1. Making the Most Out of the
Independent Sponsor Model:
6 Guidelines for Emerging Sponsors

2. First, let’s explain what an
Independent Sponsor is…

3. What is an Independent
Sponsor?
Independent Sponsors, or fundless sponsors, are
individuals or groups that buy, grow and
exit companies, much like a conventionally funded
private equity firms.
Unlike their traditional private equity counterparts,
however, independent sponsors raise debt and
equity capital on a deal by deal basis, as they do
not have a committed investment fund.

4. How does the Independent
Sponsor Model Work?
The independent sponsor model is a variation of the
traditional private equity model.
In exchange for putting the deal together, helping to
grow the business and leading the company to a
successful exit, the sponsor generally charges fees
and participates in the value creation.

5. Independent Sponsor
Compensation Packages
Independent sponsor compensation packages generally include:
• A deal fee or transaction fee
• An ongoing management fee
• A participation in the value created over the course of the
investment; usually this is in the form of a promoted
interest or carried interest, but may also be structured as
common equity or some other profit sharing vehicle

6. Independent Sponsor Fees
Independent Sponsor Deal Fee or Transaction Fee
• Deal fees or transaction fees are fees paid at closing to the
independent sponsor for putting a deal together.
• In many cases, it will be expected that a portion of this fee will be
rolled back into the transaction alongside the other equity
investors.
• Creative structuring may take place to minimize the tax
consequences to the independent sponsor.
• Although every transaction is different, we’ve seen independent
sponsor deal fees range from 1% to 4% of the enterprise value of
the business being acquired

7. Independent Sponsor Fees (continued)
Independent Sponsor Management Fee
• A fundless sponsor’s management fee is a fee paid on
an ongoing basis for focusing on building and growing
the portfolio company.
• Generally, fundless sponsor management fees range
from 3.5% to 7.5% of EBITDA, although depending on
the size of the company, a floor or ceiling may be
established.

8. Independent Sponsor Equity Participation
An independent sponsor’s equity participation provides alignment of
incentives, allowing an independent sponsor to share in the value creation of
the business and capital appreciation of the other capital providers’
investments. Carried interest structures vary widely by situation and capital
provider.
The equity participation component should represent the largest portion of an
independent sponsor’s compensation and is often a main point of negotiation
between the sponsor and capital partners.
Historically, this has been the area that Access Capital Partners has been
able to add tremendous value for its independent sponsor clients. Email ACP
to learn more.
Independent Sponsor Carry, Promote or Upside Participation

9. Making the Most Out of the
Independent Sponsor Model:
6 Guidelines for Emerging Sponsors

10. For most independent sponsors,
especially new ones, gaining perspective
on the independent sponsor model is
invaluable.

11. By learning what’s working for other
groups and what’s not, emerging
sponsors can refine their focus and
approach to accelerate their
success, or at least avoid some of
the missteps that many new
fundless sponsors experience.

12. As advisors to this expanding group of
investors, we interact regularly with both new
and long-time sponsors, as well as
independent sponsor capital providers.
Here are 6 guidelines to help you get the
most out of the independent sponsor model:

13. 1. Acting like a funded private equity firm with
discretionary capital is a fruitless exercise.
We see a lot of independent sponsors, particularly new ones,
who expect their deals will come from investment banking led
auction processes.
As an independent sponsor, unless there is a compelling
strategic reason to compete in an auction against funded
private equity firms and strategic buyers, save your time or
choose your spots wisely –e.g., having an almost proprietary
strategic relationship or management capability to bring to the
table, or, simply revisiting an auction if it fails.

14. 1. Acting like a funded private equity firm with
discretionary capital is a fruitless exercise.
Remember, if you are the winning bidder in an auction,
you’ll need to explain to prospective capital partners why
you believe an asset is worth more to you than what
other funded private equity firms and strategic buyers
were willing to pay.
Every situation is different, but this argument usually
doesn’t go over well.

15. 2. There’s usually an inverse relationship between
complexity and success.
It’s hard enough articulating to capital partners why a
particular acquisition target represents an attractive
opportunity.
If you develop an excessively elaborate or theoretical
growth strategy that requires everything to go right,
chances are that it will be challenging to convince an
institutional investor to follow.

16. 2. There’s usually an inverse relationship between
complexity and success.
That doesn’t mean that growth strategies can’t be
dynamic or there’s no room for creativity, but they should
be practical, insightful and reasonably straightforward.

17. 3. Be disciplined about the acquisition targets you
pursue, even if it means walking away from a deal.
No one likes turning down an opportunity with a
motivated seller, or even worse, walking away from a
deal that you’ve invested a lot of time and money in, but
to potential capital partners, maintaining a reasonable
amount of discipline and not chasing subpar opportunities
is a good indicator that you won’t take unnecessary risks
with their money.

18. 3. Be disciplined about the acquisition targets you
pursue, even if it means walking away from a deal.
That’s not to say that you shouldn’t work like crazy to avoid, structure
around, or mitigate potential risk points when they present themselves,
but a good independent sponsor is able to objectively look at a deal and
determine:
a) if it is a compelling opportunity that doesn’t require a small
miracle to be successful or require assuming too many
unnecessary risks; and
b) if there is enough investor appetite so that there’s a reasonably
good chance of being able to raise the capital for the
transaction.
In other words, a good sponsor can evaluate whether a deal is likely to
get funded and if there’s a good chance the investment will be
successful.

19. 4. Focus on adding value and success will follow.
We can’t emphasize enough how essential it is to focus on adding
value as an independent sponsor.
If you’re simply passing along an investment bank’s CIM without
putting much effort into the evaluation of the potential acquisition and
development of a growth strategy, you’ll generally be perceived by
capital partners as a glorified broker and compensated as such.
For specific ways independent sponsors add value, read our guide
on Negotiating Better Independent Sponsor Economics.

20. 5. The private capital markets are inefficient- be
methodical about selecting a capital partner.
SBICs, alternative debt providers, private equity firms and
family offices each have different operating models and behave
differently- they do different types of deals, utilize different
capital structures, offer different independent sponsor
compensation packages and they evaluate/process
transactions differently.
It is important to understand which capital providers make the
best partners for fundless sponsors, which ones are best suited
for the situation and which ones to avoid at all costs.

21. 5. The private capital markets are inefficient- be
methodical about selecting a capital partner.
If you aren’t sure who the best partners are for your acquisition
or you don’t have enough bandwidth to simultaneously pursue
and close deals and raise capital, hiring an investment bank
focused on raising capital for independent sponsors can be a
turn-key solution that helps you achieve better fundless
sponsor economics.
If you have the free time and enough relationships to run a
capital raising process yourself, be thoughtful about which
firms you approach and how you present the opportunity.

22. 5. The private capital markets are inefficient- be
methodical about selecting a capital partner.
Whether you choose to hire an advisor or raise capital
yourself, saying yes to the first capital provider that agrees
to fund the deal without qualifying them as a good partner
or determining what market economics are for a particular
situation can be a costly mistake.
Remember, you’ll be partners with these groups in the
years ahead.

23. 6. Sourcing compelling, proprietary acquisition
opportunities is difficult and takes time, but is the best
way to succeed as a new independent sponsor.
Most sponsors would be well served if they spent the vast majority of
their time sourcing proprietary or opportunistic deals.
It’s definitely not the easiest or most linear path to generating deal
flow, but investing the time on the front end will pay off over time.
Don’t get discouraged if it takes a year or more to find the right
opportunities. Ultimately, buying a good company, at a compelling
valuation will help make it easier to raise capital and put you in a
better position to create value after the transaction closes.

24. SAVE TIME, FOCUS ON
WHAT MATTERS
Focus on Deal Sourcing, New
Deal Evaluation, Target Company
Diligence and Value Creation of
Existing Portfolio Companies
ACCELERATE 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 has
historically exceeded 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

25. $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 an Investment Bank Focused on Providing Independent Financial
Sponsors and Executives with Unmatched Capital Raising Services.
We’ve Leveraged Years of Experience in Raising Capital Across a Wide Variety of Situations to
Develop a Focused Effort Tailored to the Unique Needs of Independent or Fundless Sponsors.
ABOUT ACCESS CAPITAL PARTNERS
Access Capital Partners
7733 Forsyth Blvd., Suite 1151
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