The vast majority (99%+) of independent sponsors deals are majority acquisitions, but in the off-chance that you're working on a minority recap, make sure the following are in place:
• Veto rights on balance sheet items and major decisions (recaps, capex, budget, dividends, etc.).
• Board representation (make sure you know who is on the board and that you're comfortable with everyone if you need to coalesce in split situations).
• Exceptional alignment with founder. (Note: strong alignment is extremely common pre-closing, but less strong and less common later).
• Clear path to liquidity and alignment around when that should occur (e.g., where should the business be when we exit).
• Drag-along rights.
• Reporting requirements. You want to have real-time access to all data.
I keep saying it: Flexibility is a feature, not a bug, of the independent sponsor model.
Listen to the latest episode of the Minds Capital Podcast with my HBS classmate, Neel Bhargava, whose minority recap of Crunch Fitness was a "home run investment."
