Independent sponsor-led minority buyout experience?

August 26, 2024

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Has anyone ever done a deal as an independent sponsor to acquire less than 50% of a target and have the management team stay in place post-deal? I'm curious if there are capital providers that would do such a deal and whether the independent sponsor economics would materially change in a minority transaction vs. a typical buyout. TIA!

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Reply by an intermediary
in New York, NY, USA

Thanks for the ping ^redacted‌. Hi Cody, there are many capital providers, including dozens on our CapFlow platform, that can provide minority "buy-in" financing. It would help to know what percentage of the equity you are buying and who (e.g. previous owner, management team, etc.) will own the remainder of the equity. Is the previous owner or are others on the post-transaction cap table willing to provide a personal guarantee? The overall sponsor economics depend on the details. Feel free to email me at redacted or schedule an intro call directly via the "Set a Call" button at capflow.net if you'd like to discuss further.

Reply by an investor
from University of California, San Diego in San Francisco, CA, USA

Such deals happen all the time. As an independent sponsor, you want to structure the deal to meet the needs of the situation and to align the interests of the parties and to add value -- presumably above and beyond the capital that you bring. For such minority deals, the economics are typically less as less effective equity is sold/bought, but the economics are always negotiable.

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