By Lou Sokolovskiy
In the brutal world of independent sponsors, only the persistent survive. In the high-stakes game of private company acquisition, the odds are punishing as these fundless buyers, who scout for companies first and line up capital second, inhabit a niche where tenacity must substitute for dry powder. Their defining advantage? Flexibility. Their curse? Deal scarcity.
The paragraph above sums up a recent virtual roundtable Opus Connect held for its members. The challenge, sponsors explained, lies not in finding a deal per se, but in out-sourcing the competition. With valuations in flux and macroeconomic headwinds stiffening, that competition has intensified.
“The quality of the deals over the last six to nine months… has deteriorated,” said one independent sponsor talking in the private, independent sponsor roundtable event.
The Great Funnel
Independent sponsors are not merely dealmakers—they are volume processors. A report from SourceScrub suggests a sponsor may have to sift through roughly 1,000 opportunities per partner, per year, to close ten. That 1% conversion rate is corroborated by other industry veterans. “You need to see a thousand deals a year per partner,” one participant confirmed, to have a realistic shot at completing even one transaction.
Not everyone concurs. For firms targeting larger platform acquisitions, a pipeline of 600 opportunities annually is seen as “a pretty good number on top of the funnel.” But whether the number is 600 or 1,000, the implication is the same: high-volume sourcing is a prerequisite, not a luxury.
A 2023 Axial survey, whose results are still believed to be applicable, found that 83% of independent sponsors rely on sell-side brokers, with a further 77% engaging deal networks and 75% conducting direct outreach. In other words, everyone is using every method available. What varies is the blend—and the stamina.
Banked vs. Back Door
How deals enter the pipeline is as crucial as how many. Most, by consensus, are banked. One sponsor estimated that “about 90%… 95%” of opportunities come from formal auction processes orchestrated by intermediaries. These are polished, rigid affairs, replete with data rooms, confidential iInformation memorandums (CIM), and competition.
To some, this is an advantage. “These bankers do get these businesses ready to sell,” one participant acknowledged. Brokered deals typically move faster and offer a clearer path to close. But they can also be frothy. Even flawed companies—those with uneven margins or succession headaches—command multiples of eight, nine, or even ten times EBITDA in competitive processes. By contrast, the median EBITDA multiple for sub-$500m U.S. deals in late 2024 was 7.2×, according to GF Data as reported by Forvis Mazars.
Proprietary deals—the mythical “one-on-one” conversations—can be less costly but far messier. Sponsors cite the operational drag. “You spend a half a turn of EBITDA to work through the headaches,” one said. Sellers contacted cold often adjust expectations upward. “The house is now worth 10% more, 20% more than I thought before they knocked on my door.”
Yet the appeal of exclusivity is undeniable. Data shows smaller firms, especially independent sponsors, benefit disproportionately from outbound and tech-enabled prospecting. Sponsors spoke of “going one by one,” mining trade associations, and manually building target lists. Another simply said, “Proprietary deals generate the best results because you can be as proactive as you want.”
Plan B Is a Strategy
In a difficult market, adaptability trumps capital. Fundless sponsors often position themselves as dependable fallbacks when larger funds stumble. “We hang around on broken deals,” one said. Another elaborated: “Keep following up months and months and months. ‘Hey, did the deal close?’”
It is a strategy borne of necessity. According to Sadis & Goldberg, over 26% of sponsors pay broken-deal expenses themselves—a high price for being Plan B. But sometimes that plan pays off.
While precise numbers are scarce, industry observers suggest that “broken” or failed processes may comprise a substantial portion of eventual deals. The persistence of independent sponsors, combined with their reputation for closing, can turn a dead lead into a proprietary opportunity—if not a bargain.
Operators, Not Engineers
Unlike large buyout funds that rely on leverage and financial re-engineering, independent sponsors often win with something less tangible: presence. “It’s more an operator role and less of a private equity role,” one said. Sellers, often founder-owners, respond to this directness. “I go in a truck, I call on customers, I go look at capital equipment,” another added. Such handshakes matter in markets skeptical of “ivory tower” private equity firms.
This operator-led model aligns well with roll-up strategies. Sponsors are increasingly acquiring modest platforms as beachheads, then adding bolt-ons. GF Data notes that even small platform deals ($10–25m EBITDA) have seen rising multiples—averaging ~6.6× in late 2024, up from 6.2× a year earlier. Consolidation offers multiple arbitrage: a scaled firm often sells at a premium.
The Affinity report cited above has observed that spin-offs and strategic divestitures—especially in sectors like healthcare, manufacturing, and B2B services—are now fertile ground for these strategies. Independent sponsors are capitalizing on this by teaming up with co-investors and “backable” CEOs to pursue buy-and-build plays. The result is often a more human, more operational flavor of private equity.
The Patient, Not the Privileged
Deal sourcing for independent sponsors remains a volume game with brutal math. The quality of deals may have deteriorated, as one sponsor put it, and that has led to a higher bar for patience.
In this world, few win by money alone. They win by making 999 calls to close one deal. They win by walking into factories when others read spreadsheets. They win by persistence—by “following up months and months and months”—until the door swings open.
In a competitive field where relationships matter and capital alone no longer cuts it, it is the patient, not the privileged, who are closing.
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July 2025
