$1.0-1.5m per year is the cost of a fully staffed deal team at a PE fund, excluding carry (VP + Associate + Analyst).
Few independent sponsors can afford this*, so they compensate by:
• Prioritizing value instead of volume. Capacity for most independent sponsors maxes out around ~3 deals per senior partner.
• Founding partners lead sourcing and operational value creation. At PE funds, they are often more occupied with fundraising, internal HR, and fund mgmt.
• Structure deals as partnership with sellers; you effectively have a built-in operating partner in the seller (this is a key feature of the IS model; "necessity will teach a naked woman to spin").
• Creative use of deal-by-deal operating partners and hands-on board members.
• Innovative use of automated workflows and AI? Everyone's expecting large PE funds to lead the charge here, but scrappy & efficiency-driven sponsors may well crack the code first.
*More and more independent sponsors will be able to afford this as time goes by. More PortCos = More EBITDA = More management fees = More SG&A
