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Leveraging the Independent Sponsor Model: Achieving Long Term Majority Ownership as an Independent Sponsor

Many private equity professionals choose the fundless or independent sponsor model because it minimizes or removes some of the pitfalls or alignment challenges of the traditional private equity model. For some independent sponsors, building and growing portfolio companies beyond a defined private equity hold period offers great appeal to both themselves, as well as the business owners that are selling their companies. As an independent sponsor financing firm, Access Capital Partners has put together a brief overview that outlines how independent sponsors can both maximize their independent sponsor economics, as well as achieve long term majority ownership of the businesses in which they invest. For more information, please visit: www.independentsponsorfinancing.com or email: info@accesscappartners.com.

1 of 11
CAPITAL RAISING FOR INDEPENDENT SPONSORS
The
Independent Sponsors’
Guide
Achieving Long Term
Majority Ownership as an
Independent Sponsor
How can Independent Sponsors end up with majority ownership of their
acquisitions? Here are the keys to long term majority ownership:
• Use our Guide to optimize economics at the acquisition:
“6 Ways to Improve Your Ability to Negotiate Better Independent Sponsor
Economics”
• Select Capital Partners that will agree to the economics you want,
not just fund your acquisition
- Always run a competitive process to source capital: seek out multiple
funding sources and create negotiating leverage to optimize
economics
- Be open to exploring all financing structures and types of capital, not
just the most familiar ones
• Growth is Critical- have an exceptional growth and valuation
creation strategy and the people ready to execute it
Summary
www.accesscappartners.com | www.fundlesssponsorcapital.com
Value Creation and Reducing
the Risk Profile
Recapitalize with Less Dilutive
Shareholders; Optimizing
Sponsor Economics Again
Value Creation and Reducing
the Risk Profile
Time from Acquisition
Control&Ownership
1
Buy
The Path to Long Term
Majority Ownership
Best Possible Economic
Position with the Right Capital
Partner
Recapitalize with Minimally-
Dilutive Shareholders –
Achieve Controlling Interest
2
Grow
3
Recap #1
4
Grow
5
Recap #2
See details on
following pages
www.accesscappartners.com | www.fundlesssponsorcapital.com
• Must complete a transaction that warrants premium Independent
Sponsor Economics (read ACP’s “6 Ways to Improve Your Ability to
Negotiate Better Independent Sponsor Economics”)
- ACP has completed capital raises whereby the independent
sponsor retained control at the outset
• Must secure a complimentary capital partner that is willing to
consider non-sale liquidity options
- Recapping the partner out must be done without selling the
business
- There are certain capital providers that are more amenable to
this than others
Start in the Best Possible Economic Position with
the Right Capital Partner
1: The Buy
www.accesscappartners.com | www.fundlesssponsorcapital.com
• The independent sponsor must have an achievable
growth strategy and the team to execute it- this may
entail bringing industry executives to the transaction at
the outset
• Growth allows you to have the value creation and cash
flow necessary to expand your capital options and
move to greater ownership
Focus on Value Creation and Reducing the Risk Profile
www.accesscappartners.com | www.fundlesssponsorcapital.com
2: Grow
Recapitalize with Less Dilutive Shareholders;
Optimizing Independent Sponsor Economics, Again
• You need to anticipate this recap on the initial acquisition
- A capital partner that requires the business to be sold will not
set you up for a recapitalization
• This recapitalization is often funded by different types of capital
partners than those who funded the acquisition initially
- This recap generally moves you away from control oriented or
opportunistic capital partners
• The presentation and positioning of the recap financing opportunity is
meaningfully different than it would be for securing capital for an
independent sponsor acquisition
www.accesscappartners.com | www.fundlesssponsorcapital.com
3: Recap #1

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Leveraging the Independent Sponsor Model: Achieving Long Term Majority Ownership as an Independent Sponsor

  • 1. CAPITAL RAISING FOR INDEPENDENT SPONSORS The Independent Sponsors’ Guide Achieving Long Term Majority Ownership as an Independent Sponsor
  • 2. How can Independent Sponsors end up with majority ownership of their acquisitions? Here are the keys to long term majority ownership: • Use our Guide to optimize economics at the acquisition: “6 Ways to Improve Your Ability to Negotiate Better Independent Sponsor Economics” • Select Capital Partners that will agree to the economics you want, not just fund your acquisition - Always run a competitive process to source capital: seek out multiple funding sources and create negotiating leverage to optimize economics - Be open to exploring all financing structures and types of capital, not just the most familiar ones • Growth is Critical- have an exceptional growth and valuation creation strategy and the people ready to execute it Summary www.accesscappartners.com | www.fundlesssponsorcapital.com
  • 3. Value Creation and Reducing the Risk Profile Recapitalize with Less Dilutive Shareholders; Optimizing Sponsor Economics Again Value Creation and Reducing the Risk Profile Time from Acquisition Control&Ownership 1 Buy The Path to Long Term Majority Ownership Best Possible Economic Position with the Right Capital Partner Recapitalize with Minimally- Dilutive Shareholders – Achieve Controlling Interest 2 Grow 3 Recap #1 4 Grow 5 Recap #2 See details on following pages www.accesscappartners.com | www.fundlesssponsorcapital.com
  • 4. • Must complete a transaction that warrants premium Independent Sponsor Economics (read ACP’s “6 Ways to Improve Your Ability to Negotiate Better Independent Sponsor Economics”) - ACP has completed capital raises whereby the independent sponsor retained control at the outset • Must secure a complimentary capital partner that is willing to consider non-sale liquidity options - Recapping the partner out must be done without selling the business - There are certain capital providers that are more amenable to this than others Start in the Best Possible Economic Position with the Right Capital Partner 1: The Buy www.accesscappartners.com | www.fundlesssponsorcapital.com
  • 5. • The independent sponsor must have an achievable growth strategy and the team to execute it- this may entail bringing industry executives to the transaction at the outset • Growth allows you to have the value creation and cash flow necessary to expand your capital options and move to greater ownership Focus on Value Creation and Reducing the Risk Profile www.accesscappartners.com | www.fundlesssponsorcapital.com 2: Grow
  • 6. Recapitalize with Less Dilutive Shareholders; Optimizing Independent Sponsor Economics, Again • You need to anticipate this recap on the initial acquisition - A capital partner that requires the business to be sold will not set you up for a recapitalization • This recapitalization is often funded by different types of capital partners than those who funded the acquisition initially - This recap generally moves you away from control oriented or opportunistic capital partners • The presentation and positioning of the recap financing opportunity is meaningfully different than it would be for securing capital for an independent sponsor acquisition www.accesscappartners.com | www.fundlesssponsorcapital.com 3: Recap #1
  • 7. Focus on Value Creation and Reducing the Risk Profile Same as #2 Additionally, if professionalizing the organization hasn’t been a focus to this point, now is great time to: • Focus on increasing revenues and EBITDA, improving margins and diversifying points of concentration (customer, vendor, channel, product); • Implement or improve systems, processes and controls; and • Develop or add to the management team to provide management depth in critical operational or growth functions www.accesscappartners.com | www.fundlesssponsorcapital.com 4: Grow
  • 8. Recapitalize with Minimally-Dilutive Shareholders- Achieve Controlling Interest • Requires some planning, but the types of capital partners who funded the recapitalization in #3 tend to be amenable to being taken out in a non-sale liquidity event • Different, more traditional capital partners than those who funded the previous transactions • To reach this stage, the company usually needs to be large enough to comfortably support enough cash flow leverage to buy out passive or non-strategic equity partners www.accesscappartners.com | www.fundlesssponsorcapital.com 5: Recap #2
  • 9. Key Takeaways • Starting out with the best possible independent sponsor economics may accelerate the process of becoming the control investor • Careful planning and selecting the right Capital Partner initially, and throughout the process, is critical to being able to execute this type of strategy • Growth, value creation and risk reduction usually must occur for this strategy to be viable www.accesscappartners.com | www.fundlesssponsorcapital.com
  • 10. SAVE TIME, FOCUS ON WHAT MATTERS Focus on Deal Sourcing, New Deal Evaluation, Target Company Diligence and Value Creation of Existing Portfolio Companies ACCELLERATE THE CAPITAL RAISING PROCESS CREDIBILITY WHEN NEGOTIATING WITH SELLERS IMPROVED FUNDLESS SPONSOR ECONOMICS ALIGNED INTERESTS Our Acquisition Financing Process Aims to Accelerate the Time to Structure, Source Negotiate and Close the Financing in a way the Aligns with the Fundless Sponsor Model Once the Proposed Financing Structures Have Been Vetted by Some of Our Capital Partners, We’ll Issue a Support Letter or Discuss Financing with the Seller or Seller’s Advisor LEVERAGE OUR NETWORK & RELATIONSHIPS Our Independent Sponsor Financing Process Aims to Preserve or Exceed Market-Based Sponsor Economics Success-Based Fee Structures and Co-Investment Opportunities Maintain Alignment with Our Independent Sponsor Partners We’ve Spent Years Identifying and Developing Relationships with Debt and Equity Capital Partners- Use Them to Complete more Acquisitions on Better Terms. Partnering with Access Capital Partners www.accesscappartners.com | www.fundlesssponsorcapital.com Access Capital Partners has tailored its capital raising process to the unique needs of independent sponsors considering an acquisition or recapitalization:
  • 11. $8.0B+ 100+ 35+ 1000+ In total transaction experience Completed transactions Years of middle market experience Relationships with debt and equity capital providers across the globe 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 of existing portfolio companies, ACP has become a trusted partner in the independent sponsor community. ABOUT ACCESS CAPITAL PARTNERS Access Capital Partners 7733 Forsyth Blvd., Suite 1168 St. Louis, MO 63105 314.783.9550 www.accesscappartners.com Securities offered through StillPoint Capital LLC, Member FINRA and SIPC Tampa, FL 33626. StillPoint Capital is not affiliated with Access Capital Partners. Greg Porto 312.339.2857 gporto@accesscappartners.com Greg Tobben 314.458.8186 gtobben@accesscappartners.com CAPITAL RAISING FOR INDEPENDENT SPONSORS