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The Wild West of Private Equity

Citrin Cooperman’s Independent Sponsor Report 2017

September 19, 2017
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About this Survey
In the spring of 2017, 245 independent sponsors shared their outlook for the industry and operational issues such as deal flow and mechanics, capital sources, relationships with portfolio companies, and liquidity events.

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A decade ago, independent sponsors were still operating on the fringes of the private equity industry. They were relatively few and far between, often fighting an uphill battle to convince companies and capital providers of their value.

Today, significant numbers of independent sponsors have entered the market, wanting to reap the benefits the model provides – better deal economics, more flexibility to choose deals, and less pressure to exit on a predetermined timeframe. Yet, despite the evolution of the sector, in many ways, it is still, as one survey contributor aptly described it, the “Wild West” of private equity.

Citrin Cooperman’s inaugural Independent Sponsor Report sheds light on the sector, as we share insights from those who fight the battle each day, offer recommendations from the trenches, and identify the rules and practices that independent sponsors use as they soldier on.

“Independent sponsors have been around for decades, but the population has exploded over the past several years,” says Sylvie Gadant, a partner in the Transaction Advisory Services Practice at Citrin Cooperman. “And, despite the high mortality rate for the sector, the fact that 54 percent of our respondents have been in business for more than 5 years is a very encouraging sign.”

As this year’s report shows, although the sector has seen significant evolution, it remains one without a clear playbook. It is a sector with considerable diversity in viewpoints, in approaches, and in economic terms, where some differences are expected and others surprising.

We expect, in future years, that the sector will continue to grow in popularity and acceptance, with more independent sponsor entrants and greater numbers of companies and capital providers embracing independent sponsor transactions. As the sector continues to mature, we also expect greater standardization of terms and best practices. We look forward to seeing how the model continues to flourish.

We are indebted to our survey respondents and our esteemed group of external contributors, both independent sponsors and capital providers, for sharing their thoughts and experiences with us. If you would like to participate in next year’s survey, please contact us at issurvey@citrincooperman.com.