I am launching an Independent Sponsor (Fundless-Sponsor) firm to focus on Lower-mid market deals in the US and Canada, and I was interested in receiving feedback from the community regarding interest in partnering with me on a part-time or full-time basis. I currently have a network of smaller FO's and Mezz shops that have previously funded fundless-sponsor backed deals that are interested in investing deals I bring to them.
The strategy is to develop proprietary dealflow of family owned industrial, software, and business services companies in the lower-mid market with $5mm-$50mm in revenue and EBITDA between $2m-$10m. The value-add we provide these investors is that we bring proprietary deals and a network of seasoned industry operators that can replace or support existing management teams.
What I'm looking for in a partner... someone that can assist with the investment analysis and due diligence. I bring to the table a background of IB and PE deal origination so I'm looking for a partner that can compliment my skill set.
What we get out of it - The fundless sponsor compensation structure is relatively similar to your traditional PE model except for a few differences, mainly the 2/20 since we do not have assets under management. Fundless sponsors get paid a closing fee at the beginning of the transaction typically in the range of .5%-2% of the purchase price as well as an ongoing management fee that is usually paid semi-annually or quarterly and is based on a percentage of EBITDA (1%-4%) for the period. In addition, fundless sponsors typically receive equity in the deal of 5%-20% dependent on deal specifics and value added ie. how much of the work we actually did on the transaction. The compensation structure may not be as attractive as the traditional PE model, however, I believe the benefits of not taking personal financial risk or being responsible for the deal-break costs offset that to a great extent.
This is just a high-level overview, however, if any of you have interest in the idea please feel free to send me a message and I'd be happy to discuss further.