless sponsors, but as the impartial sponsor sector has grown, it has turn into harder for private equity companies to overlook as a practical source of deal flow.
You want to question the proper questions – how quite a few independent sponsor bargains have they completed? What economics have they presented sponsors in the past? What are their requirements for fundless sponsor promotions? How do they see your role just after the transaction closes? Based on their responses, you can make your mind up if they genuinely want to work with you…
3. They Provide Additional than Just Debt or Equity Capital
A wonderful funding partner provides more to the table than the capital to shut your deal.
The greatest funding resources are strategic – they will help expansion by funding insert-on acquisitions they have valuable industry connections they have perception on very best methods to grow a business.