Video Preview
🎧 Podcast episode for paid subscribers only. Also available on Apple Podcasts and Spotify.
To listen to paid episodes in Apple or Spotify, link your Substack subscription via the show settings on those platforms (instructions inside the Substack app under Subscriptions → Podcast).
Table of Contents
Abstract
What an independent sponsor actually is
The money: how much you bring and how the deal gets paid for
Track record and who gets taken seriously
The economics: closing fees, management fees, promote, and what you can pay yourself
Day job, chairman, or operator
Why healthcare at $1M to $2M EBITDA is its own animal
The playbook for a first timer
The barrier to entry, honestly
Abstract
The independent sponsor model is deal by deal private equity: you find the company, sign the LOI, then raise the equity and debt for that specific deal instead of running a committed fund.
At the $1M to $2M EBITDA end of healthcare, purchase prices run roughly $4M to $14M depending on services vs tech, and the sponsor typically brings 1% to 5% of the equity, often funded by rolling the closing fee.
Standard economics: closing fee of 2% of enterprise value (with some deals at 1% and some higher), an ongoing management fee of roughly 3% to 5% of EBITDA (often structured as $150K to $400K per year at this size), and a 15% to 25% carried interest over an 8% preferred return, frequently tiered.
Track record matters less than most people think and deal quality matters more; ex operators, healthcare RCM and services people, and former PE associates all get funded, but the capital shows up for the deal, not the resume.
You can technically keep a day job while sourcing, but almost nobody closes while employed full time, and capital providers price a part time sponsor accordingly.
The chairman only setup works when a real GM stays or gets hired; investors will not back a first timer to run a 40 person home health agency from a laptop.
Healthcare adds change of ownership filings, payer enrollment lag, corporate practice of medicine structures, billing compliance risk in the QoE, and provider retention risk, all of which shift diligence cost and timeline.
Barrier to entry is low on paper and high in practice: 12 to 24 months of unpaid sourcing, $150K to $400K of transaction costs at risk, and a roughly 1% to 2% conversion rate from first call to close.
