At CapitalPad, we look at independent sponsor investing one acquisition at a time. We want to understand the business, the sponsor’s plan, and the terms on which we would invest. But individual opportunities are part of a much larger market, and the published research gives us a chance to step back and examine how that market is developing.
In this report, CapitalPad Research examines independent sponsor returns and the transactions behind them. The analysis draws on academic research and industry surveys to compare acquisition prices, sponsor experience, capital sources, fees, and carried interest.
Average gross equity IRR
Investor-reported returns · UNC/IPC (2026).1
Share of Axial’s closed deals
Largest buyer type, twelve months to October 2025.5
Returned 3x or more
Sponsors with a liquidity event, Citrin Cooperman (2026).2
The returns cited here come from third-party studies and surveys and do not represent CapitalPad’s investment performance. Past performance does not guarantee future results. Private equity investments are illiquid and may result in partial or total loss of capital.
Independent sponsor returns and buyout benchmarks
Independent sponsor investments returned an average 2.86x gross TVPI and 29.3% gross IRR in UNC’s 2026 investor-reported sample. Median returns were 2.10x and 23.8%, respectively. The sample includes exited investments and seasoned active holdings.1
TVPI measures total value relative to invested capital, including remaining holdings. IRR measures annualized performance using the timing of cash flows. The study measures these returns after sponsor fees and costs, before the reporting capital provider’s own fees and costs.
| Measure | TVPI | IRR |
|---|---|---|
| Average gross return | 2.86x | 29.3% |
| Median gross return | 2.10x | 23.8% |
| Average excess return | +0.73x* | +11.4 pp* |
| Median excess return | +0.08x | +5.3 pp* |
* Statistically significant at p < 0.01. Excess returns are relative to matched buyout benchmarks; pp means percentage points.
Source: UNC Institute for Private Capital (2026), Table 11.1 Analysis: CapitalPad Research.
How the benchmark comparison works
The researchers compared independent sponsor investments with U.S. buyout investments of up to $100 million from the MSCI Private Capital Universe. Each sponsor investment was matched by entry year and exit status with at least 20 buyout investments, using their median return as the benchmark.1
Independent sponsor investments in the sample outperformed their matched buyout benchmarks on average. Both average and median excess IRR were statistically significant, as was average excess TVPI. Median excess TVPI was positive but not statistically significant.
Independent sponsor excess IRR over buyout benchmarks
Excess gross IRR, percentage points.
Source: UNC Institute for Private Capital (2026), Table 11.1
Investment losses in the UNC sample
UNC’s loss analysis found losses in 23.5% of independent sponsor observations versus 21.6% of matched benchmark observations. The differences in loss incidence and severity were not statistically significant.1 The authors interpret the return advantage as coming from stronger upside, rather than fewer losses.
Realized returns reported by independent sponsors
In Citrin Cooperman’s 2026 survey, 43% of sponsor respondents had experienced a liquidity event. Among those respondents, 84% reported returning 3x or more to investors and 34% reported returning at least 5x.2
Share of sponsors with a liquidity event reporting each return threshold.
Source: Citrin Cooperman (2026), pp. 12–15.2
These responses describe sponsors with liquidity events and are not an average return across transactions. UNC’s investor-reported analysis provides the matched buyout comparison; the sponsor survey supplies a separate view of respondents’ realized outcomes.
Sponsor experience and company growth
Independent sponsors can connect experienced investment professionals with businesses that still have room to professionalize and grow. UNC’s research describes sourcing knowledge, specialized diligence, and close operating involvement as reasons the model fits the lower middle market.1 The work may involve building a management team, improving financial reporting, expanding sales, or combining complementary companies.
| Characteristic | Share |
|---|---|
| Previous private equity experience | 88% |
| Previous investment banking experience | 71% |
| Operational expertise | 63% |
| Industry expertise | 50% |
| Three or more closed investments | 65.2% |
| Two or more additional partners | 66.7% |
Source: UNC Institute for Private Capital (2026), Tables 7–9. 24 respondents; 23 answered the closed-investment question.1 Analysis: CapitalPad Research.
The sponsors in UNC’s survey generally brought prior transaction experience, often alongside partners with operating or industry expertise. Those backgrounds matter when a smaller company needs stronger management, financial reporting, or a more disciplined acquisition process.
Valuation multiples and employee growth
UNC’s company-level statistics show a median increase of 2.6 turns in the EBITDA valuation multiple. Median employee growth was 17%.1
For illustration, increasing a company’s valuation from 6.0x to 8.6x EBITDA raises enterprise value by about 43% if EBITDA is unchanged. This hypothetical sensitivity does not measure investor returns after debt, fees, and timing. The lower middle market private equity guide explains how operating improvements, cash generation, and valuation can affect an investment.
Independent sponsor market growth
WhiteHorse Capital reported in July 2025 that industry trackers counted more than 1,500 active U.S. independent sponsors, nearly double the number five years earlier.4 Growth in Axial’s sponsor rankings and McGuireWoods’ conference attendance shows a broader professional community taking shape around the model.
| Indicator | Reported evidence | What it measures |
|---|---|---|
| Active U.S. sponsors | More than 1,500 in 2025; nearly double five years earlier.4 | Industry-tracker estimate reported by WhiteHorse. |
| Sponsors in Axial’s ranking universe | 421 in 2023; 1,098 in 2025.6, 7 | Actively sourcing sponsors included in that platform’s rankings. |
| McGuireWoods conference attendance | 317 in 2017; more than 1,600 in 2025.3, 8 | Attendees, including sponsors, capital providers, and other professionals. |
| Share of Axial closed deals | 27% for independent sponsors; 20% for PE funds.5 | Buyer mix on Axial in the twelve months to October 2025. |
Sources cited by indicator. Analysis: CapitalPad Research.
That 27% share made independent sponsors the largest buyer category on Axial in the twelve months to October 2025, ahead of private equity funds at 20%. Axial measures its own marketplace, so the figure shows platform activity rather than total market share.5
Growth also brings competition. In Citrin Cooperman’s March 2026 survey, 73% of sponsor respondents expected competition among sponsors to intensify over the following 18 months.2 A larger market rewards clear differentiation: industry knowledge, a credible financing plan, and a record of delivering after closing.
Independent sponsor deal sizes and sectors
Independent sponsor deal activity is concentrated in established lower middle market companies. In UNC’s enterprise-value distribution, 68.1% of reported entry values were above $10 million and no greater than $50 million. Its EBITDA distribution placed 73.1% above $2 million and no greater than $10 million.1
Independent sponsor acquisition sizes
Enterprise value at acquisition, USD.
68.1% of reported enterprise values were above $10 million and no greater than $50 million.
Source: UNC Institute for Private Capital (2026), Table 2.1
Citrin Cooperman’s 2026 survey shows a similar focus. Among sponsor respondents, 79% selected businesses with $2 million to under $5 million of EBITDA as a typical size they invest in or target, and 68% selected $5 million to under $10 million. Sponsors could select several size bands.2
Industries represented in the UNC sample
Business and consumer products and services represented 69.0% of the industry observations in UNC’s sample. Across the study’s overlapping industry classifications, manufacturing accounted for 23.5%.1
Acquisition multiples and deal sourcing
In Citrin Cooperman’s March 2026 survey, 52% of sponsor respondents cited 4x to under 6x EBITDA as a typical acquisition multiple for transactions closed in the preceding year; 39% cited 6x to under 8x.2 Lower entry prices can leave room for operating investment, while the company’s cash generation, management needs, and customer base help determine what is worth paying.
Sourcing combines intermediaries and direct relationships. In the 2026 survey, business brokers were cited as significant deal-flow sources by 76% of respondents and boutique investment banks by 65%.2 McGuireWoods’ separate transaction survey attributed 43% of deals to proprietary relationships and direct outreach combined, while banker-led auctions accounted for 36%.3
Who finances independent sponsor acquisitions?
Family offices, individual investors, and specialist funds are the principal capital relationships reported by independent sponsors. In Citrin Cooperman’s 2026 survey, 69% of sponsor respondents cited family offices, 61% cited Small Business Investment Company (SBIC) funds, and 44% cited high-net-worth individuals.2
Family offices and SBIC funds lead reported capital sources
Sponsors citing each source (%); multiple selections allowed.
Source: Citrin Cooperman (2026), p. 23.2
Repeat relationships are an important part of that financing model: 53% of sponsor respondents often used the same funding partners.2 Each deal still needs its own underwriting and commitment, but a sponsor and investor can build familiarity across transactions.
CapitalPad is an equity investment partner for independent sponsors. CapitalPad invests $1 million to $2.5 million of equity per independent sponsor transaction, taking minority positions in lower middle market businesses in the United States and Canada. Sponsors can review CapitalPad’s investment criteria.10
SBIC participation has increased
The share of sponsor respondents citing SBIC funds rose from 34% in Citrin Cooperman’s 2023 report to 44% in 2024, 53% in 2025, and 61% in 2026.2 That is an increase of 27 percentage points across the four survey editions.
The broader financing infrastructure grew too. At fiscal year-end 2025, the SBA reported $53 billion in combined private capital and SBA leverage across the entire SBIC program, up from $46 billion in fiscal 2024. It also approved 48 new licenses.9
The guide to raising independent sponsor capital explains how to prepare a financing request and select an equity partner.
Independent sponsor fees and carried interest
Independent sponsor compensation commonly combines a closing fee, an annual management fee, and carried interest tied to investment results. McGuireWoods’ 2024 transaction survey and Citrin Cooperman’s 2026 sponsor survey document similar reference points: closing fees around 2% of deal value, EBITDA-based annual management fees near 5%, and carry that can rise as return hurdles are achieved.2, 3
The benchmarks help sponsors and investors establish a starting point for negotiations. The economic effect still depends on the fee base, floors and caps, carry tiers, catch-up provisions, and the amount of capital invested. The independent sponsor economics guide shows how these terms interact in a worked waterfall.
| Term | McGuireWoods 2024 deal survey | Citrin Cooperman 2026 sponsor survey |
|---|---|---|
| Closing fee | 2.00%–2.49% of enterprise value was the most common band, at 44% of transactions. | 2% of transaction value was the most commonly selected rate, at 67% of responses to the closing-fee rate question. |
| Annual management fee | 72% of EBITDA-based fee deals fell in the 5%–5.99% band. | 5% of EBITDA was the most commonly selected rate, at 76% of responses to the management-fee rate question. |
| Performance-based carry | 71% of transactions used variable carry with hurdles. | 43% of respondents used MOIC hurdles; 29% combined MOIC and IRR. |
| Maximum carried interest | Among MOIC-based deals, 25% was the most common maximum, at 35% of responses. | 60% of respondents obtained maximum carry of 25% or more on a typical deal, as reported with N/A responses excluded. |
| Full catch-up | 76% of surveyed deals. | 78% of respondents. |
Sources: McGuireWoods (2024) and Citrin Cooperman (2026), pp. 34–39.2, 3 Analysis: CapitalPad Research.
Carried interest hurdles, tiers, and catch-ups
Carried interest gives the sponsor a share of investment profits. A multiple on invested capital (MOIC) hurdle tests how much value investors receive relative to their investment; an IRR hurdle also accounts for time. A catch-up changes how profits are allocated after the investor hurdle is reached.
For a sponsor, higher carry tiers can reward a successful investment. For a capital provider, the question is what the investor receives before and after each tier. Two transactions offering the same maximum carry can produce different allocations of proceeds because their hurdles and catch-ups differ.
Citrin Cooperman reports that 60% of sponsors obtained maximum carry of at least 25% on a typical deal in 2026, compared with 64% in 2025 and 37% in 2019.2 Maximum carry of at least 25% remained more prevalent than in 2019, despite declining from the 2025 survey. The maximum rate need not apply to every dollar of profit.
Sponsor investment, seller rollover, and governance
Personal investment, fee rollover, and continuing seller ownership are common alignment tools in independent sponsor transactions. In Citrin Cooperman’s 2026 survey, 69% of sponsor respondents said capital providers required them to contribute equity. That contribution can include personal cash, rolled closing fees, or capital raised from others. In McGuireWoods’ transaction sample, approximately 70% of deals included seller rollover equity.2, 3
| Arrangement | Reported evidence | What to examine |
|---|---|---|
| Sponsor co-investment required | 69% of Citrin Cooperman respondents.2 | How much comes from personal cash, fee rollover, or other investors, and what remains at risk for the sponsor. |
| Full closing-fee rollover | 100% rollover was the most common outcome, at 53% of McGuireWoods deals.3 | How much of the fee remains exposed to the investment. |
| Seller rollover equity | Approximately 70% of McGuireWoods deals.3 | The seller’s continuing stake, role, and rights. |
| Sponsor board majority | 49% of McGuireWoods deals.3 | Who controls major decisions and how disagreements are resolved. |
| Board-control changes on defined triggers | 29% of McGuireWoods deals that began with sponsor control.3 | When control can shift to the capital partner. |
Sources: Citrin Cooperman (2026) and McGuireWoods (2024).2, 3 Analysis: CapitalPad Research.
These terms let investors examine how the relationship will work after closing. Who supplies additional capital if the company needs it? Who can approve an acquisition or a sale? What happens if a key sponsor leaves? Answering those questions is part of building an investment partnership that can survive a difficult period.
Independent sponsor holding periods
Independent sponsor investments generally require a multi-year commitment. In Citrin Cooperman’s 2026 survey, 49% of respondents reported a typical holding period of five to ten years, and 27% reported three to five years.2 UNC’s separate historical sample reported an average 4.8-year holding period and a four-year median.1
A sponsor investing deal by deal does not have the same pre-existing fund life as a conventional buyout fund. That can create flexibility to complete an operating plan or wait for a suitable buyer. Debt maturities, investor agreements, and company needs still impose constraints. The private equity distributions guide explains how operating cash, loan restrictions, and a sale affect when investors receive cash.
How accredited investors can invest in independent sponsor deals
Accredited investors can invest in independent sponsor deals through direct sponsor relationships, funds that back sponsor-led transactions, or deal-by-deal co-investment groups. The route determines who selects the investments, how each opportunity is reviewed, and how investor interests are organized.
CapitalPad is a private equity co-investment group through which accredited investors can invest in independent sponsor deals in the lower middle market on a deal-by-deal basis. Each investment is a separate decision: investors review the acquisition and choose whether to back it, with no obligation to invest in future transactions. Participating individuals generally invest through a deal-specific special purpose vehicle (SPV), with minimums generally starting at $25,000 per deal.10
Before committing, investors can examine the company, sponsor, financing, and terms together. The data above gives that review reference points: fees and carry against the survey ranges, the sponsor’s experience and personal investment, the entry multiple against the plan for growing the business, and the expected investor proceeds after all applicable fees.
Independent sponsor statistics: common questions
Do independent sponsors outperform traditional private equity?
UNC’s June 2026 investor-reported sample outperformed its matched U.S. buyout benchmarks on average. It showed average excess returns of +0.73x TVPI and +11.4 percentage points of IRR over matched U.S. buyout benchmarks, both statistically significant. Median excess IRR was also significant; median excess TVPI was not. The authors attribute the advantage to stronger upside rather than fewer losses; the loss comparison does not establish identical downside risk. Participation in the study was voluntary, so the sample may not represent every independent sponsor deal.1
What are average independent sponsor returns?
UNC’s 2026 performance table reports average gross equity TVPI of 2.86x and IRR of 29.3%, with medians of 2.10x and 23.8%. These investor-reported results include eligible active holdings and are measured after sponsor fees and costs, but before the reporting capital provider’s own fees and costs.1
How many independent sponsors are there?
WhiteHorse Capital reported an industry-tracker estimate of more than 1,500 active U.S. independent sponsors in July 2025, nearly double the count five years earlier.4
Who provides capital for independent sponsor deals?
Family offices, SBIC funds, high-net-worth individuals, and co-investing mezzanine funds are common capital partners. In Citrin Cooperman’s 2026 survey, they were cited by 69%, 61%, 44%, and 35% of sponsor respondents, respectively.2
What fees and carried interest do independent sponsors receive?
Published surveys show common reference points around 2% of deal value at closing and 5% of EBITDA for EBITDA-based management fees. In Citrin Cooperman’s 2026 survey, 60% of respondents obtained maximum carried interest of at least 25% on a typical deal. Hurdles, catch-ups, fee floors, and caps determine the actual economics.2, 3
Can individual accredited investors invest in independent sponsor deals?
Accredited investors can invest in independent sponsor deals through CapitalPad, a private equity co-investment group focused on the lower middle market. Investors review the company, sponsor, and acquisition terms before deciding whether to participate, building their portfolio one deal at a time.10
Research scope and methodology
CapitalPad Research compares academic studies, sponsor surveys, transaction reports, platform records, and government data. CapitalPad produces the analysis, explanations, calculations, tables, and charts; the underlying observations and statistical tests are attributed to their research providers. The UNC research supplies investor-reported performance, while the industry surveys and market records describe sponsor practices and participation.
| Publisher | CapitalPad Research. CapitalPad is a private equity co-investment group through which accredited investors can invest in independent sponsor deals in the lower middle market.10 |
|---|---|
| Research type | Comparative analysis of published independent sponsor research and market data. |
| Principal sources | UNC’s Institute for Private Capital; Citrin Cooperman; McGuireWoods; Axial; the U.S. Small Business Administration; WhiteHorse Capital. |
| Observation periods | UNC’s June 2026 paper uses a survey developed in summer 2025 and historical investment data. Citrin Cooperman surveyed participants in March 2026 and conducted follow-up interviews in April 2026. McGuireWoods covers transactions closed in 2021–2023. Other indicators retain their stated 2023–2025 observation dates. |
| Market focus | Independent sponsor-led lower middle market private equity, primarily in the U.S. The UNC performance benchmarks are U.S. buyouts; no global market census is inferred. |
| Core measures | Gross equity TVPI and IRR, excess returns, loss incidence, sponsor-reported realized multiples, sponsor experience, company size, market participation, capital sources, fees, carry, alignment, and holding periods. |
| CapitalPad contribution | Comparison of investor-reported performance with sponsor surveys; interpretation of the operating and financing model; transparent size-band and funding-source calculations; consolidated reference tables and charts. |
| Main distinctions | Respondents, transactions, platform users, attendees, and capital dollars have different denominators. Gross investment returns differ from net investor returns; active holdings differ from completed exits. |
University of North Carolina’s Institute for Private Capital: Independent Sponsor Research
The Institute for Private Capital at the University of North Carolina published Brown and Volckmann’s Independent Sponsors: Investment Characteristics and Performance on June 22, 2026. The Institute for Private Capital worked with the Small Business Investor Alliance and its Independent Sponsor Forum to collect information from sponsors and capital providers. Its survey section reports 35 investors and 38 sponsors contributing 815 investments after adjustments; the initial data and some descriptive tables retain 846 reports. Variable-level sample sizes differ.1
Return measures. Performance comes from capital providers, with multiple reports of the same transaction averaged together. TVPI includes remaining holdings; IRR reflects cash-flow timing. Both are after sponsor fees and costs and before the reporting capital provider’s own fees and costs. Most records came from investors reporting all their transactions. Participation was voluntary and drawn through an industry network, with SBICs prominent in the sample. Table 11 uses 328 TVPI observations and 283 IRR observations.1
Investment sample. The performance analysis includes investments entered before 2022 and later investments if already exited. This report follows that definition and Table 11’s results, including 2.86x average TVPI and +0.73x average excess TVPI. The abstract refers to fully exited transactions and nearby prose gives slightly different TVPI averages; the detailed table and methodology govern the figures used here.1
Benchmark comparison. Comparables are MSCI U.S. buyout investments of up to $100 million, matched by entry year and exit status. Excess returns are calculated for each sponsor investment against its matched benchmark, then summarized. Table 11 uses bootstrap significance tests. Table 12 compares 344 investor-reported loss observations with 5,497 benchmark observations, reweighted for vintage and exit status; it finds no statistically significant difference in loss incidence or severity.1
Company and sponsor characteristics. Company-size observations can include reports of the same transaction from different respondents and use a separate sample from the investor-only performance analysis. Sponsor-background figures use the response counts in Tables 7–9, with overlapping professional backgrounds and published rounding. Table 10 reports changes in EBITDA valuation multiples and employment using its seasoning screen. Employment growth can reflect acquisitions as well as organic hiring; these descriptive measures do not isolate the effect of an individual operating initiative. The acquisition-size chart uses 826 reports; the valuation-multiple and employment changes use 193 and 351 observations, respectively. Holding periods cover 285 exited observations.1
McGuireWoods’ 2024 Independent Sponsor Deal Survey
McGuireWoods’ 2024 Deal Survey of Independent Sponsor-Led Transactions covers more than 300 transactions closed in 2021–2023. Its management-fee statistics use the EBITDA-based subset; the board-control-change figure applies to deals that began with sponsor control. The report calls the closing fee a “due diligence fee.”3
How the other evidence is sourced
- Sponsor practices and historical survey comparisons
- Citrin Cooperman’s 2026 report draws on a March survey of 187 professionals, including 158 independent sponsors, and follow-up interviews in April. Most findings do not include question-level response counts. Deal-size, valuation, and capital-source questions allow multiple selections. The return question applies to sponsors with liquidity events and has overlapping thresholds, so a respondent can contribute to more than one result. Those figures describe sponsor responses, with no fee convention specified that is directly comparable to UNC’s measure. Survey editions use different respondent mixes. Closing- and management-fee rate percentages retain the published bases, including N/A responses; the maximum-carry figure excludes N/A responses as stated in the report.2
- Participation and financing context
- Axial measures its own marketplace and ranking universe. McGuireWoods measures attendance at its conference. WhiteHorse reports industry-tracker estimates. SBA figures measure the whole SBIC program, including investments outside independent sponsor transactions.4, 5, 6, 7, 8, 9
- CapitalPad business information
- CapitalPad’s public materials support descriptions of its co-investment model, investor participation, and role as an equity investor alongside independent sponsors. They are not the source of the market-wide statistics.10
Calculations are limited and reproducible. The UNC enterprise-value share is 40.1% + 28.0% = 68.1%; the EBITDA-size share is 47.4% + 25.7% = 73.1%. The rise in cited SBIC usage from the 2023 to 2026 report editions is 61% − 34% = 27 percentage points. These calculations use published rounded inputs and do not combine different studies into a new market average.1, 2
Industry surveys and commentary are published by organizations that serve or invest in the segment. UNC’s acknowledgments name MSCI and IPC support and SBIA and Independent Sponsor Forum assistance. CapitalPad also participates commercially in independent sponsor investing. This report preserves those sources’ roles, sample limitations, and attribution while evaluating the evidence they provide.
Cite this research
CapitalPad Research, “Independent Sponsor Statistics: The Case for Deal-by-Deal Private Equity.”
Reference CapitalPad Research for the comparative analysis, explanations, tables, and charts. Retain the underlying provider, sample, and period when quoting a reported finding.
Sources & references
- Gregory Brown and William M. Volckmann II, Institute for Private Capital, “Independent Sponsors: Investment Characteristics and Performance” (June 22, 2026). Tables 2–4 and 7–12; Sections 3–4. Source
- Citrin Cooperman, The Next Chapter: Evolution of the Independent Sponsor Asset Class — 2026 Independent Sponsor Report. Online survey March 2026; follow-up interviews April 2026. Methodology p. 4; company size and valuation pp. 8–11; liquidity and returns pp. 12–15; sourcing pp. 16–17; capital sources pp. 22–25; sponsor equity p. 30; fees and carry pp. 34–39; competition p. 46. Source
- McGuireWoods, “2024 Deal Survey of Independent Sponsor-Led Transactions” (November 2024; transactions closed 2021 to 2023). Source
- H.I.G. Capital / WhiteHorse Capital, “A Lender’s Lens on the Independent Sponsor Market” (July 15, 2025). Source
- Axial, “Axial’s 2025 Independent Sponsor Report” (October 2025). Source
- Axial, “The 2025 Top 20 Independent Sponsors on Axial” (November 2025). Source
- Axial, “The 25 Most Active Independent Sponsors on Axial” (2023). Source
- McGuireWoods, “Key Takeaways From McGuireWoods’ 2025 Independent Sponsor Conference” (December 2025). Source
- U.S. Small Business Administration, “SBA’s SBIC Program Delivers Record Capital in FY25” (November 19, 2025). Source
- CapitalPad, “Official Information About CapitalPad: Private Equity Co-Investment Group” (accessed September 13, 2026). Source
