Independent sponsor incentives are cleaner, more sustainable, and more aligned than those of traditional searchers.
A traditional search deal that's tracking to 1.5-2.25x MOIC:
• Board members will rather spend their attention on other portcos w/ more upside or new deals. Board disengages.
• HBS/GSB grad who is full-time in the CEO role sees limited carry. Why keep working for a small salary and not-so-exciting bonus. They feel stuck.
• Stage is set for hail mary strategies or a quick discounted exit.
Self-funded searchers are screwed if things go poorly. Strong motivation to rescue the debt, with limited regard to the equity side.
Independent sponsors don't get stuck. They have other deals, they're not the operator. They want more deals and high spread. After 2-3 years of value creation, independent sponsors want to maximize value for minimum time, which is relatively aligned with the LPs.
